Thank you, operator. Good morning, everyone. I'm going to take you through the earnings presentation which is available on our website. Please refer to disclaimer at the back of the presentation.
Starting on Page 1, the firm reported fourth quarter net income of $7.1 billion and EPS of $1.98 on revenue of nearly $27 billion with a return on tangible common equity of 14%. Market impacts aside, underlying business drivers remain solid, increasing core loans and deposit growth, consumer sentiment and spending in a robust holiday season, faster market activity and the credit performance continuing to be very strong across businesses. For the full year 2018, the firm reported revenue of $111.5 billion and net income was $32.5 billion, both clear records even adjusting for the impacts of tax reform. And so, we're entering 2019 with good momentum across all businesses.
Turning to Page 2 and some more detail about our fourth quarter results. Revenue of $26.8 billion was up $1.1 billion or 4% year-on-year, driven by net interest income. NII was up $1.2 billion or 9% on higher rates and on loan and deposit growth. Non-interest revenue was down slightly, with lower market levels impacting Asset Wealth Management fees and Private Equity losses being offset by higher Card fees and Auto lease growth in CCB. Expense of $15.7 billion was up 6% year-on-year. The increase is related to investments we're making in technology, marketing, real estate and front office, as well as revenue-related costs including growth in Auto.
This was partially offset by a reduction in FDIC fees. As we had hoped, the incremental surcharge was eliminated effective the end of the third quarter and this is a benefit of a little over $200 million for the quarter across our businesses. Credit trends remained favorable across both Consumer and Wholesale. Credit costs of $1.5 billion were up $240 million year-on-year, driven by changes in reserves. In Consumer, we built reserves of $150 million in Cards on loan growth. In Wholesale, over the last several quarters, we have seen net reserve releases and recoveries. However, this quarter, we had about $200 million of credit costs. Again largely reserve builds on select C&I client downgrades driven by a handful of names across multiple sectors. While we are constantly looking at the granular level, these downgrades are idiosyncratic and do not reflect signs of deterioration in our portfolio. The outlook for credit as we see it remains positive. Shifting for the full year results on Page 3, we have posted net income for the year of $32.5 billion, a return on tangible common equity of 17% and EPS of $9 a share. Net income was a record for the firm, as well as to each of our businesses even exceeding tax reform. Revenue of $111.5 billion is also record and was up nearly $7 billion or 7% year-on-year, $4.3 billion of which was higher net interest income on higher rates with growth and Card margin expansion being offset by lower markets NII. Non-interest revenues was up $2.5 billion or 5%, driven by CIB Markets and growth in Consumer being offset by Private Equity losses and the impact of spread widening on FCA. At the end of the year, the adjusted expense was $63.3 billion, up 6%, which brings our overhead ratio to 57% for the year even as we continue to make very significant investments across the franchise. And although we are showing modest positive operating leverage on a managed basis, remember our revenues were impacted by lower growth in Cards given tax reform. Adjusted for this or looking on a GAAP basis, we delivered nearly 200 basis points of positive operating leverage for the year and well over 100 basis points for the fourth quarter. On Credit, the environment remained favorable throughout 2018. Credit costs were $4.9 billion, down 8% driven by lower net reserve build in Consumer as well as the impact in 2017 of student loan sales. Moving on to Page 4 on balance sheet and capital. We ended the quarter with a CET1 ratio of 12% flat to last quarter. Risk-weighted assets decreased with loan growth more than offset by derivatives counterparty and trading RWA given a combination of seasonality, market conditions and all the enhancements. Our net payout ratio for the quarter exceeded 100% and we repurchased $5.7 billion of shares.
Moving to Consumer & Community Banking on Page 5. CCB generated net income of $4 billion and an ROE of 30% for the fourth quarter. And for the year, nearly $15 billion of net income and an ROE of 28%. Customer satisfaction remains near all time highs across our businesses. For the quarter, core loans were up 5% year-on-year, driven by Home Lending up 8%, Card up 6% and Business Banking up 5%. Deposit grew 3%. Growth continues to slow given the rising rate environment, but importantly, we believe we continue to outpace the industry. Of note, this quarter, we opened the first 10 branches in our expansion markets increasing D.C., Boston and Philadelphia. And although it's clearly early, perception in the market and the performance of the new branches has been strong. Despite volatile markets, client investment assets were still up 3% and we saw record net new money flows for the year. Card sales were up 10%, debit sales up 11% and merchant processing volume up 17% reflecting a strong and confident consumer during the holiday season. And keeping with our focus on digital everything, of note, active mobile customers were up 3 million users or 11% year-on-year.
