Business Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segments

Note 25.

Business Segments

The firm reports its activities in 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 September				Nine Months Ended September
$ in millions		2020		2019		2020	2019
Investment Banking
Non-interest revenues		$  1,904		$  1,698		$  6,614	$  5,157
Net interest income		65		143		196	378
Total net revenues		1,969		1,841		6,810	5,535
Provision for credit losses		171		91		1,612	258
Operating expenses		1,067		972		4,940	3,027
Pre-tax earnings		$     731		$     778		$     258	$  2,250
Net earnings		$     469		$     607		$     184	$  1,784
Net earnings to common		$     452		$     597		$     133	$  1,738
Average common equity		$11,271		$12,471		$11,251	$11,166
Return on average common equity		16.0%		19.1%		1.6%	20.8%
Global Markets
Non-interest revenues		$  4,093		$  3,227		$15,292	$  9,943
Net interest income		460		316		1,600	1,356
Total net revenues		4,553		3,543		16,892	11,299
Provision for credit losses		(15	)	16		236	15
Operating expenses		2,542		2,377		10,568	7,810
Pre-tax earnings		$  2,026		$  1,150		$  6,088	$  3,474
Net earnings		$  1,904		$     895		$  4,346	$  2,753
Net earnings to common		$  1,816		$     839		$  4,085	$  2,499
Average common equity		$39,960		$38,847		$40,542	$40,670
Return on average common equity		18.2%		8.6%		13.4%	8.2%
Asset Management
Non-interest revenues		$  2,717		$  1,497		$  4,626	$  5,616
Net interest income		51		124		147	346
Total net revenues		2,768		1,621		4,773	5,962
Provision for credit losses		70		81		420	154
Operating expenses		1,358		1,176		3,888	3,526
Pre-tax earnings		$  1,340		$     364		$     465	$  2,282
Net earnings		$     858		$     278		$     332	$  1,809
Net earnings to common		$     839		$     264		$     273	$  1,753
Average common equity		$19,989		$22,320		$20,332	$21,199
Return on average common equity		16.8%		4.7%		1.8%	11.0%
Consumer & Wealth Management
Non-interest revenues		$     983		$     893		$  2,946	$  2,578
Net interest income		508		425		1,398	1,217
Total net revenues		1,491		1,318		4,344	3,795
Provision for credit losses		52		103		537	302
Operating expenses		1,237		1,091		3,680	3,237
Pre-tax earnings		$     202		$     124		$     127	$     256
Net earnings		$     136		$       97		$       91	$     203
Net earnings to common		$     126		$       93		$       62	$     183
Average common equity		$  8,519		$  6,213		$  7,715	$  6,027
Return on average common equity		5.9%		6.0%		1.1%	4.0%
Total
Non-interest revenues		$  9,697		$  7,315		$29,478	$23,294
Net interest income		1,084		1,008		3,341	3,297
Total net revenues		10,781		8,323		32,819	26,591
Provision for credit losses		278		291		2,805	729
Operating expenses		6,204		5,616		23,076	17,600
Pre-tax earnings		$  4,299		$  2,416		$  6,938	$  8,262
Net earnings		$  3,367		$  1,877		$  4,953	$  6,549
Net earnings to common		$  3,233		$  1,793		$  4,553	$  6,173
Average common equity		$79,739		$79,851		$79,840	$79,062
Return on average common equity		16.2%		9.0%		7.6%	10.4%

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.

• Total operating expenses included net provisions for litigation and regulatory proceedings of $3.40 billion for the nine months ended September 2020, primarily reflected in Investment Banking and Global Markets.

• 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 September			Nine Months Ended September
$ in millions		2020	2019		2020	2019
Investment Banking		$  46	$  33		$   128	$     93
Global Markets		160	168		440	475
Asset Management		170	185		553	468
Consumer & Wealth Management		92	87		283	204
Total		$468	$473		$1,404	$1,240

Segment Assets

The table below presents assets by segment.

	As of
$ in millions		September 2020	December 2019
Investment Banking		$   118,309	$  92,009
Global Markets		818,255	725,060
Asset Management		94,897	92,102
Consumer & Wealth Management		100,598	83,797
Total		$1,132,059	$992,968

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

	As of
$ in millions		September 2020	December 2019
Corporate		$  31,548	$  27,035
Investment Banking		31,548	27,035
Corporate		11,860	11,852
Real estate		14,134	15,671
Other		3,451	3,756
Global Markets		29,445	31,279
Corporate		8,057	7,420
Real estate		8,948	9,030
Other		703	1,036
Asset Management		17,708	17,486
Wealth management		29,836	27,940
Installment		4,112	4,747
Credit cards		2,908	1,858
Consumer & Wealth Management		36,856	34,545
Total loans		$115,557	$110,345

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

	As of
$ in millions		September 2020	December 2019
Investment Banking		$    1,413	$       470
Global Markets		403	168
Asset Management		742	385
Consumer & Wealth Management		1,156	418
Total		$    3,714	$    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 September
Americas	$  6,873		64%	$  4,941	59%
EMEA	2,470		23%	2,329	28%
Asia	1,438		13%	1,053	13%
Total net revenues	$10,781		100%	$  8,323	100%
Americas	$  2,926		68%	$  1,164	48%
EMEA	935		22%	948	39%
Asia	438		10%	304	13%
Total pre-tax earnings	$  4,299		100%	$  2,416	100%
Nine Months Ended September
Americas	$20,333		62%	$15,838	60%
EMEA	8,031		24%	7,477	28%
Asia	4,455		14%	3,276	12%
Total net revenues	$32,819		100%	$26,591	100%
Americas	$  5,330		77%	$  4,444	54%
EMEA	1,937		28%	2,855	34%
Asia	(329	)	(5)%	963	12%
Total pre-tax earnings	$  6,938		100%	$  8,262	100%

In the table above:

• Asia pre-tax earnings for the nine months ended September 2020 were impacted by net provisions for litigation and regulatory proceedings.

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

• Asia includes Australia and New Zealand.