Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v3.3.0.814
Business Segment Information
 9 Months Ended
Sep. 30, 2015
Segment Reporting [Abstract]  
Business Segment Information
NOTE 18 – Business Segment Information

Effective January 1, 2015, to align the segments with how the Corporation manages the businesses in 2015, it changed its basis of presentation, and following such change, 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. The Home Loans business, which was included in the former Consumer Real Estate Services (CRES) segment, is now included in Consumer Banking, and LAS (also in the former CRES segment) became a separate segment. A portion of the Business Banking business, based on the size of the client, was moved from the former Consumer & Business Banking (CBB) segment to Global Banking, and the former CBB segment was renamed Consumer Banking. Also, the merchant services joint venture moved from the former CBB segment to All Other. In addition, certain management accounting methodologies, including the treatment of intersegment assets and liabilities, and related allocations were refined. Prior periods have been reclassified to conform to the current period presentation.

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, 16,100 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 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 client-managed 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 following tables present net income (loss) and the components thereto (with net interest income on an FTE basis) for the three and nine months ended September 30, 2015 and 2014, and total assets at September 30, 2015 and 2014 for each business segment, as well as All Other.

Results for Business Segments and All Other
 
 
 
 
At and for the Three Months Ended September 30
 
 
 
 
 
Total Corporation (1)
 
Consumer Banking
 
Global Wealth &
Investment Management
(Dollars in millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
$
9,742

 
$
10,444

 
$
5,005

 
$
5,081

 
$
1,376

 
$
1,459

Noninterest income
11,171

 
10,990

 
2,827

 
2,668

 
3,092

 
3,207

Total revenue, net of interest expense (FTE basis)
20,913

 
21,434

 
7,832

 
7,749

 
4,468

 
4,666

Provision for credit losses
806

 
636

 
648

 
668

 
(2
)
 
(15
)
Noninterest expense
13,807

 
20,142

 
4,434

 
4,462

 
3,447

 
3,405

Income before income taxes (FTE basis)
6,300

 
656

 
2,750

 
2,619

 
1,023

 
1,276

Income tax expense (FTE basis)
1,792

 
888

 
991

 
950

 
367

 
464

Net income (loss)
$
4,508

 
$
(232
)
 
$
1,759

 
$
1,669

 
$
656

 
$
812

Period-end total assets
$
2,153,006

 
$
2,123,613

 
$
615,152

 
$
580,372

 
$
279,155

 
$
266,240

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
 
 
 
 
$
2,345

 
$
2,450

 
$
1,135

 
$
999

Noninterest income
 
 
 
 
1,846

 
1,895

 
2,936

 
3,162

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,191

 
4,345

 
4,071

 
4,161

Provision for credit losses
 
 
 
 
179

 
(64
)
 
42

 
45

Noninterest expense
 
 
 
 
2,020

 
2,016

 
2,683

 
3,357

Income before income taxes (FTE basis)
 
 
 
 
1,992

 
2,393

 
1,346

 
759

Income tax expense (FTE basis)
 
 
 
 
715

 
872

 
338

 
388

Net income
 
 
 
 
$
1,277

 
$
1,521

 
$
1,008

 
$
371

Period-end total assets
 
 
 
 
$
372,363

 
$
354,944

 
$
579,776

 
$
598,804

 
 
 
 
 
 
 
 
 
 
 
 
 
Legacy Assets & Servicing
 
All Other
 
 
 
 
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
 
 
 
 
$
383

 
$
387

 
$
(502
)
 
$
68

Noninterest income
 
 
 
 
458

 
169

 
12

 
(111
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
841

 
556

 
(490
)
 
(43
)
Provision for credit losses
 
 
 
 
6

 
267

 
(67
)
 
(265
)
Noninterest expense
 
 
 
 
1,143

 
6,648

 
80

 
254

Loss before income taxes (FTE basis)
 
 
 
 
(308
)
 
(6,359
)
 
(503
)
 
(32
)
Income tax benefit (FTE basis)
 
 
 
 
(112
)
 
(1,245
)
 
(507
)
 
(541
)
Net income (loss)
 
 
 
 
$
(196
)
 
$
(5,114
)
 
$
4

 
$
509

Period-end total assets
 
 
 
 
$
49,080

 
$
56,908

 
$
257,480

 
$
266,345

(1) 
There were no material intersegment revenues.
Results of Business Segments and All Other
 
 
 
 
At and for the Nine Months Ended September 30
 
 
 
 
 
Total Corporation (1)
 
Consumer Banking
 
Global Wealth &
Investment Management
(Dollars in millions)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
$
30,128