Revenues of $13.7 billion was up 13%. In Consumer & Business Banking revenue was up 18% on higher deposit NII driven by margin expansion. Home Lending revenue was down 8%, driven by lower net production revenues in a low volume, highly competitive environment. And of note, while not a material driver of overall expense, revenue headwinds here were offset by lower net production expense. And Cards, Merchant Services & Auto revenue was up 14%, driven by higher Card NII, although loan growth and margin expansion, lower card, net acquisition costs, principally Sapphire Reserve and higher Auto lease volumes. Card revenue rate was 11.6% for the quarter and 11.27% for the year as expected. Expense of $7.1 billion was up 6%, driven by investments in technology and marketing and Auto lease appreciation partly offset by lower FDIC charges and other expense efficiencies. On Credit, net charge-offs was down $18 million as modestly higher charge-offs in Card were more than offset by lower charge-offs in Auto and Home Lending. Charge-off rates were down year-on-year across all portfolios. Economic indicators remain upbeat. And given the breadth and depth of our franchise, we have a pretty good barometer. From everything we see, the US Consumer remains very healthy. Now turning to Page 6 on the Corporate & Investment Bank.
CIB reported net income of $3 billion and ROE of 10% on revenue of $7.2 billion for the fourth quarter. And for the year, net income was nearly $12 billion and an ROE of 16%. In Banking, it was a record year for both total fees and advisory fees. We ranked number one in Global IB fees for the 10th consecutive year, gaining share across all regions. Fourth quarter IB revenue of $1.7 billion was up 3%. We feel continued momentum in advisory with fees up 38% driven by the closing of several large transactions. For the year, we ranked Number 2 in wallet gaining share. Equity underwriting fees were down 4% but significantly outperforming the market. We ranked Number 1 for the year and the quarter and saw our leadership positions across all products globally with particular strength in IPOs as well as in the technology and healthcare sectors. And debt underwriting fees were down 19% versus a strong prior year and sectors in the market. We maintained our number one brand rank for the year and continued to hold strongly lead-left positions in high-yield bonds and leveraged loans.
Moving to markets. Total revenue was $3.2 billion, down 6% reported and down 11% adjusted for the impact of tax reform and Steinhoff margin loan loss last year. A confluence of factors throughout the quarter including trade, concerns around global growth and corporate earnings, fears of lower mortgage fares as well as other negative headlines caused spikes in volatility which were amplified by markets that assets and liquidity. And although we saw decent client flow, rates rallied, spreads widened and energy prices fell significantly, all against general market conviction that was anticipating a stronger end to the year. As a result, fixed income markets in particular were challenging with revenue down 18% adjusted. Weaker performance across rates, credit trading and commodities was partially offset by good momentum in emerging markets. Equities revenue was up 2% adjusted, a solid end to a record year. Client continued to do well but we saw client deleveraging over the course of the quarter and cash derivatives were solid in a tougher environment. Treasury services revenue was $1.2 billion, up 13%, driven by growth in operating deposits as well as higher rates but also benefitting from fee growth on higher volumes. Security services revenue was a $1 billion, up 1%. Underlying this was strong fee growth and a modest benefit from higher rates together being substantially offset by the impact of lower market levels and the business exit. Credit adjustments and other was a loss of $243 million, reflecting higher funding spreads on all derivatives. Finally, expense of $4.7 billion was up slightly with continued investments in technology and bankers and volume-related transaction costs, partly offset by lower FDIC charges and lower performance-based compensation. The comps and revenue ratio for the quarter and for the year was 28%.
