PNC Bank 2011 Annual Report Download - page 59

B USINESS S EGMENTS R EVIEW
We have six reportable business segments:
• Retail Banking
• Corporate & Institutional Banking
• Asset Management Group
• Residential Mortgage Banking
• BlackRock
• Non-Strategic Assets Portfolio
Once we entered into an agreement to sell GIS, it was no
longer a reportable business segment. We sold GIS on July 1,
2010.
Business segment results, including inter-segment revenues,
and a description of each business are included in Note 25
Segment Reporting included in the Notes To Consolidated
Financial Statements in Item 8 of this Report. Certain amounts
included in this Item 7 differ from those amounts shown in
Note 25 primarily due to the presentation in this Item 7 of
business net interest revenue on a taxable-equivalent basis.
Results of individual businesses are presented based on our
management accounting practices and management structure.
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 refine our methodologies from time to time as
our management accounting practices are enhanced and our
businesses and management structure change. Certain prior
period amounts have been reclassified to reflect current
methodologies and our current business and management
structure. 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.
Assets receive a funding charge and liabilities and capital
receive a funding credit based on a transfer pricing
methodology that incorporates product maturities, duration
and other factors.
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 and other intangible assets at those business
segments, as well as the diversification of risk among the
business segments. We have revised certain capital allocations
among our business segments, including amounts for prior
periods. PNC’s total capital did not change as a result of these
adjustments for any periods presented. However, capital
allocations to the segments were lower in the year-over-year
comparisons primarily due to improving credit quality.
We have allocated the allowances for loan and lease losses
and for unfunded loan commitments and letters of credit based
on our assessment of risk in the business segment loan
portfolios. Our allocation of the costs incurred by operations
and other shared support areas not directly aligned with the
businesses is primarily based on the use of services.
Total business segment financial results differ from total
consolidated results from continuing operations before
noncontrolling interests, which itself excludes the earnings
and revenue attributable to GIS through June 30, 2010 and the
related third quarter 2010 after-tax gain on the sale of GIS that
are reflected in discontinued operations. The impact of these
differences is reflected in the “Other” category. “Other” for
purposes of this Business Segments Review and the Business
Segment Highlights in the Executive Summary includes
residual activities that do not meet the criteria for disclosure as
a separate reportable business, such as gains or losses related
to BlackRock transactions, integration costs, asset and liability
management activities including net securities gains or losses,
other-than-temporary impairment of investment securities and
certain trading activities, exited businesses, alternative
investments, including private equity, intercompany
eliminations, most corporate overhead, tax adjustments that
are not allocated to business segments, 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.
50 The PNC Financial Services Group, Inc. – Form 10-K