Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v3.4.0.3
Business Segment Information
 3 Months Ended
Mar. 31, 2016
Segment Reporting [Abstract]  
Business Segment Information
NOTE 18 – 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. For additional information, see Note 24 – Business Segment Information to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

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. Beginning in 2016, this allocation excludes any adjustments to the accumulated premium or discount amortization of MBS that are made as a result of a change in the estimated lives of these securities.

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 the three months ended March 31, 2016 and 2015, and total assets at March 31, 2016 and 2015 for each business segment, as well as All Other.

Results for Business Segments and All Other
 
 
 
 
At and for the Three Months Ended March 31
 
 
 
 
 
Total Corporation (1)
 
Consumer Banking
 
Global Wealth &
Investment Management
(Dollars in millions)
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net interest income (FTE basis)
$
9,386

 
$
9,626

 
$
5,185

 
$
4,872

 
$
1,489

 
$
1,351

Noninterest income
10,341

 
11,503

 
2,463

 
2,534

 
2,956

 
3,166

Total revenue, net of interest expense (FTE basis)
19,727

 
21,129

 
7,648

 
7,406

 
4,445

 
4,517

Provision for credit losses
997

 
765

 
560

 
716

 
25

 
23

Noninterest expense
14,816

 
15,827

 
4,266

 
4,367

 
3,250

 
3,458

Income before income taxes (FTE basis)
3,914

 
4,537

 
2,822

 
2,323

 
1,170

 
1,036

Income tax expense (FTE basis)
1,234

 
1,440

 
1,037

 
862

 
430

 
384

Net income
$
2,680

 
$
3,097

 
$
1,785

 
$
1,461

 
$
740

 
$
652

Period-end total assets
$
2,185,498

 
$
2,143,545

 
$
656,615

 
$
612,939

 
$
296,062

 
$
272,777

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2016
 
2015
 
2016
 
2015
Net interest income (FTE basis)
 
 
 
 
$
2,489

 
$
2,215

 
$
1,189

 
$
981

Noninterest income
 
 
 
 
1,909

 
2,187

 
2,762

 
3,210

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,398

 
4,402

 
3,951

 
4,191

Provision for credit losses
 
 
 
 
553

 
96

 
9

 
21

Noninterest expense
 
 
 
 
2,159

 
2,132

 
2,432

 
3,140

Income before income taxes (FTE basis)
 
 
 
 
1,686

 
2,174

 
1,510

 
1,030

Income tax expense (FTE basis)
 
 
 
 
620

 
807

 
526

 
353

Net income
 
 
 
 
$
1,066

 
$
1,367

 
$
984

 
$
677

Period-end total assets
 
 
 
 
$
390,643

 
$
365,024

 
$
582,048

 
$
585,187

 
 
 
 
 
 
 
 
 
 
 
 
 
Legacy Assets & Servicing
 
All Other
 
 
 
 
 
2016
 
2015
 
2016
 
2015
Net interest income (FTE basis)
 
 
 
 
$
314

 
$
428

 
$
(1,280
)
 
$
(221
)
Noninterest income
 
 
 
 
365

 
486

 
(114
)
 
(80
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
679

 
914

 
(1,394
)
 
(301
)
Provision for credit losses
 
 
 
 
(118
)
 
91

 
(32
)
 
(182
)
Noninterest expense
 
 
 
 
860

 
1,200

 
1,849

 
1,530

Loss before income taxes (FTE basis)
 
 
 
 
(63
)
 
(377
)
 
(3,211
)
 
(1,649
)
Income tax benefit (FTE basis)
 
 
 
 
(23
)
 
(140
)
 
(1,356
)
 
(826
)
Net loss
 
 
 
 
$
(40
)
 
$
(237
)
 
$
(1,855
)
 
$
(823
)
Period-end total assets
 
 
 
 
$
38,928

 
$
53,620

 
$
221,202

 
$
253,998

(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
 
 
Three Months Ended March 31
(Dollars in millions)
2016
 
2015
Segments' total revenue, net of interest expense (FTE basis)
$
21,121

 
$
21,430

Adjustments:
 
 
 
ALM activities
(1,241
)
 
(210
)
Liquidating businesses and other
(153
)
 
(91
)
FTE basis adjustment
(215
)
 
(215
)
Consolidated revenue, net of interest expense
$
19,512

 
$
20,914

 
 
 
 
Segments' total net income
$
4,535

 
$
3,920

Adjustments, net-of-taxes:
 
 
 
ALM activities
(884
)
 
(228
)
Liquidating businesses and other
(971
)
 
(595
)
Consolidated net income
$
2,680

 
$
3,097

 
 
 
 
 
March 31
 
2016
 
2015
Segments' total assets
$
1,964,296

 
$
1,889,547

Adjustments:
 
 
 
ALM activities, including securities portfolio
688,730

 
694,056

Equity investments
4,205

 
4,701

Liquidating businesses and other
59,888

 
68,187

Elimination of segment asset allocations to match liabilities
(531,621
)
 
(512,946
)
Consolidated total assets
$
2,185,498

 
$
2,143,545