Thank you. Good morning, everyone. I'm going to take you through the earnings presentation which is available on our website. Please refer to the disclaimer at the back of the presentation.
Starting on Page 1, the firm reported net income of $4.2 billion, EPS of $1.07 and a return on tangible common equity of 8% on revenue of $25.5 billion. The impact of the U.S. tax reform is the one significant item we have this quarter. We reported a $2.4 billion reduction to our fourth quarter net income. Excluding this, our performance would have been $6.7 billion of net income, EPS of $1.76 per share with an ROTCE of 13%. Similar to the last few quarters, our underlying results were quite strong in the fourth quarter, and highlights included, average core loan growth of 6% year-on-year, bringing us to 8% for the full year; and credit performance continued to be very strong; a good holiday season fueled double-digit growth in Card sales and merchant volumes, each up 13%; our client investment assets were up 17%; we maintained our number one rank in global IBCs and we grew share; and we had record net income and revenue in the Commercial Bank and record revenue and AUM in Asset & Wealth Management.
Before I go into our results, let's spend time on tax reform on Page 2. The $2.4 billion impact of tax reform was largely driven by a deemed repatriation of our unremitted overseas earnings as well as an adjustment to the value of our tax-oriented investments, including affordable housing and energy. These were partially offset by a benefit from the revaluation of our net deferred tax liability. The impact is primarily in Corporate, but as you can see, there was some impact to each of the CIB and the Commercial Bank. The capital impact is $1.2 billion higher at $3.6 billion or about 25 basis points of CET1. And our effective tax rate will be approximately 19% this year and 20% over the near term, think through 2020, after which, it should start to gradually increase as certain business credits are phased out over time. While there is now enacted bill, and with that, there's more clarity, there are still a number of open implementation as well as accounting questions that will require clarification. And as such, our estimated impact may be refined in future quarters. That said, I know there are a number of important questions which I'll try and get you clarity on. First, with respect to the deemed repatriations, the operative word for us is deemed. In many ways, you can think of our unremitted overseas earnings as the equivalent of bricks and mortar being required in order to meet local jurisdictional capital and liquidity requirements. So we do not expect to actually remit anything significant. Second, although the reduction in the corporate tax rate was 14%, you can see that the reduction in our effective tax rate is only about 10%, given the impact of the geographic mix of our taxable income, the disallowance of FDIC fees and smaller benefits associated with tax-exempt income and other deductions as a result of the lower absolute rate. Moving on to the BEAT tax, this is an area where there do remain open questions. However, at this point, we do not expect to have a BEAT liability.
But if we are wrong, we would not expect it to be material. Next, the question of whether the benefit will be competed away, and if so, over what time line. Pricing strategy will differ across products. It is true that we operate in competitive and transparent markets, and this means that ultimately, you could expect some of the benefit for the industry will be passed through to our customers over time. Competition is one key driver, but there are other factors, such as scale, expertise, the breadth of your products and services and the investments that you're making in customer experience, and these matter a lot. And for certain of our businesses, pricing is not necessarily directly or immediately driven by fluctuations in the cost of capital, think flow markets. And remember, we didn't get to price up the changes in market structure and capital and liquidity over the last several years. So it will be nuanced, it will be different across products, and time is a very important dimension. Any competitive dynamic will play out over time. We are in the process of putting together a cohesive and comprehensive set of long-term and sustainable actions for our employees, for customers and communities in part in response to tax reform. Some of our plans may involve subsidies for lower-income borrowers and support for small businesses. And for these customers and for some others, they may feel a benefit sooner. With respect to our capital plan, there are no immediate changes to note. This won't change our overall strategy, and remember, the first half of 2018 is governed by last year's CCAR. Finally, on the potential impact to our businesses, the modernization of the U.S. tax code is a significant step forward for the country and a big win for the economy. And we include an estimated 20 to 30 basis points of growth in the U.S. this year and next. However, clients are still digesting the tax bill, and much like this rate cycle, we haven't seen this movie before. We'll have to watch it play out. There will be pluses and minuses by client and pluses and minuses across the products. So overall, stepping back, tax reform is a positive. And for our clients, there's more certainty, more clarity, and that should give them confidence to act. Moving now to Page 3, let's get into some details on the fourth quarter results.
