Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v3.10.0.1
Business Segment Information
 12 Months Ended
Dec. 31, 2018
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 and research services 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 product coverage includes securities and derivative products in both the primary and secondary markets. 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 core and non-core MSRs and the related economic hedge results, 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 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.
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.
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 following table presents net income (loss) and the components thereto (with net interest income on an FTE basis for the business segments, All Other and the total Corporation) for 2018, 2017 and 2016, and total assets at December 31, 2018 and 2017 for each business segment, as well as All Other.
 
 
 
 
 
 
 
 
 
 
 
 
 
Results of Business Segments and All Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At and for the year ended December 31
 
Total Corporation (1)
 
Consumer Banking
(Dollars in millions)
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Net interest income
 
$
48,042

 
$
45,592

 
$
41,996

 
$
27,123

 
$
24,307

 
$
21,290

Noninterest income
 
43,815

 
42,685

 
42,605

 
10,400

 
10,214

 
10,441

Total revenue, net of interest expense
 
91,857

 
88,277

 
84,601

 
37,523

 
34,521

 
31,731

Provision for credit losses
 
3,282

 
3,396

 
3,597

 
3,664

 
3,525

 
2,715

Noninterest expense
 
53,381

 
54,743

 
55,083

 
17,713

 
17,795

 
17,664

Income before income taxes
 
35,194

 
30,138

 
25,921

 
16,146

 
13,201

 
11,352

Income tax expense
 
7,047

 
11,906

 
8,099

 
4,117

 
4,999

 
4,186

Net income
 
$
28,147

 
$
18,232

 
$
17,822

 
$
12,029

 
$
8,202

 
$
7,166

Year-end total assets
 
$
2,354,507

 
$
2,281,234

 
 
 
$
768,877

 
$
749,325

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Net interest income
 
$
6,294

 
$
6,173

 
$
5,759

 
$
10,881

 
$
10,504

 
$
9,471

Noninterest income
 
13,044

 
12,417

 
11,891

 
8,763

 
9,495

 
8,974

Total revenue, net of interest expense
 
19,338

 
18,590

 
17,650

 
19,644

 
19,999

 
18,445

Provision for credit losses
 
86

 
56

 
68

 
8

 
212

 
883

Noninterest expense
 
13,777

 
13,556

 
13,166

 
8,591

 
8,596

 
8,486

Income before income taxes
 
5,475

 
4,978

 
4,416

 
11,045

 
11,191

 
9,076

Income tax expense
 
1,396

 
1,885

 
1,635

 
2,872

 
4,238

 
3,347

Net income
 
$
4,079

 
$
3,093

 
$
2,781

 
$
8,173

 
$
6,953

 
$
5,729

Year-end total assets
 
$
305,906

 
$
284,321

 
 

 
$
441,477

 
$
424,533

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Net interest income
 
$
3,171

 
$
3,744

 
$
4,557

 
$
573

 
$
864

 
$
919

Noninterest income
 
12,892

 
12,207

 
11,533

 
(1,284
)
 
(1,648
)
 
(234
)
Total revenue, net of interest expense
 
16,063

 
15,951

 
16,090

 
(711
)
 
(784
)
 
685

Provision for credit losses
 
—

 
164

 
31

 
(476
)
 
(561
)
 
(100
)
Noninterest expense
 
10,686

 
10,731

 
10,171

 
2,614

 
4,065

 
5,596

Income (loss) before income taxes
 
5,377

 
5,056

 
5,888

 
(2,849
)
 
(4,288
)
 
(4,811
)
Income tax expense (benefit)
 
1,398

 
1,763

 
2,071

 
(2,736
)
 
(979
)
 
(3,140
)
Net income (loss)
 
$
3,979

 
$
3,293

 
$
3,817

 
$
(113
)
 
$
(3,309
)
 
$
(1,671
)
Year-end total assets
 
$
641,922

 
$
629,013

 
 
 
$
196,325

 
$
194,042

 
 

(1) 
There were no material intersegment revenues.
The table below presents noninterest income and the components thereto for 2018, 2017 and 2016 for each business segment, as well as All Other. For more information, see Note 1 – Summary of Significant Accounting Principles and Note 2 – Noninterest Income.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest Income by Business Segment and All Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Corporation
 
Consumer Banking
 
Global Wealth &
Investment Management
(Dollars in millions)
2018
 
2017
 
2016
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Card income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interchange fees
$
4,093

 
$
3,942

 
$
3,960

 
$
3,383

 
$
3,224

 
$
3,271

 
$
82

 
$
109

 
$
106

Other card income
1,958

 
1,960

 
1,891

 
1,906

 
1,846

 
1,664

 
46

 
44

 
44

Total card income
6,051

 
5,902

 
5,851

 
5,289

 
5,070

 
4,935

 
128

 
153

 
150

Service charges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit-related fees
6,667

 
6,708

 
6,545

 
4,300

 
4,266

 
4,142

 
73

 
76

 
74

Lending-related fees
1,100

 
1,110

 
1,093

 
—

 
—

 
—

 
—

 
—

 
—

Total service charges
7,767

 
7,818

 
7,638

 
4,300

 
4,266

 
4,142

 
73

 
76

 
74

Investment and brokerage services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees
10,189

