2004 Annual Report: Financial Review: Statements and Notes: Note 19 Business Segment Information

Note 19

Business Segment Information

In connection with the Merger, the Corporation realigned its business segment reporting to reflect the new business model of the combined company. The Corporation reports the results of its operations through four business segments: Global Consumer and Small Business Banking, Global Business and Financial Services, Global Capital Markets and Investment Banking, and Global Wealth and Investment Management. Certain operating segments have been aggregated into a single business segment. The Corporation may periodically reclassify business segment results based on modifications to its management reporting and profitability measurement methodologies, and changes in organizational alignment.

Global Consumer and Small Business Banking provides a diversified range of products and services to individuals and small businesses through multiple delivery channels. Global Business and Financial Services primarily provides commercial lending and treasury management services to middle-market companies. Global Capital Markets and Investment Banking provides capital-raising solutions, advisory services, derivatives capabilities, equity and debt sales and trading for the Corporation's clients as well as traditional bank deposit and loan products, treasury management and payment services to large corporations and institutional clients. Global Wealth and Investment Management offers investment, fiduciary and comprehensive banking and credit expertise, asset management services to institutional clients, high-net-worth individuals and retail customers, investment, securities and financial planning services to affluent and high-net-worth individuals, and retail clearing services for broker/dealers.

All Other consists primarily of Latin America, Equity Investments, Noninterest Income and Expense amounts associated with the ALM process, including Gains on Sales of Debt Securities, the allowance for credit losses process, the residual impact of methodology allocations, intersegment eliminations, and the results of certain consumer finance and commercial lending businesses that are being liquidated. Latin America includes the Corporation’s full-service Latin American operations in Brazil, Argentina and Chile.

Total Revenue includes Net Interest Income on a fully taxable-equivalent basis and Noninterest Income. The adjustment of Net Interest Income to a fully taxable-equivalent basis results in a corresponding increase in Income Tax Expense. The Net Interest Income of the business segments includes the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Net Interest Income also reflects an allocation of Net Interest Income generated by assets and liabilities used in the Corporation’s ALM process.

Certain expenses not directly attributable to a specific business segment are allocated to the segments based on pre-determined means. The most significant of these expenses include data processing costs, item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The costs of certain centralized or shared functions are allocated based on methodologies which reflect utilization.

The following table presents Total Revenue and Net Income for 2004, 2003 and 2002, and Total Assets at December 31, 2004 and 2003 for each business segment, as well as All Other.

