Intangible Assets

6 Months Ended

Jun. 30, 2012

Intangible Assets and Goodwill [Abstract]

Intangible Assets

9.    Intangible Assets

Intangible assets consisted of the following:

	June 30, 2012		December 31, 2011
	(in millions)
Mortgage servicing rights	$	194	$	227
Purchased credit card relationships		63		-
Other		11		15
Total other intangible assets, net	$	268	$	242

Mortgage Servicing Rights (“MSRs”)  A servicing asset is a contract under which estimated future revenues from contractually specified cash flows, such as servicing fees and other ancillary revenues, are expected to more than adequately compensate the servicer for performing the servicing. We recognize the right to service mortgage loans as a separate and distinct asset at the time they are acquired or when originated loans are sold.

MSRs are subject to credit, prepayment and interest rate risk, in that their value will fluctuate as a result of changes in these economic variables. Interest rate risk is mitigated through an economic hedging program that uses securities and derivatives to offset changes in the fair value of MSRs. Since the hedging program involves trading activity, risk is quantified and managed using a number of risk assessment techniques, which are addressed in more detail in the 2011 Form 10-K.

Residential mortgage servicing rights  Residential MSRs are initially measured at fair value at the time that the related loans are sold and are re-measured at fair value at each reporting date. Changes in fair value of the MSRs are reflected in residential mortgage banking revenue in the period in which the changes occur. Fair value is determined based upon the application of valuation models and other inputs. The valuation models incorporate assumptions market participants would use in estimating future cash flows. The reasonableness of these valuation models is periodically validated by reference to external independent broker valuations and industry surveys.

Fair value of residential MSRs is calculated using the following critical assumptions:

	June 30, 2012			December 31, 2011
Annualized constant prepayment rate (“CPR”)		23.0	%		21.4	%
Constant discount rate		11.2	%		11.3	%
Weighted average life		3.2 years			3.4 years

Residential MSRs activity is summarized in the following table:

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2012			2011			2012			2011
	(in millions)
Fair value of MSRs:
Beginning balance	$	228		$	396		$	220		$	394
Additions related to loan sales		6			9			14			25
Changes in fair value due to:
Change in valuation inputs or assumptions used in the valuation models		(31	)		(27	)		(15	)		(22	)
Realization of cash flows		(16	)		(15	)		(32	)		(34	)
Ending balance	$	187		$	363		$	187		$	363

Information regarding residential mortgage loans serviced for others, which are not included in the consolidated balance sheet, is summarized in the following table:

	June 30, 2012		December 31, 2011
	(in millions)
Outstanding principal balances at period end	$	35,095	$	37,839
Custodial balances maintained and included in noninterest bearing deposits at period end	$	827	$	838

Servicing fees collected are included in residential mortgage banking revenue and totaled $22 million and $47 million during the three and six months ended June 30, 2012, respectively, compared to $28 million and $56 million during the three and six months ended June 30, 2011, respectively.

Commercial Mortgage Servicing Rights  Commercial MSRs, which are accounted for using the lower of cost or fair value method, totaled $7 million and $7 million at June 30, 2012 and December 31, 2011.

Purchased credit card relationships  In March 2012, we purchased from HSBC Finance the account relationships associated with $746 million of credit card receivables which were not included in the sale to Capital One at a fair value of $108 million. Approximately $43 million of this value is associated with the credit card receivables being sold to First Niagara and, as a result, have been included in Other branch related assets held for sale. The remaining $65 million is included in intangible assets and is being amortized over its estimated useful life of ten years.

Other Intangible Assets  Other intangible assets, which result from purchase business combinations, are comprised of favorable lease arrangements of $10 million and $12 million at June 30, 2012 and December 31, 2011, respectively, and customer lists in the amount of $1 million and $3 million at June 30, 2012 and December 31, 2011, respectively.