Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v3.3.1.900
Business Segment Information
 12 Months Ended
Dec. 31, 2015
Segment Reporting [Abstract]  
Business Segment Information
Business Segment Information
The Corporation reports its results of operations through the following five business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, Global Markets and Legacy Assets & Servicing (LAS), with the remaining operations recorded in All Other.
Consumer Banking
Consumer Banking offers a diversified range of credit, banking and investment products and services to consumers and small businesses. Consumer Banking product offerings include traditional savings accounts, money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans to consumers and small businesses in the U.S. Customers and clients have access to a franchise network that stretches coast to coast through 33 states and the District of Columbia. The franchise network includes approximately 4,700 financial centers, 16,000 ATMs, nationwide call centers, and online and mobile platforms.
Global Wealth & Investment Management
GWIM provides a high-touch client experience through a network of financial advisors focused on clients with over $250,000 in total investable assets, including tailored solutions to meet clients’ needs through a full set of investment management, brokerage, banking and retirement products. GWIM also provides comprehensive wealth management solutions targeted to high net worth and ultra high net worth clients, as well as customized solutions to meet clients’ wealth structuring, investment management, trust and banking needs, including specialty asset management services.
Global Banking
Global Banking provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients, and underwriting and advisory services through the Corporation’s network of offices and client relationship teams. Global Banking’s lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Global Banking’s treasury solutions business includes treasury management, foreign exchange and short-term investing options. Global Banking also provides investment banking products to clients such as debt and equity underwriting and distribution, and merger-related and other advisory services. The economics of most investment banking and underwriting activities are shared primarily between Global Banking and Global Markets based on the activities performed by each segment. Global Banking clients generally include middle-market companies, commercial real estate firms, auto dealerships, not-for-profit companies, large global corporations, financial institutions, leasing clients, and mid-sized U.S.-based businesses requiring customized and integrated financial advice and solutions.
Global Markets
Global Markets offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. Global Markets provides market-making, financing, securities clearing, settlement and custody services globally to institutional investor clients in support of their investing and trading activities. Global Markets also works with commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. As a result of market-making activities in these products, Global Markets may be required to manage risk in a broad range of financial products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, MBS, commodities and ABS. In addition, the economics of most investment banking and underwriting activities are shared primarily between Global Markets and Global Banking based on the activities performed by each segment.
Legacy Assets & Servicing
LAS is responsible for mortgage servicing activities related to residential first mortgage and home equity loans serviced for others and loans held by the Corporation, including loans that have been designated as the LAS Portfolios, and manages certain legacy exposures related to mortgage origination, sales and servicing activities (e.g., litigation, representations and warranties). LAS also includes the results of MSR activities, including net hedge results. Home equity loans are held on the balance sheet of LAS, and residential mortgage loans are included as part of All Other. The financial results of the on-balance sheet loans are reported in the segment that owns the loans or in All Other.
All Other
All Other consists of ALM activities, equity investments, the international consumer card business, liquidating businesses, residual expense allocations and other. ALM activities encompass certain residential mortgages, debt securities, interest rate and foreign currency risk management activities including the residual net interest income allocation, the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to the business segments. Additionally, certain residential mortgage loans that are managed by LAS are held in All Other.

Basis of Presentation
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. Further, net interest income on an FTE basis includes market-related adjustments, which are adjustments to net interest income to reflect the impact of changes in long-term interest rates on the estimated lives of mortgage-related debt securities thereby impacting premium amortization. Also included in market-related adjustments is hedge ineffectiveness that impacts net interest income.
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 2015, 2014 and 2013, and total assets at December 31, 2015 and 2014 for each business segment, as well as All Other.
 
 
 
 
 
 
 
 
 
 
 
 
Results for Business Segments and All Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At and for the Year Ended December 31
Total Corporation (1)
 
Consumer Banking
 
Global Wealth &
Investment Management
(Dollars in millions)
2015
2014
2013
 
2015
2014
2013
 
2015
2014
2013
Net interest income (FTE basis)
$
40,160

$
40,821

$
43,124

 
$
19,844

$
20,177

$
20,619

 
$
5,499

$
5,836

$
6,064

Noninterest income
43,256

44,295

46,677

 
10,774

10,632

11,313

 
12,502

12,568

11,726

Total revenue, net of interest expense (FTE basis)
83,416

85,116

89,801

 
30,618

30,809

31,932

 
18,001

18,404

17,790

Provision for credit losses
3,161

2,275

3,556

 
2,524

2,680

3,166

 
51

14

56

Noninterest expense
57,192

75,117

69,214

 
17,485

17,865

18,865

 
13,843

13,654

13,039

Income before income taxes (FTE basis)
23,063

7,724

17,031

 
10,609

10,264

9,901

 
4,107

4,736

4,695

Income tax expense (FTE basis)
7,175

2,891

5,600

 
3,870

3,828

3,630

 
1,498

1,767

1,722

Net income
$
15,888

$
4,833

$
11,431

 
$
6,739

$
6,436

$
6,271

 
$
2,609

$
2,969

$
2,973

Year-end total assets
$
2,144,316

$
2,104,534

 