	Total Corporation: 2004	Total Corporation: 2003	Total Corporation: 2002	Global Consumer and Small Business Banking: 2004(1)	Global Consumer and Small Business Banking: 2003(1)	Global Consumer and Small Business Banking: 2002(1)
	At and for the Year Ended December 31
	Total Corporation			Global Consumer and                Small Business Banking (1)
(Dollars in millions)	2004	2003	2002	2004	2003	2002
Net interest income (fully taxable-equivalent basis)	$   29,513	$ 22,107	$21,511	$ 17,308	$ 12,114	$11,411
Noninterest income	20,097	16,450	13,580	9,549	8,816	6,911
Total revenue	49,610	38,557	35,091	26,857	20,930	18,322
Provision for credit losses	2,769	2,839	3,697	3,341	1,678	1,521
Gains on sales of debt securities	2,123	941	630	117	13	20
Amortization of intangibles	664	217	218	463	147	143
Other noninterest expense	26,363	19,938	18,227	12,871	10,186	9,168
Income before income taxes	21,937	16,504	13,579	10,299	8,932	7,510
Income tax expense	7,794	5,694	4,330	3,751	3,226	2,769
Net income	$   14,143	$ 10,810	$ 9,249	$  6,548	$  5,706	$ 4,741
Period-end total assets	$1,110,457	$719,483		$378,359	$264,578
	Global Business and Financial Services: 2004(1)	Global Business and Financial Services: 2003(1)	Global Business and Financial Services: 2002(1)	Global Capital Markets and Investment Banking: 2004(1)	Global Capital Markets and Investment Banking: 2003(1)	Global Capital Markets and Investment Banking: 2002(1)
	Global Business          and Financial Services (1)			Global Capital Markets                  and Investment Banking (1)
(Dollars in millions)	2004	2003	2002	2004	2003	2002
Net interest income (fully taxable-equivalent basis)	$    4,593	$  3,118	$3,195	$  4,122	$  4,289	$ 4,345
Noninterest income	2,129	1,399	1,214	4,927	4,045	3,856
Total revenue	6,722	4,517	4,409	9,049	8,334	8,201
Provision for credit losses	(241)	458	453	(459)	303	768
Losses on sales of debt securities	-	-	-	(10)	(14)	(92)
Amortization of intangibles	82	21	21	44	24	29
Other noninterest expense	2,394	1,776	1,810	6,512	5,303	4,896
Income before income taxes	4,487	2,262	2,125	2,942	2,690	2,416
Income tax expense	1,654	791	756	992	896	814
Net income	$    2,833	$  1,471	$1,369	$  1,950	$  1,794	$ 1,602
Period-end total assets	$  178,093	$107,791		$307,451	$225,839
	Global Wealth and Investment Management: 2004(1)	Global Wealth and Investment Management: 2003(1)	Global Wealth and Investment Management: 2002(1)	All Other: 2004	All Other: 2003	All Other: 2002
	Global Wealth and           Investment Management (1)			All Other
(Dollars in millions)	2004	2003	2002	2004	2003	2002
Net interest income (fully taxable-equivalent basis)	$    2,854	$  1,952	$1,923	$    636	$    634	$   637
Noninterest income	3,064	2,078	1,706	428	112	(107)
Total revenue	5,918	4,030	3,629	1,064	746	530
Provision for credit losses	(20)	11	320	148	389	635
Gains on sales of debt securities	-	-	-	2,016	942	702
Amortization of intangibles	62	20	20	13	5	5
Other noninterest expense	3,387	2,081	1,899	1,199	592	454
Income before income taxes	2,489	1,918	1,390	1,720	702	138
Income tax expense (benefit)	905	684	507	492	97	(516)
Net income	$    1,584	$  1,234	$  883	$  1,228	$    605	$   654
Period-end total assets	$  121,974	$ 69,370		$124,580	$ 51,905
(1) There were no material intersegment revenues among the segments.

The following table presents reconciliations of the four business segments’ Total Revenue, Net Income and Total Assets to consolidated totals. The adjustments presented in the table below include consolidated income and expense amounts not specifically allocated to individual business segments.

	Year Ended December 31, 2004	Year Ended December 31, 2003	Year Ended December 31, 2002
	Year Ended December 31
(Dollars in millions)	2004	2003	2002
Segments' revenue	$48,546	$37,811	$34,561
Adjustments:
Revenue associated with unassigned capital	318	674	560
ALM activities (1)	(74)	500	294
Latin America	834	33	43
Equity investments	440	(256)	(445)
Liquidating businesses	282	324	539
Fully taxable-equivalent basis adjustment	(716)	(643)	(588)
Other	(736)	(529)	(461)
Consolidated revenue	$48,894	$37,914	$34,503
Segments' net income	$12,915	$10,205	$ 8,595
Adjustments, net of taxes:
Earnings associated with unassigned capital	212	459	399
ALM activities (1, 2)	1,117	870	523
Latin America	310	(48)	(148)
Equity investments	192	(249)	(330)
Liquidating businesses	79	(19)	58
Merger and restructuring charges	(411)	-	-
Litigation expense	66	(150)	-
Tax settlement	-	-	488
Severance charge	-	-	(86)
Other	(337)	(258)	(250)
Consolidated net income	$14,143	$10,810	$ 9,249
	December 31, 2004	December 31, 2003
	December 31
	2004	2003
Segments' total assets	$  985,877	$667,578
Adjustments:
ALM activities	131,751	103,313
Securities portfolio	177,803	59,333
Latin America	12,402	515
Equity investments	8,064	6,250
Liquidating businesses	4,390	6,528
Elimination of excess earning asset allocations	(254,225)	(177,303)
Other, net	44,395	53,269
Consolidated total assets	$1,110,457	$719,483
(1) Includes pre-tax whole mortgage loan sale gains/(losses) of $(2), $772 and $500 for 2004, 2003, and 2002, respectively. (2) Includes pre-tax Gains on Sales of Debt Securities of $2,011, $938 and $701 for 2004, 2003 and 2002, respectively.