SEGMENT REPORTING

Effective for the first quarter of 2017, as a result of changes to how we manage our businesses, we realigned our segments and, accordingly, have changed the basis of presentation of our segments, resulting in four reportable business segments:


•	Retail Banking


•	Corporate & Institutional Banking


•	Asset Management Group


•	BlackRock

Results of individual businesses are presented based on our internal management reporting practices. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP; therefore, the financial results of our individual businesses are not necessarily comparable with similar information for any other company. We periodically refine our internal methodologies as management reporting practices are enhanced. To the extent significant and practicable, retrospective application of new methodologies is made to prior period reportable business segment results and disclosures to create comparability with the current period.

Net interest income in business segment results reflects our internal funds transfer pricing methodology. Assets receive a funding charge and liabilities and capital receive a funding credit based on a transfer pricing methodology that incorporates product repricing characteristics, tenor and other factors. Effective for the first quarter of 2017, we made certain adjustments to our internal funds transfer pricing methodology primarily relating to weighted average lives of certain non-maturity deposits based on our recent historical experience. These changes in methodology affected business segment results, primarily adversely impacting net interest income for Corporate & Institutional Banking and Retail Banking, offset by increased net interest income in the “Other” category.

All prior periods presented were revised to conform to the new segment alignment and to our change in internal funds transfer pricing methodology.

Our business segment results reflect the allocation of the impact of the new tax legislation to our business segments, primarily the revaluation of the net deferred tax positions allocated to the segments. Certain tax legislation amounts are considered reasonable estimates as of December 31, 2017. See Note 17 Income Taxes for additional details.

Total business segment financial results differ from total consolidated net income. The impact of these differences is reflected in the “Other” category in the business segment tables. “Other” includes residual activities that do not meet the criteria for disclosure as a separate reportable business, such as asset and liability management activities including net securities gains or losses, other-than-temporary impairment of investment securities, certain trading activities, certain non-strategic runoff consumer loan portfolios, private equity investments, intercompany eliminations, most corporate overhead, tax adjustments that are not allocated to business segments, gains or losses related to BlackRock transactions, integration costs, exited businesses, and differences between business segment performance reporting and financial statement reporting (GAAP), including the presentation of net income attributable to noncontrolling interests as the segments’ results exclude their portion of net income attributable to noncontrolling interests. Assets, revenue and earnings attributable to foreign activities were not material in the periods presented for comparative purposes.

Financial results are presented, to the extent practicable, as if each business operated on a stand-alone basis. Additionally, we have aggregated the results for corporate support functions within “Other” for financial reporting purposes.

Our allocation of the costs incurred by shared support areas not directly aligned with the businesses is primarily based on the use of services.

A portion of capital is intended to cover unexpected losses and is assigned to our business segments using our risk-based economic capital model, including consideration of the goodwill at those business segments as well as the diversification of risk among the business segments, ultimately reflecting our portfolio risk adjusted capital allocation.

We have allocated the allowances for loan and lease losses and for unfunded loan commitments and letters of credit based on the loan exposures within each business segment’s portfolio. Key reserve assumptions and estimation processes react to and are influenced by observed changes in loan portfolio performance experience, the financial strength of the borrower and economic conditions. Key reserve assumptions are periodically updated.

Business Segment Products and Services

Retail Banking provides deposit, lending, brokerage, insurance services, investment management and cash management services to consumer and small business customers within our primary geographic markets. Our customers are serviced through our branch network, ATMs, call centers, online banking and mobile channels. The branch network is located primarily in Pennsylvania, Ohio, New Jersey, Michigan, Illinois, Maryland, Indiana, Florida, North Carolina, Kentucky, Washington, D.C., Delaware, Virginia, Georgia, Alabama, Missouri, Wisconsin and South Carolina. Deposit products include checking, savings and money market accounts and certificates of deposit. Lending products include residential mortgages, home equity loans and lines of credit, auto loans, credit cards, education loans and personal and small business loans and lines of credit. The residential mortgage loans are directly originated within our branch network and nationwide, and are typically underwritten to government agency and/or third-party standards, and either sold, servicing retained, or held on our balance sheet. Brokerage, investment management and cash management products and services include managed, education, retirement and trust accounts.

Corporate & Institutional Banking provides lending, treasury management, and capital markets-related products and services to mid-sized and large corporations, and government and not-for-profit entities. Lending products include secured and unsecured loans, letters of credit and equipment leases. Treasury management services include cash and investment management, receivables management, disbursement services, funds transfer services, information reporting and global trade services. Capital markets-related products and services include foreign exchange, derivatives, securities underwriting, loan syndications, mergers and acquisitions advisory and equity capital markets advisory related services. We also provide commercial loan servicing and technology solutions for the commercial real estate finance industry. Products and services are provided nationally. We offer certain products and services internationally.

