Lines of business

9 Months Ended

Sep. 30, 2021

Lines of businessWe have an internal information system that produces performance data along product and service lines for our two principal businesses and the Other segment. The primary products and services and types of revenue for our principal businesses and a description of the Other segment are presented in Note 24 of the Notes to Consolidated Financial Statements in our 2020 Annual Report.

Business accounting principles

Our business data has been determined on an internal management basis of accounting, rather than GAAP which is used for consolidated financial reporting. These measurement principles are designed so that reported results of the businesses will track their economic performance.

Business results are subject to reclassification when organizational changes are made, or for refinements in revenue and expense allocation methodologies. Refinements are typically reflected on a prospective basis. There were no reclassification or organization changes in the third quarter of 2021.

The accounting policies of the businesses are the same as those described in Note 1 of the Notes to Consolidated Financial Statements in our 2020 Annual Report.

The results of our businesses are presented and analyzed on an internal management reporting basis.

•Revenue amounts reflect fee and other revenue generated by each business and include revenue for services provided between the segments that are also provided to third parties. Fee and other revenue transferred between businesses under revenue transfer agreements is included within other revenue in each business.

•Revenues and expenses associated with specific client bases are included in those businesses. For example, foreign exchange activity associated with clients using custody products is included in Investment Services.

•Net interest revenue is allocated to businesses based on the yields on the assets and liabilities generated by each business. We employ a funds transfer pricing system that matches funds with the

specific assets and liabilities of each business based on their interest sensitivity and maturity characteristics.

•The provision for credit losses associated with the respective credit portfolios is reflected in each business segment.

•Incentives expense related to restricted stock and RSUs is allocated to each business segment.

•Support and other indirect expenses, including services provided between segments that are not provided to third parties or not subject to a revenue transfer agreement, are allocated to businesses based on internally developed methodologies and reflected in noninterest expense.

•Recurring FDIC expense is allocated to the businesses based on average deposits generated within each business.

•Litigation expense is generally recorded in the business in which the charge occurs.

•Management of the securities portfolio is a shared service contained in the Other segment. As a result, gains and losses associated with the valuation of the securities portfolio are generally included in the Other segment.

•Client deposits serve as the primary funding source for our securities portfolio. We typically allocate all interest revenue to the businesses generating the deposits. Accordingly, accretion related to the portion of the securities portfolio restructured in 2009 has been included in the results of the businesses.

•Balance sheet assets and liabilities and their related income or expense are specifically assigned to each business. Businesses with a net liability position have been allocated assets.

•Goodwill and intangible assets are reflected within individual businesses.

The following consolidating schedules present the contribution of our businesses to our overall profitability.


For the quarter ended Sept. 30, 2021	Investment Services			Investment and Wealth Management				Other		Consolidated
(dollars in millions)
Total fee and other revenue	$	2,378		$	985		(a)	$	35	$	3,398		(a)
Net interest revenue (expense)	632			47				(38)		641
Total revenue (loss)	3,010			1,032			(a)	(3)		4,039			(a)
Provision for credit losses	(35)			(7)				(3)		(45)
Noninterest expense	2,211			691				16		2,918
Income (loss) before income taxes	$	834		$	348		(a)	$	(16)	$	1,166		(a)
Pre-tax operating margin (b)	28		%	34		%		N/M		29		%
Average assets	$	379,273		$	30,195			$	37,293	$	446,761

(a) Total fee and other revenue, total revenue and income before income taxes are net of loss attributable to noncontrolling interests related to consolidated investment management funds of $4 million.