Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.3.0.15
Business Segment Information
 9 Months Ended
Sep. 30, 2011
Segment Reporting [Abstract]  
Business Segment Information
NOTE 20 – Business Segment Information

The Corporation reports the results of its operations through six business segments: Deposits, Card Services, Consumer Real Estate Services, Global Commercial Banking, Global Banking & Markets and Global Wealth & Investment Management, with the remaining operations recorded in All Other. During the three months ended September 30, 2011, as a result of the decision to exit the international consumer card businesses, the Global Card Services business segment was renamed Card Services. The international consumer card business results were moved to All Other and prior periods have been reclassified. For more information on each business segment, see Note 26 – Business Segment Information to the Consolidated Financial Statements of the Corporation's 2010 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 a fully taxable-equivalent (FTE) basis and noninterest income. The adjustment of net interest income to a 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. For presentation purposes, 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 the Corporation’s ALM activities.

The Corporation’s ALM activities include an overall interest rate risk management strategy that incorporates the use of interest rate contracts to manage fluctuations in earnings 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 net interest income. The majority of the Corporation’s ALM activities are allocated to the business segments and fluctuate based on performance. 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 centralized or shared functions are allocated based on methodologies that reflect utilization.

The following tables present total revenue, net of interest expense, on a FTE basis and net income (loss) for the three and nine months ended September 30, 2011 and 2010, and total assets at September 30, 2011 and 2010 for each business segment, as well as All Other.

Business Segments
Three Months Ended September 30
 
Total Corporation (1)
 
Deposits
 
Card Services
(Dollars in millions)
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Net interest income (2)
$
10,739

 
$
12,717

 
$
1,987

 
$
1,954

 
$
2,823

 
$
3,500

Noninterest income
17,963

 
14,265

 
1,132

 
1,192

 
1,684

 
1,877

Total revenue, net of interest expense
28,702

 
26,982

 
3,119

 
3,146

 
4,507

 
5,377

Provision for credit losses
3,407

 
5,396

 
52

 
62

 
1,037

 
3,066

Amortization of intangibles
377

 
426

 
39

 
49

 
150

 
167

Goodwill impairment
—

 
10,400

 
—

 
—

 
—

 
10,400

Other noninterest expense
17,236

 
16,390

 
2,588

 
2,725

 
1,308

 
1,267

Income (loss) before income taxes
7,682

 
(5,630
)
 
440

 
310

 
2,012

 
(9,523
)
Income tax expense (2)
1,450

 
1,669

 
164

 
112

 
748

 
321

Net income (loss)
$
6,232

 
$
(7,299
)
 
$
276

 
$
198

 
$
1,264

 
$
(9,844
)
Period-end total assets
$
2,219,628

 
$
2,339,660

 
$
448,906

 
$
434,854

 
$
128,759

 
$
140,257

 
 
 
 
 
 
 
Consumer Real
Estate Services
 
Global Commercial
Banking
 
Global Banking &
Markets
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Net interest income (2)
$
923

 
$
1,339

 
$
1,743

 
$
1,853

 
$
1,846

 
$
1,884

Noninterest income
1,899

 
2,273

 
790

 
780

 
3,376

 
5,189

Total revenue, net of interest expense
2,822

 
3,612

 
2,533

 
2,633

 
5,222

 
7,073

Provision for credit losses
918

 
1,302

 
(150
)
 
556

 
15

 
(157
)
Amortization of intangibles
—

 
7

 
15

 
18

 
32

 
31

Other noninterest expense
3,852

 
2,916

 
1,003

 
1,043

 
4,448

 
4,280

Income (loss) before income taxes
(1,948
)
 
(613
)
 
1,665

 
1,016

 
727

 
2,919

Income tax expense (benefit) (2)
(811
)
 
(221
)
 
615

 
372

 
1,029

 
1,451

Net income (loss)
$
(1,137
)
 
$
(392
)
 
$
1,050

 
$
644

 
$
(302
)
 
$
1,468

Period-end total assets
$
188,769

 
$
214,498

 
$
284,897

 
$
304,543

 
$
686,035

 
$
745,863

 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2011
 
2010
 
2011
 
2010
 
 
 
 
Net interest income (2)
$
1,411

 
$
1,345

 
$
6

 
$
842

 
 
 
 
Noninterest income
2,819

 
2,553

 
6,263

 
401

 
 
 
 
Total revenue, net of interest expense
4,230

 
3,898

 
6,269

 
1,243

 
 
 
 
Provision for credit losses
162

 
127

 
1,373

 
440

 
 
 
 
Amortization of intangibles
108

 
113

 
33

 
41

 
 
 
 
Other noninterest expense
3,408

 
3,232

 
629

 
927

 
 
 
 
Income (loss) before income taxes
552

 
426

 
4,234

 
(165
)
 
 
 
 
Income tax expense (benefit) (2)
205

 
157

 
(500
)
 
(523
)
 
 
 
 
Net income
$
347

 
$
269

 
$
4,734

 
$
358

 
 
 
 
Period-end total assets
$
280,686

 
$
266,489

 
$
201,576

 
$
233,156

 
 
 
 
(1) 
There were no material intersegment revenues.
(2) 
FTE basis
Business Segments
Nine Months Ended September 30
 
Total Corporation (1)

Deposits

Card Services
(Dollars in millions)
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Net interest income (2)
$
34,629

