Business Segments

3 Months Ended

Mar. 31, 2017

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 net revenues, 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 March
$ in millions		2017	2016
Investment Banking
Financial Advisory		$       756	$       771
Equity underwriting		311	183
Debt underwriting		636	509
Total Underwriting		947	692
Total net revenues		1,703	1,463
Operating expenses		975	762
Pre-tax earnings		$       728	$       701
Segment assets		$    2,614	$    2,579
Institutional Client Services
FICC Client Execution		$    1,685	$    1,663
Equities client execution		552	470
Commissions and fees		738	878
Securities services		384	432
Total Equities		1,674	1,780
Total net revenues		3,359	3,443
Operating expenses		2,544	2,421
Pre-tax earnings		$       815	$    1,022
Segment assets		$667,778	$671,462
Investing & Lending
Equity securities		$       798	$          —
Debt securities and loans		666	87
Total net revenues		1,464	87
Operating expenses		750	443
Pre-tax earnings/(loss)		$       714	$      (356	)
Segment assets		$209,958	$188,985
Investment Management
Management and other fees		$    1,219	$    1,165
Incentive fees		121	46
Transaction revenues		160	134
Total net revenues		1,500	1,345
Operating expenses		1,218	1,136
Pre-tax earnings		$       282	$       209
Segment assets		$  13,719	$  15,010
Total net revenues		$    8,026	$    6,338
Total operating expenses		5,487	4,762
Total pre-tax earnings		$    2,539	$    1,576
Total assets		$894,069	$878,036

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.

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

	Three Months Ended March
$ in millions		2017	2016
Investment Banking		$  —	$   —
Institutional Client Services		203	703
Investing & Lending		243	136
Investment Management		70	44
Total net interest income		$516	$883

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

	Three Months Ended March
$ in millions		2017	2016
Investment Banking		$  33	$  31
Institutional Client Services		122	114
Investing & Lending		57	54
Investment Management		45	40
Total depreciation and amortization		$257	$239

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: FICC 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 table below presents 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.

	Three Months Ended March
$ in millions		2017		2016
Net revenues
Americas		$4,892	61%	$3,863	61%
EMEA		1,919	24%	1,660	26%
Asia		1,215	15%	815	13%
Total net revenues		$8,026	100%	$6,338	100%
Pre-tax earnings
Americas		$1,524	61%	$   987	63%
EMEA		622	24%	399	25%
Asia		393	15%	190	12%
Total pre-tax earnings		$2,539	100%	$1,576	100%

In the table above:

• Substantially all of the amounts in Americas were attributable to the U.S.

• EMEA represents Europe, Middle East and Africa.

• Asia includes Australia and New Zealand.