| Business Segment Information |
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NOTE 18 – Business Segment Information |
Effective April 1, 2016, to align the segments with how the Corporation now manages its businesses, the Corporation changed its basis of presentation, and following such change, reports its results of operations through the following four business segments: Consumer Banking, GWIM, Global Banking and Global Markets, with the remaining operations recorded in All Other. For more information on the business segments and All Other, see Note 24 – Business Segment Information to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K. For more information on the Corporation’s segment realignment, see Note 1 – Summary of Significant Accounting Principles.
The management accounting and reporting process derives segment and business results by utilizing allocation methodologies for revenue and expense. The net income derived for the businesses is dependent upon revenue and cost allocations using an activity-based costing model, funds transfer pricing, and other methodologies and assumptions management believes are appropriate to reflect the results of the business.
Total revenue, net of interest expense, includes net interest income on an FTE basis and noninterest income. The adjustment of net interest income to an FTE basis results in a corresponding increase in income tax expense. The segment results also reflect certain revenue and expense methodologies that are utilized to determine net income. The net interest income of the businesses includes the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, the Corporation allocates assets to match liabilities. Net interest income of the business segments also includes an allocation of net interest income generated by certain of the Corporation's ALM activities. Beginning in 2016, this allocation excludes any adjustments to the accumulated premium or discount amortization of MBS that are made as a result of a change in the estimated lives of these securities.
In addition, the business segments are impacted by the migration of customers and clients and their deposit, loan and brokerage balances between businesses. Subsequent to the date of migration, the associated net interest income, noninterest income and noninterest expense are recorded in the business to which the customers or clients migrated.
The Corporation's ALM activities include an overall interest rate risk management strategy that incorporates the use of various derivatives and cash instruments to manage fluctuations in earnings and capital that are caused by interest rate volatility. The Corporation's goal is to manage interest rate sensitivity so that movements in interest rates do not significantly adversely affect earnings and capital. The results of a majority of the Corporation's ALM activities are allocated to the business segments and fluctuate based on the performance of the ALM activities. ALM activities include external product pricing decisions including deposit pricing strategies, the effects of the Corporation's internal funds transfer pricing process and the net effects of other ALM activities.
Certain expenses not directly attributable to a specific business segment are allocated to the segments. The most significant of these expenses include data and item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The costs of certain other centralized or shared functions are allocated based on methodologies that reflect utilization.
The table below presents net income (loss) and the components thereto (with net interest income on an FTE basis) for the three and six months ended June 30, 2016 and 2015, and total assets at June 30, 2016 and 2015 for each business segment, as well as All Other.
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Results for Business Segments and All Other |
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At and for the Three Months Ended June 30 |
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Total Corporation (1)
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Consumer Banking |
(Dollars in millions) |
2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
9,436 |
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$ |
10,684 |
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$ |
5,276 |
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$ |
5,043 |
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Noninterest income |
11,185 |
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11,495 |
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2,588 |
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2,714 |
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Total revenue, net of interest expense (FTE basis) |
20,621 |
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22,179 |
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7,864 |
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7,757 |
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Provision for credit losses |
976 |
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780 |
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726 |
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|
470 |
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Noninterest expense |
13,493 |
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13,958 |
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4,416 |
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4,637 |
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Income before income taxes (FTE basis) |
6,152 |
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7,441 |
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2,722 |
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2,650 |
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Income tax expense (FTE basis) |
1,920 |
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2,307 |
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1,004 |
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988 |
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Net income |
$ |
4,232 |
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$ |
5,134 |
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$ |
1,718 |
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$ |
1,662 |
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Period-end total assets |
$ |
2,186,609 |
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$ |
2,149,034 |
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$ |
668,470 |
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$ |
621,883 |
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Global Wealth &
Investment Management
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Global Banking |
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2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
1,434 |
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$ |
1,352 |
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$ |
2,421 |
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$ |
2,170 |
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Noninterest income |
3,022 |
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3,215 |
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2,269 |
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2,066 |
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Total revenue, net of interest expense (FTE basis) |
4,456 |
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4,567 |
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4,690 |
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4,236 |
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Provision for credit losses |
14 |
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15 |
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203 |
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177 |
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Noninterest expense |
3,288 |
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3,485 |
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2,126 |
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2,086 |
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Income before income taxes (FTE basis) |
1,154 |
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1,067 |
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2,361 |
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1,973 |
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Income tax expense (FTE basis) |
432 |
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398 |
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|
870 |
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|
737 |
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Net income |
$ |
722 |
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$ |
669 |
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$ |
1,491 |
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$ |
1,236 |
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Period-end total assets |
$ |
286,846 |
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$ |
267,099 |
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$ |
393,380 |
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$ |
367,052 |
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Global Markets |
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All Other |
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2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
1,093 |
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$ |
988 |
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$ |
(788 |
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$ |
1,131 |
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Noninterest income |
3,220 |
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2,962 |
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86 |
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538 |
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Total revenue, net of interest expense (FTE basis) |
4,313 |
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3,950 |
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(702 |
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1,669 |
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Provision for credit losses |
(5 |
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6 |
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38 |
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112 |
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Noninterest expense |
2,582 |
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2,748 |
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1,081 |
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1,002 |
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Income (loss) before income taxes (FTE basis) |
1,736 |
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1,196 |
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(1,821 |
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555 |
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Income tax expense (benefit) (FTE basis) |
620 |
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410 |
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(1,006 |
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(226 |
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Net income (loss) |
$ |
1,116 |
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$ |
786 |
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$ |
(815 |
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$ |
781 |
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Period-end total assets |
$ |
577,428 |
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$ |
578,052 |
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$ |
260,485 |
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$ |
314,948 |
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(1) |
There were no material intersegment revenues. |
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Results of Business Segments and All Other |
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At and for the Six Months Ended June 30 |
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Total Corporation (1)
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Consumer Banking |
(Dollars in millions) |
2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
18,822 |
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$ |
20,310 |
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$ |
10,548 |
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$ |
10,046 |