Revenue of $25.5 billion was up $1.1 billion or 5% year-on-year as net interest income was up $1.3 billion, mainly reflecting the impact of higher rates and continued strong loan and deposit growth, partially offset by lower NII in Markets. Loan interest revenue was down modestly as growth in Auto as well as Asset & Wealth Management partially made up for lower Market performance. Adjusted expense of $14.8 billion was up 9% year-on-year, reflecting higher compensation expense as well as business growth including Auto lease depreciation.
In the fourth quarter, we took an impairment charge of a little over $100 million related to certain leased asset in the Commercial Bank. And we increased our contribution to the foundation, adding $200 million this quarter. Credit cost of $1.3 billion were up about $450 million year-on-year. Charge-offs were flat, with an increase in Card being offset by continued decreases across other portfolios.
And although net reserve builds this quarter were modest, we saw releases in the fourth quarter of last year of approximately $400 million. Shifting to the full year on Page 4. We reported net income for the year of $24.4 billion, a return on tangible common equity of 12% and EPS of $6.31. Adjusting for the two front-page significant items that we had this year, being tax reform this quarter and the benefit of the WaMu settlement in the second quarter, our net income would've been another record of $26.5 billion with an ROTCE of 13% and EPS of $6.87. Revenue crossed back over the $100 billion threshold this year which feels good, $104 billion, up 5%, $4.1 billion of which was higher net interest income in line with guidance, benefiting from higher rates and growth, relatively modest deposit repricing, but pressured by lower Market NII. Noninterest revenue was up $400 million with higher Auto lease income as well as higher fees across the Investment Bank; Asset, Wealth Management; and Consumer, adding $2.6 billion to revenues and more than compensating for headwinds in Home Lending on a smaller market, investments in Card and lower Markets. We ended the year with adjusted expense of $58.5 billion, but as you can see, we made a total contribution to our foundation this year of $350 million in part in anticipation of tax reform. This brings our adjusted overhead ratio to 57% for the year even as we continue to make very significant investments across the franchise.
Credit cost for the year were $5.3 billion, down 1% as the environment remains benign. Moving on to Page 5, balance sheet and capital. We ended the year with CET1 of 12.1%, down almost 40 basis points versus the prior quarter, about 25 basis points of which related to tax adjustments, and the remainder, loan growth. All the other ratios as well as tangible book value per share also reflected a combination of $6.7 billion of capital distributions and the $3.6 billion impact of tax reform. Moving on to Page 6 on Consumer & Community Banking. CCB generated $2.6 billion of net income and an ROE of 19%. We continued to grow core loans, up 8% year-on-year, driven by Home Lending, up 13%; and Business Banking, Card and Auto loans and leases were each up 6%. Consumer deposit growth was strong, up 7%, and we believe we are maintaining our sizable lead over the market despite an industry-wide slowdown, given rising rates. Card sales and merchant processing volumes were each up 13%, driven by continued strength from Card new products as well as ongoing momentum in Merchant Services. In December, we completed the acquisition of WePay, which marks a big step for us into the integrated payment space, allowing us to efficiently provide software-enabled payments to small business clients. And we also completed the renegotiation with Marriott for our co-branded cards, which will make us the largest issuer of the largest co-branded hotel program in the world. For all intents and purposes, we've now finished the renewals of our cobranded card deals.
Revenue of $12.1 billion was up 10% year-on-year. Consumer & Business Banking revenue was up 16% on higher NII, driven by continued margin expansion as well as strong average deposit growth. Home Lending revenue was down 15% on lower net servicing revenue driven by MSR as well as loan spread compression. Our originations were down 16% and the Markets down an estimated 25%. And we gained share, a trend we expect to continue, given our investments. And Card, Merchant Services & Auto revenue was up 11% year-on-year on higher Auto lease income, growth in Card loan balances and margins and lower net acquisition costs. For the full year, Card revenue rate was 10.6%, in line with our guidance, and we still expect to reach 11.25% in the first half of this year. Expense of $6.7 billion was up 6% year-on-year, driven by higher Auto lease depreciation and continued underlying business growth. The overhead ratio was 55% for the quarter, 56% for the year as the business moved past the impact of investments and started generating positive operating leverage in the second half of '17. Finally, on credit. Card charge-offs came in line with guidance for the year at 2.95%. The increase in Card charge-offs was predominantly offset by preceding credit performance across other portfolios. In terms of credit reserve, the net $15 million build this quarter was driven by a $200 million build in Card on growth, offset by releases in Home Lending of $150 million and Auto of $35 million. And as I noted last quarter, Auto trends have stabilized and the industry feels to be on solid footing. Now turning to Page 7 in the Corporate & Investment Bank.
