Revenue from bond trading, which is part of the bank's sales and trading business, plunged 30 percent to $1.46 billion.
BofA, like much of Wall Street, was hit by a sharp spike in market volatility in December that discouraged many investors from taking positions.
JPMorgan Chase & Co reported a decline of 14 percent in quarterly bond trading revenue on Wednesday.
BofA's total revenue fell 13 percent to $18.73 billion, excluding accounting adjustments, hit by a 25 percent fall in its sales and trading business and a 31 percent decline in revenue from its consumer real estate business.
BofA's shares were down 3 percent in premarket trading on Thursday.
Net income attributable to common shareholders fell to $2.74 billion, or 25 cents per share, as the bank took a $1.2 billion charge related to a change in the treatment of its bonds and derivatives portfolios and to the tightening of its credit spreads.
BofA had adjusted earnings of 32 cents per share, narrowly beating analysts' estimates of 31 cent, according to Thomson Reuters I/B/E/S.
Overall fixed-income trading has been declining since 2009 as new rules discourage banks from taking risks. Several big banks have scaled back trading operations or quit the business.
BofA has been hit by high legal costs since the financial crisis, which have undermined the cost-cutting initiatives introduced by Chief Executive Brian Moynihan.
Operating expenses declined 18 percent to $14.2 billion.
BofA's legal expenses fell to $393 million, suggesting the worst may be behind the bank in terms of costs to resolve regulatory probes linked to home loans, mortgage bonds and other issues.
The bank's legal costs totaled $2.3 billion in the fourth quarter of 2013 and $5.6 billion in the third quarter of 2014. BofA has agreed to pay at least $70 billion in fines and settlements since 2010.
The bank agreed to pay a record $16.65 billion in August to resolve U.S. Department of Justice charges that it and companies it bought misled investors into buying troubled mortgage-backed securities.
Citigroup Inc reported a slim fourth-quarter profit after taking charges of $3.5 billion to settle legal claims and overhaul its operations.