Business Segments

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Business Segments

Note 25.

Business Segments

The firm reports its activities in the following four business segments: Investment Banking, Institutional Client Services, Investing & Lending and Investment Management.

Basis of Presentation

In reporting segments, certain of the firm’s business lines have been aggregated where they have similar economic characteristics and are similar in each of the following areas: (i) the nature of the services they provide, (ii) their methods of distribution, (iii) the types of clients they serve and (iv) the regulatory environments in which they operate.

The cost drivers of the firm taken as a whole, compensation, headcount and levels of business activity, are broadly similar in each of the firm’s business segments. Compensation and benefits expenses in the firm’s segments reflect, among other factors, the overall performance of the firm as well as the performance of individual businesses. Consequently, pre-tax margins in one segment of the firm’s business may be significantly affected by the performance of the firm’s other business segments.

The firm allocates assets (including allocations of global core liquid assets and cash, secured client financing and other assets), revenues and expenses among the four business segments. Due to the integrated nature of these segments, estimates and judgments are made in allocating certain assets, revenues and expenses. The allocation process is based on the manner in which management currently views the performance of the segments. Transactions between segments are based on specific criteria or approximate third-party rates.

The table below presents the firm’s pre-tax earnings and total assets by segment. Management believes that this information provides a reasonable representation of each segment’s contribution to consolidated pre-tax earnings and total assets.

	Three Months Ended or as of September			Nine Months Ended September
$ in millions		2016	2015		2016	2015
Investment Banking
Financial Advisory		$       658	$       809		$  2,223	$  2,591
Equity underwriting		227	190		679	1,318
Debt underwriting		652	557		1,885	1,571
Total Underwriting		879	747		2,564	2,889
Total net revenues		1,537	1,556		4,787	5,480
Operating expenses		863	788		2,720	3,049
Pre-tax earnings		$       674	$       768		$  2,067	$  2,431
Segment assets		$    2,245	$    2,515
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution		$    1,964	$    1,461		$  5,554	$  6,199
Equities client execution		678	555		1,735	2,466
Commissions and fees		719	818		2,342	2,393
Securities services		387	379		1,241	1,215
Total Equities		1,784	1,752		5,318	6,074
Total net revenues		3,748	3,213		10,872	12,273
Operating expenses		2,526	2,522		7,649	10,101
Pre-tax earnings		$    1,222	$       691		$  3,223	$  2,172
Segment assets		$667,105	$700,548
Investing & Lending
Equity securities		$       920	$       370		$  1,546	$  2,784
Debt securities and loans		478	300		1,050	1,356
Total net revenues		1,398	670		2,596	4,140
Operating expenses		690	358		1,714	1,948
Pre-tax earnings		$       708	$       312		$     882	$  2,192
Segment assets		$195,774	$162,444
Investment Management
Management and other fees		$    1,225	$    1,212		$  3,571	$  3,651
Incentive fees		114	73		197	590
Transaction revenues		146	137		415	413
Total net revenues		1,485	1,422		4,183	4,654
Operating expenses		1,221	1,122		3,448	3,718
Pre-tax earnings		$       264	$       300		$     735	$     936
Segment assets		$  14,863	$  15,052
Total net revenues		$    8,168	$    6,861		$22,438	$26,547
Total operating expenses		5,300	4,815		15,531	18,841
Total pre-tax earnings		$    2,868	$    2,046		$  6,907	$  7,706
Total assets		$879,987	$880,559

In the table above:

• Revenues and expenses directly associated with each segment are included in determining pre-tax earnings.

• Net revenues in the firm’s segments include allocations of interest income and interest expense to specific securities, commodities and other positions in relation to the cash generated by, or funding requirements of, such underlying positions. Net interest is included in segment net revenues as it is consistent with the way in which management assesses segment performance.

• Overhead expenses not directly allocable to specific segments are allocated ratably based on direct segment expenses.

• Total operating expenses include $25 million of charitable contributions that have not been allocated to the firm’s segments for the three and nine months ended September 2015.

The table below presents the amounts of net interest income by segment included in net revenues.

	Three Months Ended September		Nine Months Ended September
$ in millions	2016	2015	2016	2015
Investment Banking	$  —	$   —	$     —	$      —
Institutional Client Services	312	665	1,459	1,916
Investing & Lending	235	127	618	318
Investment Management	67	50	174	130
Total net interest income	$614	$842	$2,251	$2,364

The table below presents the amounts of depreciation and amortization expense by segment included in pre-tax earnings.

	Three Months Ended September		Nine Months Ended September
$ in millions	2016	2015	2016	2015
Investment Banking	$  32	$  32	$     95	$     90
Institutional Client Services	118	104	346	326
Investing & Lending	52	50	165	182
Investment Management	45	36	125	108
Total depreciation and amortization	$247	$222	$   731	$   706

Geographic Information

Due to the highly integrated nature of international financial markets, the firm manages its businesses based on the profitability of the enterprise as a whole. The methodology for allocating profitability to geographic regions is dependent on estimates and management judgment because a significant portion of the firm’s activities require cross-border coordination in order to facilitate the needs of the firm’s clients.

Geographic results are generally allocated as follows:

• Investment Banking: location of the client and investment banking team.

• Institutional Client Services: Fixed Income, Currency and Commodities Client Execution, and Equities (excluding Securities Services): location of the market-making desk; Securities Services: location of the primary market for the underlying security.

• Investing & Lending: Investing: location of the investment; Lending: location of the client.

• Investment Management: location of the sales team.

The tables below present the total net revenues and pre-tax earnings of the firm by geographic region allocated based on the methodology referred to above, as well as the percentage of total net revenues and pre-tax earnings for each geographic region. In the tables below, Asia includes Australia and New Zealand.

	Three Months Ended September
$ in millions		2016		2015
Net revenues
Americas		$  4,695	58%	$  3,838	56%
Europe, Middle East and Africa		2,079	25%	2,042	30%
Asia		1,394	17%	981	14%
Total net revenues		$  8,168	100%	$  6,861	100%
Pre-tax earnings
Americas		$  1,609	56%	$  1,022	50%
Europe, Middle East and Africa		716	25%	712	34%
Asia		543	19%	337	16%
Total pre-tax earnings		$  2,868	100%	$  2,046	100%
	Nine Months Ended September
$ in millions		2016		2015
Net revenues
Americas		$13,395	60%	$14,851	56%
Europe, Middle East and Africa		5,937	26%	7,157	27%
Asia		3,106	14%	4,539	17%
Total net revenues		$22,438	100%	$26,547	100%
Pre-tax earnings
Americas		$  4,099	59%	$  3,458	44%
Europe, Middle East and Africa		1,861	27%	2,525	33%
Asia		947	14%	1,748	23%
Total pre-tax earnings		$  6,907	100%	$  7,706	100%

In the tables above, Total pre-tax earnings include $25 million of charitable contributions that have not been allocated to the firm’s geographic regions for the three and nine months ended September 2015.