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Noninterest income |
21,526 |
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22,998 |
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5,117 |
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5,426 |
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Total revenue, net of interest expense (FTE basis) |
40,348 |
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43,308 |
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15,665 |
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15,472 |
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Provision for credit losses |
1,973 |
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1,545 |
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1,257 |
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1,139 |
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Noninterest expense |
28,309 |
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29,785 |
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8,954 |
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9,369 |
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Income before income taxes (FTE basis) |
10,066 |
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11,978 |
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5,454 |
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4,964 |
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Income tax expense (FTE basis) |
3,154 |
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3,747 |
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2,007 |
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1,846 |
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Net income |
$ |
6,912 |
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$ |
8,231 |
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$ |
3,447 |
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$ |
3,118 |
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Period-end total assets |
$ |
2,186,609 |
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$ |
2,149,034 |
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$ |
668,470 |
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$ |
621,883 |
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Global Wealth &
Investment Management |
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Global Banking |
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2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
2,922 |
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$ |
2,695 |
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$ |
4,902 |
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$ |
4,371 |
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Noninterest income |
5,978 |
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6,382 |
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4,178 |
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4,251 |
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Total revenue, net of interest expense (FTE basis) |
8,900 |
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9,077 |
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9,080 |
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8,622 |
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Provision for credit losses |
39 |
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38 |
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756 |
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273 |
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Noninterest expense |
6,563 |
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6,974 |
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4,297 |
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4,235 |
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Income before income taxes (FTE basis) |
2,298 |
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2,065 |
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4,027 |
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4,114 |
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Income tax expense (FTE basis) |
852 |
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768 |
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1,482 |
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1,531 |
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Net income |
$ |
1,446 |
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$ |
1,297 |
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$ |
2,545 |
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$ |
2,583 |
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Period-end total assets |
$ |
286,846 |
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$ |
267,099 |
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$ |
393,380 |
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$ |
367,052 |
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Global Markets |
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All Other |
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2016 |
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2015 |
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2016 |
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2015 |
Net interest income (FTE basis) |
$ |
2,273 |
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$ |
1,961 |
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$ |
(1,823 |
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$ |
1,237 |
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Noninterest income |
5,987 |
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6,180 |
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266 |
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759 |
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Total revenue, net of interest expense (FTE basis) |
8,260 |
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8,141 |
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(1,557 |
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1,996 |
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Provision for credit losses |
4 |
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27 |
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(83 |
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68 |
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Noninterest expense |
5,032 |
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5,909 |
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3,463 |
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3,298 |
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Income (loss) before income taxes (FTE basis) |
3,224 |
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2,205 |
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(4,937 |
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(1,370 |
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Income tax expense (benefit) (FTE basis) |
1,138 |
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755 |
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(2,325 |
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(1,153 |
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Net income (loss) |
$ |
2,086 |
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$ |
1,450 |
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$ |
(2,612 |
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$ |
(217 |
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Period-end total assets |
$ |
577,428 |
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$ |
578,052 |
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$ |
260,485 |
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$ |
314,948 |
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(1) |
There were no material intersegment revenues. |
The table below presents a reconciliation of the four business segments' total revenue, net of interest expense, on an FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. The adjustments presented in the table below include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
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Business Segment Reconciliations |
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Three Months Ended June 30 |
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Six Months Ended June 30 |
(Dollars in millions) |
2016 |
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2015 |
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2016 |
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2015 |
Segments' total revenue, net of interest expense (FTE basis) |
$ |
21,323 |
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$ |
20,510 |
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$ |
41,905 |
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$ |
41,312 |
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Adjustments: |
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ALM activities |
(886 |
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976 |
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(2,137 |
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727 |
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Liquidating businesses and other |
184 |
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693 |
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580 |
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1,269 |
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FTE basis adjustment |
(223 |
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(223 |
) |
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(438 |
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(438 |
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Consolidated revenue, net of interest expense |
$ |
20,398 |
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$ |
21,956 |
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$ |
39,910 |
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$ |
42,870 |
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Segments' total net income |
$ |
5,047 |
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$ |
4,353 |
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$ |
9,524 |
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$ |
8,448 |
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Adjustments, net-of-taxes: |
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ALM activities |
(668 |
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468 |
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(1,550 |
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167 |
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Liquidating businesses and other |
(147 |
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313 |
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(1,062 |
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(384 |
) |
Consolidated net income |
$ |
4,232 |
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$ |
5,134 |
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$ |
6,912 |
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$ |
8,231 |
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June 30 |
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2016 |
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2015 |
Segments' total assets |
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$ |
1,926,124 |
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$ |
1,834,086 |
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Adjustments: |
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ALM activities, including securities portfolio |
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623,051 |
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614,053 |
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Equity investments |
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4,137 |
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4,655 |
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Liquidating businesses and other |
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125,331 |
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153,551 |
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Elimination of segment asset allocations to match liabilities |
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(492,034 |
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(457,311 |
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Consolidated total assets |
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$ |
2,186,609 |
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$ |
2,149,034 |
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