CIB reported net income of $2.3 billion on revenue of $7.5 billion and an ROE of 12%. But revenue was impacted by 2 noteworthy items this quarter, and both of them had an impact in Markets, so I'll start with Markets. Total Markets revenue was $3.4 billion, down 26% year-on-year. However, Fixed Income Markets included the net impact of tax reform on our tax-oriented investments which was approximately $260 million, accounting for 6% of the year-on-year Markets decline. Additionally, Equity Markets included a notable loss of $143 million on a single margin loan. This accounted for 3% of the year-on-year decline. It's worth noting that the loss appears here in Markets as we elected fair value option on this loan. However, when you do industry comparisons, be aware that others involved in this facility may not have made that same election and may have all of their losses in credit. So in addition, although not in Markets revenues, $130 million of credit cost this quarter was driven by a reserve build related to that same name.
So adjusting for those items, our Markets revenue would have been down 17% year-on-year, which is much closer to the experience up to the beginning of December, when we last spoke publicly. Fixed income revenue was down 27% adjusted, principally driven by a tough prior year comparison and low volatility and tight credit spreads which have continued into this quarter. Equities revenue was up 12% adjusted against the record fourth quarter of '16. And similar to the past few quarters, the driver of the increase was continued tailwinds from investments in cash, prime and corporate derivatives. Moving on to banking. We had a record year for total fees and for debt underwriting fees.
We maintained our number one rank in global IBCs while growing share and we also ranked number one in North America and EMEA. This quarter, IB revenue was $1.6 billion, up 10% year-on-year, driven by broad strength across capital markets. Advisory fees were up 2% as we saw good momentum with some large deals closing. We ranked number two for the year in wallet, gaining share. And we completed more deals than any other bank. Equity underwriting fees were up 14%, with indices up across every region and several at or near all-time highs. We maintained leadership positions in wallet and volumes across every product globally this year.
And while we ended up number two in wallet, the distance to number one was only a few basis points. And debt underwriting fees were up 12% as the market remained receptive to new issuance across high-grade and leveraged finance and refinancing activity was strong. We maintained our number one rank. We gained share, and this year, booked around the most number of deals in the firm's history. The overall pipeline remains healthy and at levels similar to last year.
Our balance sheets are strong and market conditions favorable. Treasury Services revenue of $1.1 billion was up 13%. In addition to higher rates, we continued to see organic growth within the business as the investments we've made over the past several years have improved our clients' experience across the platform. Security Services revenues of $1 billion was up 14%, driven by rates and balances, with average deposits up 12% year-on-year, and higher asset-based fees on record AUC, given higher market levels globally. Finally, expense of $4.5 billion was up 8% year-on-year, driven by the relative timing of compensation accruals. The comp-to-revenue ratio for the quarter was 27%; for the year, 28%, broadly in line with prior year.
Moving to Commercial Banking on Page 8. I was another outstanding quarter for the Commercial Bank, with record net income of $957 million, record revenue of $2.4 billion and an ROE of 18%. And for the year, net income and revenue were also records. The business is firing on all cylinders and delivered an ROE of 17%. For the quarter, revenue included a benefit of a little over $100 million associated with tax reform and in our Community Development Banking business. Even without this benefit, revenue would still be a record, up 14% year-on-year, on higher NII from higher rates as well as deposit and loan growth across businesses. IB revenue of $587 million was down 3% year-on-year, but still a strong performance. For the full year, we saw record IB revenue of $2.3 billion, up 2%, with particular strength in middle market, which was up over 50%, compensating for a smaller number of large deals. The pipeline and momentum into the first quarter feels good. Expense of $912 million included an impairment charge, also, of a little over $100 million on certain leased equipment which we expect to sell in the first half of this year. Excluding this, we saw got expense growth of 9% as we executed on our technology and product investments. And this year, we added net 120 new bankers in the business and entered six new markets, giving us a presence in all top 50 MSAs.