 
9,310

 
8,328

 
147

 
133

 
120

 
10,042

 
9,177

 
8,208

Brokerage fees
3,971

 
4,526

 
5,021

 
172

 
184

 
200

 
1,917

 
2,217

 
2,666

Total investment and brokerage services
14,160

 
13,836

 
13,349

 
319

 
317

 
320

 
11,959

 
11,394

 
10,874

Investment banking income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting income
2,722

 
2,821

 
2,585

 
(1
)
 
—

 
2

 
335

 
316

 
225

Syndication fees
1,347

 
1,499

 
1,388

 
—

 
—

 
—

 
—

 
—

 
1

Financial advisory services
1,258

 
1,691

 
1,268

 
—

 
—

 
—

 
2

 
2

 
1

Total investment banking income
5,327

 
6,011

 
5,241

 
(1
)
 
—

 
2

 
337

 
318

 
227

Trading account profits
8,540

 
7,277

 
6,902

 
8

 
3

 
—

 
112

 
144

 
175

Other income
1,970

 
1,841

 
3,624

 
485

 
558

 
1,042

 
435

 
332

 
391

Total noninterest income
$
43,815

 
$
42,685

 
$
42,605

 
$
10,400

 
$
10,214

 
$
10,441

 
$
13,044

 
$
12,417

 
$
11,891

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
All Other (1)
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Card income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interchange fees
$
533

 
$
506

 
$
483

 
$
95

 
$
94

 
$
79

 
$
—

 
$
9

 
$
21

Other card income
8

 
12

 
20

 
(2
)
 
(2
)
 
(5
)
 
—

 
60

 
168

Total card income
541

 
518

 
503

 
93

 
92

 
74

 
—

 
69

 
189

Service charges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposit-related fees
2,111

 
2,197

 
2,170

 
161

 
147

 
143

 
22

 
22

 
16

Lending-related fees
916

 
928

 
924

 
184

 
182

 
169

 
—

 
—

 
—

Total service charges
3,027

 
3,125

 
3,094

 
345

 
329

 
312

 
22

 
22

 
16

Investment and brokerage services
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Brokerage fees
94

 
97

 
74

 
1,780

 
2,049

 
2,102

 
8

 
(21
)
 
(21
)
Total investment and brokerage services
94

 
97

 
74

 
1,780

 
2,049

 
2,102

 
8

 
(21
)
 
(21
)
Investment banking income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Underwriting income
502

 
511

 
426

 
2,084

 
2,249

 
2,100

 
(198
)
 
(255
)
 
(168
)
Syndication fees
1,237

 
1,403

 
1,302

 
109

 
95

 
85

 
1

 
1

 
—

Financial advisory services
1,152

 
1,557

 
1,156

 
103

 
132

 
111

 
1

 
—

 
—

Total investment banking income
2,891

 
3,471

 
2,884

 
2,296

 
2,476

 
2,296

 
(196
)
 
(254
)
 
(168
)
Trading account profits
260

 
134

 
133

 
7,932

 
6,710

 
6,550

 
228

 
286

 
44

Other income
1,950

 
2,150

 
2,286

 
446

 
551

 
199

 
(1,346
)
 
(1,750
)
 
(294
)
Total noninterest income
$
8,763

 
$
9,495

 
$
8,974

 
$
12,892

 
$
12,207

 
$
11,533

 
$
(1,284
)
 
$
(1,648
)
 
$
(234
)
(1) 
All Other includes eliminations of intercompany transactions.
The tables below present 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.
 
 
 
 
 
 
(Dollars in millions)
2018
 
2017
 
2016
Segments’ total revenue, net of interest expense
$
92,568

 
$
89,061

 
$
83,916

Adjustments (1):
 

 
 

 
 

ALM activities
588

 
312

 
(299
)
Liquidating businesses, eliminations and other
(1,299
)
 
(1,096
)
 
984

FTE basis adjustment
(610
)
 
(925
)
 
(900
)
Consolidated revenue, net of interest expense
$
91,247

 
$
87,352

 
$
83,701

Segments’ total net income
28,260

 
21,541

 
19,493

Adjustments, net-of-tax (1):
 
 
 

 
 

ALM activities
(46
)
 
(355
)
 
(651
)
Liquidating businesses, eliminations and other
(67
)
 
(2,954
)
 
(1,020
)
Consolidated net income
$
28,147

 
$
18,232

 
$
17,822

(1) 
Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
 
 
 
 
 
 
 
December 31
(Dollars in millions)
 
 
2018
 
2017
Segments’ total assets
$
2,158,182

 
$
2,087,192

Adjustments (1):
 

 
 

ALM activities, including securities portfolio
670,057

 
625,483

Elimination of segment asset allocations to match liabilities
(540,801
)
 
(520,448
)
Other
67,069

 
89,007

Consolidated total assets
$
2,354,507

 
$
2,281,234

(1) 
Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.