Making Financial Headlines · Page 4
Revenue Miss and Fine Refuse to Share a Footnote
· New York time
Bank of America shares fell after its third-quarter report showed weaker-than-expected trading revenue and the impact of a $1.2 billion Treasury fine. Investors faced two different matters: operating performance against forecasts and a regulatory penalty affecting the quarter. Trading revenue concerns what a business activity brought in relative to expectations. The fine is a separate financial item. Their appearance in the same earnings report does not turn them into identical problems, any more than placing a parking ticket beside a restaurant receipt makes both dinner. The distinction affects how the result can be assessed. Understanding a revenue shortfall involves looking at the activity generating revenue. Understanding the penalty involves recognising the cost as a penalty, rather than quietly assigning it a desk in the trading department. The share-price fall records the market's reaction to the news. It does not provide a labelled breakdown of the importance each investor assigned to each item. A stock chart is admirably fast at moving and considerably less helpful at submitting minutes. Large institutions resist the demand for a single explanation because their moving parts keep moving after the headline has selected a verb. This quarter requires at least two columns. One holds the trading disappointment; another holds the Treasury fine. The calculator may resent the workload, but merging the cells would not improve the arithmetic.
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