Loan balances were up 7% year-on-year, 1% quarter-on-quarter. C&I loans were up 6% year-on-year, driven by continued strength in expansion market and specialized industries. While sequential growth was up a more modest 1%, we are seeing decent deal flow and pipelines are holding steady. Client sentiment continues to be strong, supported by corporate tax reform. CRE saw growth of 9% year-on-year and 1% quarter-on-quarter, in line with the industry.
Multifamily lending continued to see tightened pricing on elevated competition. We remain appropriately focused on client selection, given where we are in the cycle and with particular caution around construction lending. Finally, credit remains among the best we've seen. This quarter, we saw a benefit of $62 million, largely driven by reserve releases in the Oil & Gas portfolio.
And net charge-offs were four basis points. Leaving the Commercial Bank and moving on to Asset, Wealth Management on Page 9. Asset & Wealth Management reported net income of $654 million with a pretax margin of 30% and an ROE of 28%.
Revenue was a record $3.4 billion this quarter, driven by higher management fees on growth in AUM as well as higher NII on deposits and loans. For the full year, net income and revenue were records with a pretax margin of 28% and an ROE of 25%. Expense for the quarter of $2.3 billion was up 8% year-on-year, driven by a combination of higher compensation as well as a gross up for external fees which is offset in revenue. For the quarter, we saw long-term net inflows of $30 billion with positive flows across all asset classes on continued strong long-term performance. For the full year, we had long-term net inflows of $68 billion, driven predominantly by fixed income, multi-asset and alternatives. Record AUM of $2 trillion and overall client assets of $2.8 trillion were up 15% and 14%, respectively, year-on-year, reflecting higher market levels globally as well as net inflows. Deposits were down 10% year-on-year, down 2% sequentially, reflecting continued migration into investment-related assets, the vast majority of which we are retaining. And new client flows remain healthy. Finally, we had record loan balances, up 11% year-on-year; including mortgage, up 14%.
Moving to Page 10 and Corporate. Corporate reported a net loss of $2.3 billion, which includes $2.7 billion of the tax reform adjustment. Treasury & CIO's results improved year-on-year, primarily due to the benefit of higher rates. So finally turning to Page 11 and the outlook. Before I get to specifics, remember, we do have Investor Day coming up in February, so we will be giving you a lot more guidance there. So that leaves me with two structural things to talk about, the first, staying on the theme of tax reform.
And lower corporate tax rate in 2018 will have the effect of reducing the tax equivalent adjustments or gross ups in our managed revenues. On a run rate basis, that reduction for the full year will be about $1.2 billion, and more than half of that is in the NII. Secondly, effective January 1, 2018, a new revenue recognition accounting rule came into effect, which requires certain expenses to be grossed up that were previously recognized as contra expense — contra revenue. We estimate, for the full year, the impact will increase both revenues and expenses for the firm by another $1.2 billion, the vast majority of which will be in Asset, Wealth Management with a small amount in the CIB.
So for guidance, expect the first quarter NII will be down modestly quarter-on-quarter, reflecting a combination of the lower gross ups I mentioned as well as normal day count which offset the benefits of higher rates and growth. And we estimate the first quarter effective tax rate will be about 17%, reflecting seasonality of stock comp adjustments. So to wrap up, the end of 2017 was constructive, characterized by strong equity markets; higher interest rates; good economic data globally; decent client activity; high levels of confidence; and, obviously, the enactment of the Tax Cuts and Jobs Act. Against that backdrop, our underlying financial performance in the fourth quarter and 2017 was strong, benefiting from diversification and scale and consistently delivering for our customers and communities, gaining share across our businesses. Adjusting for significant items in the year, net income and EPS would have been clear records, driving a healthy 13% return on tangible common equity. We're excited about the landscape and the opportunities for our clients in 2018. We will be there for them, and the company is poised to continue to perform. With that, operator, I will take questions.