Bank of America 2010 Annual Report Download - page 240

Global Commercial Banking
Global Commercial Banking provides a wide range of lending-related products
and services, integrated working capital management and treasury solutions
to clients through the Corporation’s network of offices and client relationship
teams along with various product partners. Clients include business banking
and middle-market companies, commercial real estate firms and govern-
ments, and are generally defined as companies with sales up to $2 billion.
Lending products and services include commercial loans and commitment
facilities, real estate lending, asset-based lending and indirect consumer
loans. Capital management and treasury solutions include treasury manage-
ment, foreign exchange and short-term investing options.
Global Banking & Markets
GBAM provides financial products, advisory services, financing, securities
clearing, settlement and custody services globally to institutional investor
clients in support of their investing and trading activities. GBAM also works
with commercial and corporate clients to provide debt and equity underwriting
and distribution capabilities, merger-related and other advisory services, and
risk management products using interest rate, equity, credit, currency and
commodity derivatives, foreign exchange, fixed-income and mortgage-related
products. As a result of the Corporation’s market-making activities in these
products, it may be required to manage positions in government securities,
equity and equity-linked securities, high-grade and high-yield corporate debt
securities, commercial paper, MBS and ABS. Corporate banking services
provide a wide range of lending-related products and services, integrated
working capital management and treasury solutions to clients through the
Corporation’s network of offices and client relationship teams along with
various product partners. Corporate clients are generally defined as compa-
nies with sales greater than $2 billion. In addition, GBAM also includes the
results related to the merchant services joint venture.
Global Wealth & Investment Management
GWIM provides comprehensive wealth management capabilities to a broad
base of clients from emerging affluent to the ultra-high-net-worth. These
services include investment and brokerage services, estate and financial
planning, fiduciary portfolio management, cash and liability management and
specialty asset management. GWIM also provides retirement and benefit plan
services, philanthropic management and asset management to individual and
institutional clients. In addition, GWIM includes the results of BofA Capital
Management, the cash and liquidity asset management business that the
Corporation retained following the sale of the Columbia long-term asset
management business, and other miscellaneous items. GWIM also reflects
the impact of migrating clients and their related deposit and loan balances to
or from GWIM and Deposits, Home Loans & Insurance and the Corporation’s
ALM activities. Subsequent to the date of migration, the associated net
interest income, noninterest income and noninterest expense are recorded
in the business to which the clients migrated.
All Other
All Other consists of equity investment activities including Global Principal
Investments, Strategic Investments, the residential mortgage portfolio asso-
ciated with ALM activities, the impact of the cost allocation processes, merger
and restructuring charges, intersegment eliminations, and the results of
certain businesses that are expected to be or have been sold or are in the
process of being liquidated. All Other also includes certain amounts associ-
ated with ALM activities, amounts associated with the change in the value of
derivatives used as economic hedges of interest rate and foreign exchange
rate fluctuations, the impact of foreign exchange rate fluctuations related to
revaluation of foreign currency-denominated debt, fair value adjustments
related to certain structured notes, certain gains (losses) on sales of whole
mortgage loans, gains (losses) on sales of debt securities, OTTI write-downs
on certain AFS securities and for periods prior to January 1, 2010, a secu-
ritization offset which removed the securitization impact of sold loans in
Global Card Services in order to present the consolidated results of the
Corporation on a GAAP basis (i.e., held basis).
Basis of Presentation
The management accounting and reporting process derives segment and
business results by utilizing allocation methodologies for revenue and ex-
pense. The net income derived for the businesses is dependent upon revenue
and cost allocations using an activity-based costing model, funds transfer
pricing, and other methodologies and assumptions management believes are
appropriate to reflect the results of the business.
Total revenue, net of interest expense, includes net interest income on a
fully taxable-equivalent (FTE) basis and noninterest income. The adjustment of
net interest income to a FTE basis results in a corresponding increase in
income tax expense. The segment results also reflect certain revenue and
expense methodologies that are utilized to determine net income. The net
interest income of the businesses includes the results of a funds transfer
pricing process that matches assets and liabilities with similar interest rate
sensitivity and maturity characteristics. For presentation purposes, in seg-
ments where the total of liabilities and equity exceeds assets, which are
generally deposit-taking segments, the Corporation allocates assets to match
liabilities. Net interest income of the business segments also includes an
allocation of net interest income generated by the Corporation’s ALM
activities.
The Corporation’s ALM activities include an overall interest rate risk
management strategy that incorporates the use of interest rate contracts
to manage fluctuations in earnings that are caused by interest rate volatility.
The Corporation’s goal is to manage interest rate sensitivity so that move-
ments in interest rates do not significantly adversely affect net interest
income. The Corporation’s ALM activities are allocated to the business
segments and fluctuate based on performance. ALM activities include exter-
nal product pricing decisions including deposit pricing strategies, the effects
of the Corporation’s internal funds transfer pricing process and the net effects
of other ALM activities.
Certain expenses not directly attributable to a specific business segment
are allocated to the segments. The most significant of these expenses include
data and 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 that reflect
utilization.
238 Bank of America 2010