Business Segments

3 Months Ended

Mar. 31, 2020

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.



	Three Months Ended March

$ in millions		2020		2019
Investment Banking
Non-interest revenues		$ 2,046		$ 1,627
Net interest income		138		119
Total net revenues		2,184		1,746
Provision for credit losses		622		86
Operating expenses		1,169		1,005
Pre-tax earnings		$ 393		$ 655
Net earnings		$ 354		$ 543
Net earnings to common		$ 343		$ 535
Average common equity		$ 11,308		$11,496
Return on average common equity		12.1%		18.6%
Global Markets
Non-interest revenues		$ 4,652		$ 3,483
Net interest income		511		557
Total net revenues		5,163		4,040
Provision for credit losses		68		3
Operating expenses		2,847		2,748
Pre-tax earnings		$ 2,248		$ 1,289
Net earnings		$ 2,023		$ 1,068
Net earnings to common		$ 1,964		$ 1,020
Average common equity		$ 39,797		$40,705
Return on average common equity		19.7%		10.0%
Asset Management
Non-interest revenues		$ (267	)	$ 1,646
Net interest income		171		147
Total net revenues		(96	)	1,793
Provision for credit losses		79		13
Operating expenses		1,198		1,103
Pre-tax earnings/(loss)		$ (1,373	)	$ 677
Net earnings/(loss)		$ (1,236	)	$ 559
Net earnings/(loss) to common		$ (1,250	)	$ 549
Average common equity		$ 21,156		$20,365
Return on average common equity		(23.6)%		10.8%
Consumer & Wealth Management
Non-interest revenues		$ 999		$ 833
Net interest income		493		395
Total net revenues		1,492		1,228
Provision for credit losses		168		122
Operating expenses		1,244		1,008
Pre-tax earnings		$ 80		$ 98
Net earnings		$ 72		$ 81
Net earnings to common		$ 66		$ 78
Average common equity		$ 7,002		$ 5,859
Return on average common equity		3.8%		5.3%
Total
Non-interest revenues		$ 7,430		$ 7,589
Net interest income		1,313		1,218
Total net revenues		8,743		8,807
Provision for credit losses		937		224
Operating expenses		6,458		5,864
Pre-tax earnings		$ 1,348		$ 2,719
Net earnings		$ 1,213		$ 2,251
Net earnings to common		$ 1,123		$ 2,182
Average common equity		$ 79,263		$78,425
Return on average common equity		5.7%		11.1%

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.

The table below presents depreciation and amortization expense by segment.



	Three Months Ended March

$ in millions		2020	2019
Investment Banking		$ 39	$ 29
Global Markets		133	147
Asset Management		170	137
Consumer & Wealth Management		95	55
Total		$437	$368

Segment Assets

The table below presents assets by segment.



	As of

$ in millions		March 2020	December 2019
Investment Banking		$ 105,059	$ 92,009
Global Markets		800,476	725,060
Asset Management		92,636	92,102
Consumer & Wealth Management		91,585	83,797
Total		$1,089,756	$992,968

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



	As of

$ in millions		March 2020	December 2019
Corporate		$ 48,121	$ 27,035
Investment Banking		48,121	27,035
Corporate		12,881	11,852
Real estate		12,787	15,671
Other		4,873	3,756
Global Markets		30,541	31,279
Corporate		7,528	7,420
Real estate		8,456	9,030
Other		751	1,036
Asset Management		16,735	17,486
Wealth management		29,017	27,940
Installment		4,826	4,747
Credit cards		2,081	1,858
Consumer & Wealth Management		35,924	34,545
Total		$ 131,321	$110,345

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



	As of

$ in millions		March 2020	December 2019
Investment Banking		$1,174	$ 470
Global Markets		269	168
Asset Management		489	385
Consumer & Wealth Management		936	418
Total		$2,868	$1,441

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 and debt investments): location of the sales team; Equity investments: location of the investment; Lending and debt investments: 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 and

pre-tax

earnings by geographic region.



$ in millions	2020			2019
Three Months Ended March
Americas		$5,171	59%		$5,245	60%
EMEA		2,108	24%		2,459	28%
Asia		1,464	17%		1,103	12%
Total net revenues		$8,743	100%		$8,807	100%
Americas		$ 551	41%		$1,488	55%
EMEA		436	32%		911	33%
Asia		361	27%		320	12%
Total pre-tax earnings		$1,348	100%		$2,719	100%

In the table above:

•	Results in Americas were primarily attributable to the U.S.

•	Asia includes Australia and New Zealand.