Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v3.6.0.2
Business Segment Information
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Business Segment Information
Business Segment Information
The Corporation 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.
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, 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. Consumer Banking includes the impact of servicing residential mortgages and home equity loans in the core portfolio.
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, and underwriting and advisory services through the Corporation’s network of offices and client relationship teams. Global Banking also provides investment banking products to clients. The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. Global Banking clients generally include middle-market companies, commercial real estate firms, 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 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. As a result of market-making activities, Global Markets may be required to manage risk in a broad range of financial products. In addition, the economics of certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking under an internal revenue-sharing arrangement.
All Other
All Other consists of ALM activities, equity investments, the non-U.S. consumer credit card business, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the MSR valuation model for both core and non-core MSRs, other liquidating businesses, residual expense allocations and other. ALM activities encompass certain residential mortgages, debt securities, interest rate and foreign currency risk management activities, the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to the business segments. Equity investments include the merchant services joint venture as well as GPI. On December, 20, 2016, the Corporation entered into an agreement to sell its non-U.S. consumer credit card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017.
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.
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 costs of certain centralized or shared functions are allocated based on methodologies that reflect utilization.
The tables below present net income (loss) and the components thereto (with net interest income on an FTE basis) for 2016, 2015 and 2014, and total assets at December 31, 2016 and 2015 for each business segment, as well as All Other, including 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.
 
 
 
 
 
 
 
 
 
 
 
 
Results of Business Segments and All Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At and for the Year Ended December 31
 
 
Total Corporation (1)
 
Consumer Banking
(Dollars in millions)
 
 
 
 
2016
2015
2014
 
2016
2015
2014
Net interest income (FTE basis)
 
 
 
 
$
41,996

$
39,847

$
41,630

 
$
21,290

$
20,428

$
20,790

Noninterest income
 
 
 
 
42,605

44,007

45,115

 
10,441

11,097

11,038

Total revenue, net of interest expense (FTE basis)
 
 
 
 
84,601

83,854

86,745

 
31,731

31,525

31,828

Provision for credit losses
 
 
 
 
3,597

3,161

2,275

 
2,715

2,346

2,470

Noninterest expense
 
 
 
 
54,951

57,734

75,656

 
17,653

18,716

19,390

Income before income taxes (FTE basis)
 
 
 
 
26,053

22,959

8,814

 
11,363

10,463

9,968

Income tax expense (FTE basis)
 
 
 
 
8,147

7,123

3,294

 
4,190

3,814

3,717

Net income
 
 
 
 
$
17,906

$
15,836

$
5,520

 
$
7,173

$
6,649

$
6,251

Year-end total assets
 
 
 
 
$
2,187,702

$
2,144,287

 

 
$
702,339

$
645,427

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
 
 
 
2016
2015
2014
 
2016
2015
2014
Net interest income (FTE basis)
 
 
 
 
$
5,759

$
5,527

$
5,830

 
$
9,942

$
9,244

$
9,752

Noninterest income
 
 
 
 
11,891

12,507

12,573

 
8,488

8,377

8,514

Total revenue, net of interest expense (FTE basis)
 
 
 
 
17,650

18,034

18,403

 
18,430

17,621

18,266

Provision for credit losses
 
 
 
 
68

51

14

 
883

686

325

Noninterest expense
 
 
 
 
13,182

13,943

13,836

 
8,486

8,481

8,806

Income before income taxes (FTE basis)
 
 
 
 
4,400

4,040

4,553

 
9,061

8,454

9,135

Income tax expense (FTE basis)
 
 
 
 
1,629

1,473

1,698

 
3,341

3,114

3,353

Net income
 
 
 
 
$
2,771

$
2,567

$
2,855

 
$
5,720

$
5,340

$
5,782

Year-end total assets
 
 
 
 
$
298,932

$
296,271

 

 
$
408,268

$
386,132

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2016
2015
2014
 
2016
2015
2014
Net interest income (FTE basis)
 
 
 
 
$
4,558

$
4,191

$
3,851

 
$
447

$
457

$
1,407

Noninterest income
 
 
 
 
11,532

10,822

12,279

 
253

1,204

711

Total revenue, net of interest expense (FTE basis)
 
 
 
 
16,090

15,013

16,130

 
700

1,661

2,118

Provision for credit losses
 
 
 
 
31

99

110

 
(100
)
(21
)
(644
)
Noninterest expense
 
 
 
 
10,170

11,374

11,989

 
5,460

5,220

21,635

Income (loss) before income taxes (FTE basis)
 
 
 
 
5,889

3,540

4,031

 
(4,660
)
(3,538
)
(18,873
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
2,072

1,117

1,441

 
(3,085
)
(2,395
)
(6,915
)
Net income (loss)
 
 
 
 
$
3,817

$
2,423

$
2,590

 
$
(1,575
)
$
(1,143
)
$
(11,958
)
Year-end total assets
 
 
 
 
$
566,060

$
548,790

 
 
$
212,103

$
267,667

 

 
 
 
 
 
 
 
 
 
 
 
 
Business Segment Reconciliations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016
2015
2014
Segments’ total revenue, net of interest expense (FTE basis)
 
$
83,901

$
82,193

$
84,627

Adjustments (2):
 
 

 

 

ALM activities
 
(286
)
(208
)
13

Liquidating businesses and other
 
986

1,869

2,105

FTE basis adjustment
 
(900
)
(889
)
(851
)
Consolidated revenue, net of interest expense
 
 
 
 
 
 
 
 
$
83,701

$
82,965

$
85,894

Segments’ total net income
 
 
 
 
 
 
 
 
19,481

16,979

17,478

Adjustments, net-of-taxes (2):
 
 
 
 
 
 
 
 
 

 

 

ALM activities
 
 
 
 
 
 
 
 
(642
)
(694
)
(262
)
Liquidating businesses and other
 
 
 
 
 
 
 
 
(933
)
(449
)
(11,696
)
Consolidated net income
 
 
 
 
 
 
 
 
$
17,906

$
15,836

$
5,520

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31
 
 
 
 
 
 
 
 
 
 
2016
2015
Segments’ total assets
 
 
 
 
 
 
 
 
 
$
1,975,599

$
1,876,620

Adjustments (2):
 
 
 
 
 
 
 
 
 
 

 

ALM activities, including securities portfolio
 
 
 
 
 
 
 
 
 
613,058

612,364

Liquidating businesses and other (3)
 
 
 
 
 
 
 
 
 
117,708

144,310

Elimination of segment asset allocations to match liabilities
 
 
 
 
 
 
(518,663
)
(489,007
)
Consolidated total assets
 
 
 
 
 
 
 
 
 
$
2,187,702

$
2,144,287


(1) 
There were no material intersegment revenues.
(2) 
Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
(3) 
Includes assets of the non-U.S. consumer credit card business which are included in assets of business held for sale on the Consolidated Balance Sheet.