Business Segments and Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2023

Segment Reporting [Abstract]

Business Segments and Revenue from Contracts with Customers

NOTE 17—BUSINESS SEGMENTS AND REVENUE FROM CONTRACTS WITH CUSTOMERS

Our principal operations are organized into three major business segments, which are defined primarily based on the products and services provided or the types of customers served: Credit Card, Consumer Banking and Commercial Banking. The operations of acquired businesses have been integrated into or managed as a part of our existing business segments. Certain activities that are not part of a business segment are included in the Other category, such as the management of our corporate investment portfolio and asset/liability positions performed by our centralized Corporate Treasury group and any residual tax expense or benefit beyond what is assessed to our business segments in order to arrive at the consolidated effective tax rate.

•Credit Card: Consists of our domestic consumer and small business card lending, and international card businesses in the United Kingdom and Canada.

•Consumer Banking: Consists of our deposit gathering and lending activities for consumers and small businesses, and national auto lending.

•Commercial Banking: Consists of our lending, deposit gathering, capital markets and treasury management services to commercial real estate and commercial and industrial customers. Our customers typically include companies with annual revenues between $20 million and $2 billion.

•Other category: Includes the residual impact of the allocation of our centralized Corporate Treasury group activities, such as management of our corporate investment portfolio, asset/liability management and oversight of our funds transfer pricing process, to our business segments. Accordingly, net gains and losses on our investment securities portfolio and certain trading activities are included in the Other category. The Other category also includes unallocated corporate expenses that do not directly support the operations of the business segments or for which the business segments are not considered financially accountable in evaluating their performance, such as certain restructuring charges, as well as residual tax expense or benefit to arrive at the consolidated effective tax rate that is not assessed to our primary business segments.

Basis of Presentation

We report the results of each of our business segments on a continuing operations basis. The results of our individual businesses reflect the manner in which management evaluates performance and makes decisions about funding our operations and allocating resources.

Business Segment Reporting Methodology

The results of our business segments are intended to present each segment as if it were a stand-alone business. Our internal management and reporting process used to derive our segment results employs various allocation methodologies, including funds transfer pricing, to assign certain balance sheet assets, deposits and other liabilities and their related revenues and expenses directly or indirectly attributable to each business segment. Our funds transfer pricing process managed by our centralized Corporate Treasury group provides a funds credit for sources of funds, such as deposits generated by our Consumer Banking and Commercial Banking businesses, and a charge for the use of funds by each segment. The allocation is unique to each business segment and acquired business and is based on the composition of assets and liabilities. The funds transfer pricing process considers the interest rate and liquidity risk characteristics of assets and liabilities and off-balance sheet products. Periodically the methodology and assumptions utilized in the funds transfer pricing process are adjusted to reflect economic conditions and other factors, which may impact the allocation of net interest income to the business segments. Due to the integrated nature of our business segments, estimates and judgments have been made in allocating certain revenue and expense items. Transactions between segments are based on specific criteria or approximate market rates. We regularly assess the assumptions, methodologies and reporting classifications used for segment reporting, which may result in the implementation of refinements or changes in future periods.

The following is additional information on the principles and methodologies used in preparing our business segment results.

•Net interest income: Interest income from loans held for investment and interest expense from deposits and other interest-bearing liabilities are reflected within each applicable business segment. Because funding and asset/liability management are managed centrally by our Corporate Treasury group, net interest income for our business segments also

includes the results of a funds transfer pricing process that is intended to allocate a cost of funds used or credit for funds provided to all business segment assets and liabilities, respectively, using a matched funding concept. The taxable-equivalent benefit of tax-exempt products is also allocated to each business unit with a corresponding increase in income tax expense.

•Non-interest income: Non-interest fees and other revenue associated with loans or customers managed by each business segment and other direct revenues are accounted for within each business segment.

•Provision for credit losses: The provision for credit losses is directly attributable to the business segment in accordance with the loans each business segment manages.

•Non-interest expense: Non-interest expenses directly managed and incurred by a business segment are accounted for within each business segment. We allocate certain non-interest expenses indirectly incurred by business segments, such as corporate support functions, to each business segment based on various factors, including the actual cost of the services from the service providers, the utilization of the services, the number of employees or other relevant factors.

•Goodwill and other intangible assets: Goodwill and other intangible assets are assigned to one or more segments at acquisition. Intangible amortization is included in the results of the applicable segment.

•Income taxes: Income taxes are assessed for each business segment based on a standard tax rate with the residual tax expense or benefit to arrive at the consolidated effective tax rate included in the Other category.

•Loans held for investment: Loans are reported within each business segment based on product or customer type served by that business segment.

•Deposits: Deposits are reported within each business segment based on product or customer type served by that business segment.

Segment Results and Reconciliation

We may periodically change our business segments or reclassify business segment results based on modifications to our management reporting methodologies or changes in organizational alignment. The following table presents our business segment results for the years ended December 31, 2023, 2022 and 2021, selected balance sheet data as of December 31, 2023 and 2022, and a reconciliation of our total business segment results to our reported consolidated income from continuing operations, loans held for investment and deposits.