Asset Management Group provides personal wealth management for high net worth and ultra high net worth clients and institutional asset management. Wealth management products and services include investment and retirement planning, customized investment management, private banking, tailored credit solutions, and trust management and administration for individuals and their families. Our Hawthorn unit provides multi-generational family planning including estate, financial, tax planning, fiduciary, investment management and consulting, private banking, personal administrative services, asset custody and customized performance reporting to ultra high net worth families. Institutional asset management provides advisory, custody and retirement administration services. The business also offers PNC proprietary mutual funds. Institutional clients include corporations, unions, municipalities, non-profits, foundations and endowments, primarily located in our geographic footprint.

BlackRock, in which we hold an equity investment, is a leading publicly-traded investment management firm providing a broad range of investment, risk management and technology services to institutional and retail clients worldwide. Using a diverse platform of active and index investment strategies across asset classes, BlackRock develops investment outcomes and asset allocation solutions for clients. Product offerings include single- and multi-asset class portfolios investing in equities, fixed income, alternatives and money market instruments. BlackRock also offers an investment and risk management technology platform, risk analytics, advisory and technology services and solutions to a broad base of institutional and wealth management investors.

Our equity investment in BlackRock provides us with an additional source of noninterest income and increases our overall revenue diversification. BlackRock is a publicly-traded company, and additional information regarding its business is available in its filings with the Securities and Exchange Commission (SEC). At December 31, 2017, our economic interest in BlackRock was 22%. We received cash dividends from BlackRock of $354 million, $331 million, and $320 million during 2017, 2016, and 2015, respectively.

Table 103: Results of Businesses



Year ended December 31 In millions	Retail Banking		Corporate & Institutional Banking		Asset Management Group			BlackRock			Other			Consolidated (a)
2017
INCOME STATEMENT
Net interest income	$	4,625	$	3,396	$	287					$	800		$	9,108
Noninterest income	2,236		2,271		881			$	1,078		755			7,221
Total revenue	6,861		5,667		1,168			1,078			1,555			16,329
Provision for credit losses (benefit)	347		160		1						(67		)	441
Depreciation and amortization	177		184		50						510			921
Other noninterest expense	5,274		2,244		813						1,146			9,477
Income (loss) before income taxes (benefit) and noncontrolling interests	1,063		3,079		304			1,078			(34		)	5,490
Income taxes (benefit)	533		615		102			(686		)	(462		)	102
Net income	$	530	$	2,464	$	202		$	1,764		$	428		$	5,388
Average Assets (b)	$	88,663	$	148,414	$	7,511		$	7,677		$	119,504		$	371,769
2016
INCOME STATEMENT
Net interest income	$	4,509	$	3,181	$	300					$	401		$	8,391
Noninterest income	2,693		2,035		851			$	685		507			6,771
Total revenue	7,202		5,216		1,151			685			908			15,162
Provision for credit losses (benefit)	297		177		(6		)				(35		)	433
Depreciation and amortization	175		153		45						470			843
Other noninterest expense	5,116		2,069		780						668			8,633
Income (loss) before income taxes (benefit) and noncontrolling interests	1,614		2,817		332			685			(195		)	5,253
Income taxes (benefit)	591		908		122			153			(506		)	1,268
Net income	$	1,023	$	1,909	$	210		$	532		$	311		$	3,985
Average Assets (b)	$	85,871	$	140,309	$	7,707		$	7,118		$	120,255		$	361,260
2015
INCOME STATEMENT
Net interest income	$	4,306	$	3,144	$	292					$	536		$	8,278
Noninterest income	2,781		1,947		869			$	717		633			6,947
Total revenue	7,087		5,091		1,161			717			1,169			15,225
Provision for credit losses (benefit)	253		78		9						(85		)	255
Depreciation and amortization	187		149		44						429			809
Other noninterest expense	5,257		2,038		802						557			8,654
Income before income taxes (benefit) and noncontrolling interests	1,390		2,826		306			717			268			5,507
Income taxes (benefit)	506		934		112			169			(357		)	1,364
Net income	$	884	$	1,892	$	194		$	548		$	625		$	4,143
Average Assets (b)	$	86,977	$	133,754	$	7,920		$	6,983		$	119,330		$	354,964


(a)	There were no material intersegment revenues for the years ended 2017, 2016 and 2015.


(b)	Period-end balances for BlackRock.