Business Segments

12 Months Ended

Dec. 31, 2019

Note 25.

Business Segments

The firm reports its activities in the following four business segments: Investment Banking, Global Markets, Asset Management and Consumer & Wealth Management. See Note 1 for information about 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.

The allocation of common shareholders’ equity and preferred stock dividends to each segment is based on the estimated amount of

equity required to support the activities of the segment under relevant regulatory capital requirements.

Net earnings for each segment is calculated by applying the firmwide tax rate to each segment’s pre-tax earnings.

Management believes that this allocation provides a reasonable representation of each segment’s contribution to consolidated net earnings to common, return on average common equity and total assets. Transactions between segments are based on specific criteria or approximate third-party rates.

Segment Results

The table below presents a summary of the firm’s segment results.



	Year Ended December

$ in millions		2019	2018	2017
Investment Banking
Non-interest revenues		$ 7,079	$ 7,856	$ 7,158
Net interest income		520	322	301
Total net revenues		7,599	8,178	7,459
Provision for credit losses		333	124	34
Operating expenses		4,685	4,473	3,613
Pre-tax earnings		$ 2,581	$ 3,581	$ 3,812
Net earnings		$ 2,065	$ 3,001	$ 1,468
Net earnings to common		$ 1,996	$ 2,924	$ 1,394
Average common equity		$11,167	$ 8,737	$ 8,753
Return on average common equity		17.9%	33.5%	15.9%
Global Markets
Non-interest revenues		$13,109	$12,831	$10,853
Net interest income		1,670	1,607	1,442
Total net revenues		14,779	14,438	12,295
Provision for credit losses		35	52	178
Operating expenses		10,851	10,585	9,981
Pre-tax earnings		$ 3,893	$ 3,801	$ 2,136
Net earnings		$ 3,114	$ 3,185	$ 823
Net earnings to common		$ 2,729	$ 2,796	$ 397
Average common equity		$40,060	$41,237	$44,448
Return on average common equity		6.8%	6.8%	0.9%
Asset Management
Non-interest revenues		$ 8,454	$ 8,353	$ 8,491
Net interest income		511	482	39
Total net revenues		8,965	8,835	8,530
Provision for credit losses		274	160	322
Operating expenses		4,817	4,179	3,773
Pre-tax earnings		$ 3,874	$ 4,496	$ 4,435
Net earnings		$ 3,099	$ 3,767	$ 1,707
Net earnings to common		$ 3,013	$ 3,668	$ 1,639
Average common equity		$21,575	$19,061	$16,904
Return on average common equity		14.0%	19.2%	9.7%
Consumer & Wealth Management
Non-interest revenues		$ 3,542	$ 3,809	$ 3,296
Net interest income		1,661	1,356	1,150
Total net revenues		5,203	5,165	4,446
Provision for credit losses		423	338	123
Operating expenses		4,545	4,224	3,574
Pre-tax earnings		$ 235	$ 603	$ 749
Net earnings		$ 188	$ 506	$ 288
Net earnings to common		$ 159	$ 472	$ 255
Average common equity		$ 6,292	$ 4,950	$ 4,616
Return on average common equity		2.5%	9.5%	5.5%
Total
Non-interest revenues		$32,184	$32,849	$29,798
Net interest income		4,362	3,767	2,932
Total net revenues		36,546	36,616	32,730
Provision for credit losses		1,065	674	657
Operating expenses		24,898	23,461	20,941
Pre-tax earnings		$10,583	$12,481	$11,132
Net earnings		$ 8,466	$10,459	$ 4,286
Net earnings to common		$ 7,897	$ 9,860	$ 3,685
Average common equity		$79,094	$73,985	$74,721
Return on average common equity		10.0%	13.3%	4.9%

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 expense to specific positions in relation to the cash generated by, or funding requirements of, such positions. Net interest is included in segment net revenues as it is consistent with how management assesses segment performance.