 
$
39,984

 
$
6,473

 
$
6,272

 
$
8,743

 
$
11,002

Noninterest income
34,651

 
48,738

 
3,136

 
4,287

 
5,342

 
5,982

Total revenue, net of interest expense
69,280

 
88,722

 
9,609

 
10,559

 
14,085

 
16,984

Provision for credit losses
10,476

 
23,306

 
116

 
160

 
1,934

 
9,116

Amortization of intangibles
1,144

 
1,311

 
117

 
147

 
451

 
502

Goodwill impairment
2,603

 
10,400

 
—

 
—

 
—

 
10,400

Other noninterest expense
57,005

 
50,533

 
7,718

 
7,779

 
4,181

 
3,993

Income (loss) before income taxes
(1,948
)
 
3,172

 
1,658

 
2,473

 
7,519

 
(7,027
)
Income tax expense (benefit) (2)
(1,403
)
 
4,166

 
607

 
911

 
2,752

 
1,242

Net income (loss)
$
(545
)
 
$
(994
)
 
$
1,051

 
$
1,562

 
$
4,767

 
$
(8,269
)
Period-end total assets
$
2,219,628

 
$
2,339,660

 
$
448,906

 
$
434,854

 
$
128,759

 
$
140,257

 
 
 
 
 
 
 
Consumer Real
Estate Services
 
Global Commercial
Banking
 
Global Banking &
Markets
 
2011
 
2010
 
2011
 
2010
 
2011
 
2010
Net interest income (2)
$
2,398

 
$
3,538

 
$
5,420

 
$
6,143

 
$
5,668

 
$
6,011

Noninterest income (loss)
(8,828
)
 
6,311

 
2,577

 
2,468

 
14,228

 
16,573

Total revenue, net of interest expense
(6,430
)
 
9,849

 
7,997

 
8,611

 
19,896

 
22,584

Provision for credit losses
3,523

 
7,292

 
(488
)
 
2,115

 
(269
)
 
(54
)
Amortization of intangibles
11

 
32

 
44

 
55

 
89

 
93

Goodwill impairment
2,603

 
—

 
—

 
—

 
—

 
—

Other noninterest expense
14,683

 
8,874

 
3,151

 
3,013

 
13,803

 
13,120

Income (loss) before income taxes
(27,250
)
 
(6,349
)
 
5,290

 
3,428

 
6,273

 
9,425

Income tax expense (benefit) (2)
(9,180
)
 
(2,339
)
 
1,936

 
1,263

 
2,873

 
3,797

Net income (loss)
$
(18,070
)
 
$
(4,010
)
 
$
3,354

 
$
2,165

 
$
3,400

 
$
5,628

Period-end total assets
$
188,769

 
$
214,498

 
$
284,897

 
$
304,543

 
$
686,035

 
$
745,863

 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
2011
 
2010
 
2011
 
2010
 
 
 
 
Net interest income (2)
$
4,551

 
$
4,252

 
$
1,376

 
$
2,766

 
 
 
 
Noninterest income
8,661

 
7,876

 
9,535

 
5,241

 
 
 
 
Total revenue, net of interest expense
13,212

 
12,128

 
10,911

 
8,007

 
 
 
 
Provision for credit losses
280

 
491

 
5,380

 
4,186

 
 
 
 
Amortization of intangibles
331

 
346

 
101

 
136

 
 
 
 
Other noninterest expense
10,415

 
9,391

 
3,054

 
4,363

 
 
 
 
Income (loss) before income taxes
2,186

 
1,900

 
2,376

 
(678
)
 
 
 
 
Income tax expense (benefit) (2)
800

 
878

 
(1,191
)
 
(1,586
)
 
 
 
 
Net income
$
1,386

 
$
1,022

 
$
3,567

 
$
908

 
 
 
 
Period-end total assets
$
280,686

 
$
266,489

 
$
201,576

 
$
233,156

 
 
 
 
(1) 
There were no material intersegment revenues.
(2) 
FTE basis

The tables below present a reconciliation of the six business segments’ total revenue, net of interest expense, on a FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. The adjustments presented in the tables below include consolidated income, expense and asset amounts not specifically allocated to individual business segments.

 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2011
 
2010
 
2011
 
2010
Segments’ total revenue, net of interest expense (1)
$
22,433

 
$
25,739

 
$
58,369

 
$
80,715

Adjustments:
 
 
 
 
 
 
 
ALM activities
5,286

 
690

 
6,193

 
2,401

Equity investment income
1,382

 
266

 
3,930

 
3,050

Liquidating businesses
519

 
687

 
2,284

 
4,052

FTE basis adjustment
(249
)
 
(282
)
 
(714
)
 
(900
)
Other
(918
)
 
(400
)
 
(1,496
)
 
(1,496
)
Consolidated revenue, net of interest expense
$
28,453

 
$
26,700

 
$
68,566

 
$
87,822

 
 
 
 
 
 
 
 
Segments’ net income (loss)
$
1,498

 
$
(7,657
)
 
$
(4,112
)
 
$
(1,902
)
Adjustments, net-of-tax:
 
 
 
 
 
 
 
ALM activities
2,579

 
117

 
633

 
(845
)
Equity investment income
871

 
168

 
2,476

 
1,922

Liquidating businesses
(220
)
 
52

 
—

 
526

Merger and restructuring charges
111

 
265

 
338

 
914

Other
1,393

 
(244
)
 
120

 
(1,609
)
Consolidated net income (loss)
$
6,232

 
$
(7,299
)
 
$
(545
)
 
$
(994
)
(1) 
FTE basis

 
September 30
(Dollars in millions)
2011
 
2010
Segments’ total assets
$
2,018,052

 
$
2,106,504

Adjustments:
 
 
 
ALM activities, including securities portfolio
653,131

 
603,242

Equity investments
14,659

 
42,032

Liquidating businesses
38,133

 
42,111

Elimination of segment excess asset allocations to match liabilities
(623,902
)
 
(612,451
)
Other
119,555

 
158,222

Consolidated total assets
$
2,219,628

 
$
2,339,660