Table 17.1: Segment Results and Reconciliation

	Year Ended December 31, 2023
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	19,729	$	8,713	$	2,518	$	(1,719)	$	29,241
Non-interest income	5,940		589		1,002		15		7,546
Total net revenue (loss)(2)	25,669		9,302		3,520		(1,704)		36,787
Provision for credit losses	8,651		1,169		605		1		10,426
Non-interest expense	12,490		5,178		2,011		637		20,316
Income (loss) from continuing operations before income taxes	4,528		2,955		904		(2,342)		6,045
Income tax provision (benefit)	1,071		697		213		(823)		1,158
Income (loss) from continuing operations, net of tax	$	3,457	$	2,258	$	691	$	(1,519)	$	4,887
Loans held for investment	$	154,547	$	75,437	$	90,488	$	0	$	320,472
Deposits	0		296,171		32,712		19,530		348,413

                                                                                                                                                                                                                                                                                                                                                                                                                                    

	Year Ended December 31, 2022
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	16,584	$	8,965	$	2,461	$	(896)	$	27,114
Non-interest income (loss)	5,771		469		1,129		(233)		7,136
Total net revenue (loss)(2)	22,355		9,434		3,590		(1,129)		34,250
Provision (benefit) for credit losses	4,265		1,173		415		(6)		5,847
Non-interest expense	11,627		5,312		2,070		154		19,163
Income (loss) from continuing operations before income taxes	6,463		2,949		1,105		(1,277)		9,240
Income tax provision (benefit)	1,536		699		262		(617)		1,880
Income (loss) from continuing operations, net of tax	$	4,927	$	2,250	$	843	$	(660)	$	7,360
Loans held for investment	$	137,730	$	79,925	$	94,676	$	0	$	312,331
Deposits	0		270,592		40,808		21,592		332,992

	Year Ended December 31, 2021
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Net interest income (loss)	$	14,074	$	8,448	$	2,153	$	(504)	$	24,171
Non-interest income (loss)	4,806		554		1,148		(244)		6,264
Total net revenue (loss)(2)	18,880		9,002		3,301		(748)		30,435
Benefit for credit losses	(902)		(521)		(519)		(2)		(1,944)
Non-interest expense	9,621		4,711		1,815		423		16,570
Income (loss) from continuing operations before income taxes	10,161		4,812		2,005		(1,169)		15,809
Income tax provision (benefit)	2,403		1,136		473		(597)		3,415
Income (loss) from continuing operations, net of tax	$	7,758	$	3,676	$	1,532	$	(572)	$	12,394
Loans held for investment	$	114,772	$	77,646	$	84,922	$	0	$	277,340
Deposits	0		256,407		44,809		9,764		310,980

_________

(1)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.

(2)Total net revenue was reduced by $1.9 billion, $946 million and $629 million for the years ended December 31, 2023, 2022 and 2021, respectively, for credit card finance charges and fees charged off as uncollectible.

Revenue from Contracts with Customers

The majority of our revenue from contracts with customers consists of interchange fees, service charges and other customer-related fees, and other contract revenue. Interchange fees are primarily from our Credit Card business and are recognized upon settlement with the interchange networks, net of rewards earned by customers. Service charges and other customer-related fees within our Consumer Banking business are primarily related to fees earned on consumer deposit accounts for account maintenance and various transaction-based services such as automated teller machine (“ATM”) usage. Service charges and other customer-related fees within our Commercial Banking business are mostly related to fees earned on treasury management and capital markets services. Other contract revenue in our Credit Card business consists primarily of revenue from our partnership arrangements. Other contract revenue in our Consumer Banking business consists primarily of revenue earned on certain marketing and promotional events from our auto dealers. Revenue from contracts with customers is included in non-interest income in our consolidated statements of income.

The following table presents revenue from contracts with customers and a reconciliation to non-interest income by business segment for the years ended December 31, 2023, 2022 and 2021.

Table 17.2: Revenue from Contracts with Customers and Reconciliation to Segment Results

	Year Ended December 31, 2023
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	4,333	$	367	$	91	$	2	$	4,793
Service charges and other customer-related fees	0		86		222		(2)		306
Other	413		102		31		0		546
Total contract revenue (loss)	4,746		555		344		0		5,645
Revenue from other sources	1,194		34		658		15		1,901
Total non-interest income	$	5,940	$	589	$	1,002	$	15	$	7,546

	Year Ended December 31, 2022
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	4,178	$	320	$	109	$	(1)	$	4,606
Service charges and other customer-related fees	0		91		236		0		327
Other	395		74		16		(1)		484
Total contract revenue (loss)	4,573		485		361		(2)		5,417
Revenue (reduction) from other sources	1,198		(16)		768		(231)		1,719
Total non-interest income (loss)	$	5,771	$	469	$	1,129	$	(233)	$	7,136

	Year Ended December 31, 2021
(Dollars in millions)	Credit Card		Consumer Banking		Commercial Banking(1)		Other(1)		Consolidated Total
Contract revenue:
Interchange fees, net(2)	$	3,497	$	267	$	96	$	0	$	3,860
Service charges and other customer-related fees	0		171		287		(1)		457
Other	383		75		5		0		463
Total contract revenue (loss)	3,880		513		388		(1)		4,780
Revenue (reduction) from other sources	926		41		760		(243)		1,484
Total non-interest income (loss)	$	4,806	$	554	$	1,148	$	(244)	$	6,264

__________

(1)Some of our commercial investments generate tax-exempt income, tax credits or other tax benefits. Accordingly, we present our Commercial Banking revenue and yields on a taxable-equivalent basis, calculated using the federal statutory tax rate of 21% and state taxes where applicable, with offsetting reductions to the Other category.

(2)Interchange fees are presented net of customer reward expenses of $8.2 billion, $7.6 billion and $6.4 billion for the years ended December 31, 2023, 2022 and 2021, respectively.