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

•

Operating expenses related to corporate charitable contributions, previously not allocated to the segments, have now been allocated. This allocation reflects a change in the manner in which management measures the performance of the firm’s segments. As a result of this change, all operating expenses are now allocated to segments. Reclassifications have been made to previously reported segment amounts to conform to the current presentation.

•	Total operating expenses included net provisions for litigation and regulatory proceedings of $1.24 billion for 2019, $844 million for 2018 and $188 million for 2017. The net provisions for 2019 and 2018 were primarily reflected in Investment Banking and Global Markets.

•	Net earnings included an income tax benefit of $487 million in 2018 and estimated income tax expense of $4.40 billion in 2017 related to Tax Legislation.

The table below presents depreciation and amortization expense by segment.



	Year Ended December

$ in millions		2019	2018	2017
Investment Banking		$ 139	$ 114	$ 123
Global Markets		646	563	514
Asset Management		618	450	365
Consumer & Wealth Management		301	201	150
Total		$1,704	$1,328	$1,152

Segment Assets

The table below presents assets by segment.



	As of December

$ in millions		2019	2018
Investment Banking		$ 92,009	$ 89,451
Global Markets		725,060	683,702
Asset Management		92,102	85,003
Consumer & Wealth Management		83,797	73,640
Total		$992,968	$931,796

The table below presents gross loans by segment and loan type.



	As of December

$ in millions		2019	2018
Corporate		$ 27,035	$ 26,375
Investment Banking		27,035	26,375
Corporate		11,852	11,147
Real estate		15,671	14,231
Other		3,756	3,636
Global Markets		31,279	29,014
Corporate		7,420	4,853
Real estate		9,030	8,248
Other		1,036	1,109
Asset Management		17,486	14,210
Wealth Management		27,940	24,768
Consumer		4,747	4,536
Credit cards		1,858	–
Consumer & Wealth Management		34,545	29,304
Total		$110,345	$98,903

The table below presents the allowance for loan losses by segment.



	As of December

$ in millions		2019	2018
Investment Banking		$ 470	$ 355
Global Markets		168	138
Asset Management		385	254
Consumer & Wealth Management		418	319
Total		$1,441	$1,066

See Note 9 for further information about loans.

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.

•	Global Markets: FICC and Equities intermediation: location of the market-making desk; FICC and Equities financing (excluding prime brokerage financing): location of the desk; prime brokerage financing: location of the primary market for the underlying security.

•	Asset Management (excluding Equity investments and lending): location of the sales team; Equity investments: location of the investment; Lending: location of the client.

•	Consumer & Wealth Management: Wealth management: location of the sales team; Consumer banking: location of the client.

The table below presents total net revenues,

pre-tax

earnings and net earnings by geographic region.




$ in millions	2019			2018			2017
Year Ended December
Americas		$22,148	60%		$22,339	61%		$19,737	60%
EMEA		9,745	27%		9,244	25%		8,168	25%
Asia		4,653	13%		5,033	14%		4,825	15%
Total net revenues		$36,546	100%		$36,616	100%		$32,730	100%
Americas		$ 6,623	62%		$ 8,125	65%		$ 7,014	63%
EMEA		3,349	32%		3,244	26%		2,561	23%
Asia		611	6%		1,112	9%		1,557	14%
Total pre-tax earnings		$10,583	100%		$12,481	100%		$11,132	100%
Americas		$ 5,514	65%		$ 7,092	68%		$ 1,059	25%
EMEA		2,600	31%		2,522	24%		2,048	48%
Asia		352	4%		845	8%		1,179	27%
Total net earnings		$ 8,466	100%		$10,459	100%		$ 4,286	100%

In the table above:

•	Americas net earnings included an income tax benefit of $487 million in 2018 and estimated income tax expense of $4.40 billion in 2017 related to Tax Legislation.

•	Asia pre-tax earnings and net earnings for 2019 were impacted by net provisions for litigation and regulatory proceedings.

•	Charitable contributions, previously not allocated across geographic regions for pre-tax earnings and net earnings, have now been allocated. Reclassifications have been made to previously reported amounts to conform to the current presentation.

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

•	Asia includes Australia and New Zealand.