 
$
636,464

$
588,878

 

 
$
296,139

$
274,887

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2015
2014
2013
 
2015
2014
2013
Net interest income (FTE basis)
 
 
 
 
$
9,254

$
9,810

$
9,692

 
$
4,338

$
4,004

$
4,237

Noninterest income
 
 
 
 
7,665

7,797

7,744

 
10,729

12,184

11,221

Total revenue, net of interest expense (FTE basis)
 
 
 
 
16,919

17,607

17,436

 
15,067

16,188

15,458

Provision for credit losses
 
 
 
 
685

322

1,142

 
99

110

140

Noninterest expense
 
 
 
 
7,888

8,170

8,051

 
11,310

11,862

12,094

Income before income taxes (FTE basis)
 
 
 
 
8,346

9,115

8,243

 
3,658

4,216

3,224

Income tax expense (FTE basis)
 
 
 
 
3,073

3,346

3,024

 
1,162

1,511

2,090

Net income
 
 
 
 
$
5,273

$
5,769

$
5,219

 
$
2,496

$
2,705

$
1,134

Year-end total assets
 
 
 
 
$
382,043

$
353,637

 

 
$
551,587

$
579,594

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legacy Assets & Servicing
 
All Other
 
 
 
 
 
2015
2014
2013
 
2015
2014
2013
Net interest income (FTE basis)
 
 
 
 
$
1,573

$
1,520

$
1,552

 
$
(348
)
$
(526
)
$
960

Noninterest income
 
 
 
 
1,857

1,156

2,872

 
(271
)
(42
)
1,801

Total revenue, net of interest expense (FTE basis)
 
 
 
 
3,430

2,676

4,424

 
(619
)
(568
)
2,761

Provision for credit losses
 
 
 
 
144

127

(283
)
 
(342
)
(978
)
(665
)
Noninterest expense
 
 
 
 
4,451

20,633

12,416

 
2,215

2,933

4,749

Loss before income taxes (FTE basis)
 
 
 
 
(1,165
)
(18,084
)
(7,709
)
 
(2,492
)
(2,523
)
(1,323
)
Income tax benefit (FTE basis)
 
 
 
 
(425
)
(4,974
)
(2,826
)
 
(2,003
)
(2,587
)
(2,040
)
Net income (loss)
 
 
 
 
$
(740
)
$
(13,110
)
$
(4,883
)
 
$
(489
)
$
64

$
717

Year-end total assets
 
 
 
 
$
47,292

$
45,957

 

 
$
230,791

$
261,581

 


(1) 
There were no material intersegment revenues.
The table below presents a reconciliation of the five 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.
 
 
 
 
 
 
Business Segment Reconciliations
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
2015
 
2014
 
2013
Segments’ total revenue, net of interest expense (FTE basis)
$
84,035

 
$
85,684

 
$
87,040

Adjustments:
 

 
 

 
 

ALM activities
237

 
(804
)
 
(545
)
Equity investment income
—

 
727

 
2,737

Liquidating businesses and other
(856
)
 
(491
)
 
569

FTE basis adjustment
(909
)
 
(869
)
 
(859
)
Consolidated revenue, net of interest expense
$
82,507

 
$
84,247

 
$
88,942

Segments’ total net income
$
16,377

 
$
4,769

 
$
10,714

Adjustments, net-of-taxes:
 

 
 

 
 

ALM activities
(305
)
 
(343
)
 
(929
)
Equity investment income
—

 
454

 
1,724

Liquidating businesses and other
(184
)
 
(47
)
 
(78
)
Consolidated net income
$
15,888

 
$
4,833

 
$
11,431

 
 
 
 
 
 
 
 
 
December 31
 
 
 
2015
 
2014
Segments’ total assets
 
 
$
1,913,525

 
$
1,842,953

Adjustments:
 
 
 

 
 

ALM activities, including securities portfolio
 
 
681,876

 
658,319

Equity investments
 
 
4,297

 
4,871

Liquidating businesses and other
 
 
63,465

 
73,008

Elimination of segment asset allocations to match liabilities
 
 
(518,847
)
 
(474,617
)
Consolidated total assets
 
 
$
2,144,316

 
$
2,104,534