 
$
30,956

 
$
14,786

 
$
15,211

 
$
4,086

 
$
4,430

Noninterest income
34,551

 
35,205

 
8,040

 
7,838

 
9,472

 
9,372

Total revenue, net of interest expense (FTE basis)
64,679

 
66,161

 
22,826

 
23,049

 
13,558

 
13,802

Provision for credit losses
2,351

 
2,056

 
1,870

 
2,027

 
36

 
—

Noninterest expense
43,320

 
60,921

 
13,141

 
13,446

 
10,366

 
10,213

Income before income taxes (FTE basis)
19,008

 
3,184

 
7,815

 
7,576

 
3,156

 
3,589

Income tax expense (FTE basis)
5,823

 
1,401

 
2,875

 
2,795

 
1,161

 
1,325

Net income
$
13,185

 
$
1,783

 
$
4,940

 
$
4,781

 
$
1,995

 
$
2,264

Period-end total assets
$
2,153,006

 
$
2,123,613

 
$
615,152

 
$
580,372

 
$
279,155

 
$
266,240

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
 
 
 
 
$
6,818

 
$
7,396

 
$
3,172

 
$
2,968

Noninterest income
 
 
 
 
5,749

 
5,897

 
9,789

 
10,833

Total revenue, net of interest expense (FTE basis)
 
 
 
 
12,567

 
13,293

 
12,961

 
13,801

Provision for credit losses
 
 
 
 
452

 
353

 
69

 
83

Noninterest expense
 
 
 
 
5,952

 
6,200

 
8,556

 
9,341

Income before income taxes (FTE basis)
 
 
 
 
6,163

 
6,740

 
4,336

 
4,377

Income tax expense (FTE basis)
 
 
 
 
2,268

 
2,491

 
1,392

 
1,597

Net income
 
 
 
 
$
3,895

 
$
4,249

 
$
2,944

 
$
2,780

Period-end total assets
 
 
 
 
$
372,363

 
$
354,944

 
$
579,776

 
$
598,804

 
 
 
 
 
 
 
 
 
 
 
Legacy Assets & Servicing
 
All Other
 
 
 
 
 
2015
 
2014
 
2015
 
2014
Net interest income (FTE basis)
 
 
 
 
$
1,228

 
$
1,126

 
$
38

 
$
(175
)
Noninterest income
 
 
 
 
1,616

 
916

 
(115
)
 
349

Total revenue, net of interest expense (FTE basis)
 
 
 
 
2,844

 
2,042

 
(77
)
 
174

Provision for credit losses
 
 
 
 
154

 
240

 
(230
)
 
(647
)
Noninterest expense
 
 
 
 
3,307

 
19,287

 
1,998

 
2,434

Loss before income taxes (FTE basis)
 
 
 
 
(617
)
 
(17,485
)
 
(1,845
)
 
(1,613
)
Income tax benefit (FTE basis)
 
 
 
 
(227
)
 
(4,748
)
 
(1,646
)
 
(2,059
)
Net income (loss)
 
 
 
 
$
(390
)
 
$
(12,737
)
 
$
(199
)
 
$
446

Period-end total assets
 
 
 
 
$
49,080

 
$
56,908

 
$
257,480

 
$
266,345


(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 (loss) 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
 
 
 
 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2015
 
2014
 
2015
 
2014
Segments' total revenue, net of interest expense (FTE basis)
$
21,403

 
$
21,477

 
$
64,756

 
$
65,987

Adjustments:
 
 
 
 
 
 
 
ALM activities
(115
)
 
195

 
677

 
(154
)
Equity investment income (loss)
(46
)
 
(26
)
 
(34
)
 
766

Liquidating businesses and other
(329
)
 
(212
)
 
(720
)
 
(438
)
FTE basis adjustment
(231
)
 
(225
)
 
(678
)
 
(639
)
Consolidated revenue, net of interest expense
$
20,682

 
$
21,209

 
$
64,001

 
$
65,522

 
 
 
 
 
 
 
 
Segments' total net income (loss)
$
4,504

 
$
(741
)
 
$
13,384

 
$
1,337

Adjustments, net-of-taxes:
 
 
 
 
 
 
 
ALM activities
(184
)
 
107

 
25

 
33

Equity investment income (loss)
(29
)
 
(16
)
 
(21
)
 
479

Liquidating businesses and other
217

 
418

 
(203
)
 
(66
)
Consolidated net income (loss)
$
4,508

 
$
(232
)
 
$
13,185

 
$
1,783

 
 
 
 
 
 
 
 
 
 
 
September 30
 
 
 
 
 
2015
 
2014
Segments' total assets
 
 
 
 
$
1,895,526

 
$
1,857,268

Adjustments:
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
683,700

 
665,202

Equity investments
 
 
 
 
4,378

 
5,001

Liquidating businesses and other
 
 
 
 
63,135

 
79,576

Elimination of segment asset allocations to match liabilities
 
 
 
 
(493,733
)
 
(483,434
)
Consolidated total assets
 
 
 
 
$
2,153,006

 
$
2,123,613