Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v3.8.0.1
Business Segment Information
 12 Months Ended
Dec. 31, 2017
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, and 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, 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 and the related economic hedge results and ineffectiveness, liquidating businesses, and residual expense allocations. 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 a portfolio of equity, real estate and other alternative investments. The initial impact of the Tax Act was recorded 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.
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 2017, 2016 and 2015, and total assets at December 31, 2017 and 2016 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)
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Net interest income (FTE basis)
$
45,592

 
$
41,996

 
$
39,847

 
$
24,307

 
$
21,290

 
$
20,428

Noninterest income
42,685

 
42,605

 
44,007

 
10,214

 
10,441

 
11,091

Total revenue, net of interest expense (FTE basis)
88,277

 
84,601

 
83,854

 
34,521

 
31,731

 
31,519

Provision for credit losses
3,396

 
3,597

 
3,161

 
3,525

 
2,715

 
2,346

Noninterest expense
54,743

 
55,083

 
57,617

 
17,787

 
17,654

 
18,710

Income before income taxes (FTE basis)
30,138

 
25,921

 
23,076

 
13,209

 
11,362

 
10,463

Income tax expense (FTE basis)
11,906

 
8,099

 
7,166

 
5,002

 
4,190

 
3,814

Net income
$
18,232

 
$
17,822

 
$
15,910

 
$
8,207

 
$
7,172

 
$
6,649

Period-end total assets
$
2,281,234

 
$
2,188,067

 
 

 
$
749,325

 
$
702,333

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Net interest income (FTE basis)
$
6,173

 
$
5,759

 
$
5,527

 
$
10,504

 
$
9,471

 
$
9,244

Noninterest income
12,417

 
11,891

 
12,507

 
9,495

 
8,974

 
8,377

Total revenue, net of interest expense (FTE basis)
18,590

 
17,650

 
18,034

 
19,999

 
18,445

 
17,621

Provision for credit losses
56

 
68

 
51

 
212

 
883

 
686

Noninterest expense
13,564

 
13,175

 
13,938

 
8,596

 
8,486

 
8,482

Income before income taxes (FTE basis)
4,970

 
4,407

 
4,045

 
11,191

 
9,076

 
8,453

Income tax expense (FTE basis)
1,882

 
1,632

 
1,475

 
4,238

 
3,347

 
3,114

Net income
$
3,088

 
$
2,775

 
$
2,570

 
$
6,953

 
$
5,729

 
$
5,339

Period-end total assets
$
284,321

 
$
298,931

 
 

 
$
424,533

 
$
408,330

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
2017
 
2016
 
2015
 
2017
 
2016
 
2015
Net interest income (FTE basis)
$
3,744

 
$
4,558

 
$
4,191

 
$
864

 
$
918

 
$
457

Noninterest income (loss)
12,207

 
11,532

 
10,822

 
(1,648
)
 
(233
)
 
1,210

Total revenue, net of interest expense (FTE basis)
15,951

 
16,090

 
15,013

 
(784
)
 
685

 
1,667

Provision for credit losses
164

 
31

 
99

 
(561
)
 
(100
)
 
(21
)
Noninterest expense
10,731

 
10,169

 
11,374

 
4,065

 
5,599

 
5,113

Income (loss) before income taxes (FTE basis)
5,056

 
5,890

 
3,540

 
(4,288
)
 
(4,814
)
 
(3,425
)
Income tax expense (benefit) (FTE basis)
1,763

 
2,072

 
1,117

 
(979
)
 
(3,142
)
 
(2,354
)
Net income (loss)
$
3,293

 
$
3,818

 
$
2,423

 
$
(3,309
)
 
$
(1,672
)
 
$
(1,071
)
Period-end total assets
$
629,007

 
$
566,060

 
 
 
$
194,048

 
$
212,413

 
 


 
 
 
 
 
 
 
Business Segment Reconciliations
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
Segments’ total revenue, net of interest expense (FTE basis)
 
$
89,061

 
$
83,916

 
$
82,187

Adjustments (2):
 
 
 
 

 
 

ALM activities
 
312

 
(300
)
 
(208
)
Liquidating businesses and other
 
(1,096
)
 
985

 
1,875

FTE basis adjustment
 
(925
)
 
(900
)
 
(889
)
Consolidated revenue, net of interest expense
 
$
87,352

 
$
83,701

 
$
82,965

Segments’ total net income
 
21,541

 
19,494

 
16,981

Adjustments, net-of-taxes (2):
 
 
 
 

 
 

ALM activities
 
(355
)
 
(651
)
 
(694
)
Liquidating businesses and other
 
(2,954
)
 
(1,021
)
 
(377
)
Consolidated net income
 
$
18,232

 
$
17,822

 
$
15,910

 
 
 
 
 
 
 
 
 
 
 
December 31
 
 
 
 
2017
 
2016
Segments’ total assets
 
 
 
$
2,087,186

 
$
1,975,654

Adjustments (2):
 
 
 
 

 
 

ALM activities, including securities portfolio
 
 
 
625,488

 
612,996

Liquidating businesses and other (3)
 
 
 
89,008

 
118,073

Elimination of segment asset allocations to match liabilities
 
 
 
(520,448
)
 
(518,656
)
Consolidated total assets
 
 
 
$
2,281,234

 
$
2,188,067


(1) 
There were no material intersegment revenues.
(2) 
Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
(3) 
At December 31, 2016, includes assets of the non-U.S. consumer credit card business which were included in assets of business held for sale on the Consolidated Balance Sheet.