Moving to commercial banking on page seven. The commercial bank reported net income of $1 billion and an ROE of 20% for the fourth quarter, and for the year $4 billion of net income and a ROE of 20%. Revenue of $2.3 billion for the quarter was down 2%, and for prior year included a tax reform related benefit. Excluding this, revenue was up 3%, driven by higher deposit NII. Gross IB revenue of $600 million was down 1% year-on-year but up 4% sequentially on a strong underlying flow of activity, particularly in M&A. Full-year IB revenue was a record $2.5 billion, up 4% on strong activity across segments, in particular middle market banking which was up 8%. Deposit balances were up 1% sequentially as client cash positions are seasonally highest toward year-end although down 7% year-on-year as we continue to see migration of non-operating deposits to higher yielding alternatives. We believe we are retaining a significant portion of these flows. Expense of $845 million was down 7% year-on-year as the prior year included $100 million of impairment on leased assets. Excluding this, expense was up 5%, driven by continued investment in the business in banker coverage as well as in technology and product initiatives. Loans were up 2% year-on-year and flat sequentially. C&I loans were up 1%, reflecting a decline in our tax exempt portfolio given tax reform. Adjusting for this, we would have been up 4%, which is still below the industry as we focus on client selection, pricing and credit discipline. But keep in mind, in areas where we have chosen to grow such as in our expansion markets, we are growing at or about industry benchmarks. CRE loans were up 2%, also below the industry as we proactively slowed our growth due to where we are in the cycle, through continued structural and pricing discipline and targeted selections as we build. Underlying credit performance remains strong with credit costs at a $106 million including higher loan loss reserves, largely due to select client downgrades.
Moving on to assets and wealth management on page eight. Assets and wealth management reported net income of $604 million with a pretax margin of 23% and an ROE of 26% for the fourth quarter. And for the year, net income was nearly $3 billion pretax margin at 26% and an ROE of 31%. Revenue of $3.4 billion for the quarter was down 5% year-on-year with the impact of current market levels driving lower investment valuations and management fees as well as to a lesser extent, lower performance fees. These were partially offset by strong banking results and the cumulative impact of net inflows. Expense of $2.6 billion was flat, as continued investments in advisors and in technology were offset by lower performance-based compensation and lower revenue-driven external fees. For the quarter, we saw net long-term outflows of $3 billion with strength in fixed income more than offset by outflows from equity and multi-asset products. Additionally, we had net liquidity inflows of $21 billion. For the 10th consecutive year, we saw net long-term inflows of $25 billion this year, driven predominantly by multi-assets and in addition saw $31 billion of net liquidity inflows this year. Assets under management of $2 trillion and overall client assets of $2.7 trillion were both down 2% as the impact of market levels more than offset the benefit of net inflows. Deposits were flat sequentially and down 7% year-on-year, reflecting migration into investments, and we continue to capture the vast majority inflows. Finally, we had record loan balances, up 13% with strength in global wholesale and mortgage lending.
Moving to page nine and corporate. Corporate reported a net loss of $577 million. Treasury and CIO net income of a $175 million was up year-on-year, primarily driven by higher rates. Other corporate saw a net loss of $752 million, including on a pre-tax basis funding our foundation for corporate philanthropy $200 million this quarter, flat year-on-year, and including a $150 million of markdown on certain legacy private equity investments market related. Remainder is driven by tax-related items, totaling a little over a $300 million.
And within this are two notable components. The first is regularly tax reserve; and second represents small differences between the effective tax rate for each for our businesses and that for the overall company as we close the year. So, therefore there is an offset across our businesses. Our full-year effective tax rate was just a little over 20%, in line with guidance.
Moving to page 10 and outlook. We will give you more full-year outlook and sensitivity information at Investor Day as always. However, for now, I would like to provide some color and reminders about the first quarter. Net interest income will continue to benefit from the impact of higher rates and growth but quarter-over-quarter will be negatively impacted by day count. And we expect the first quarter NII to be relatively flat sequentially. While it's too early clearly to give guidance on fee revenues, it's also fair to say that this quarter market is still calmer and more positive and capital market pipelines are strong. So, if the environment remains positive, we would expect normal seasonal strength in the first quarter. But I will remind you that the first quarter of 2018 included a $500 million accounting write off as well as broad strength in performance. Expect expense to be up mid-single-digits year-on-year, obviously market dependent, primarily annualization effects. And finally, as I said, we expect credit to remain favorable across products. So, to close, while the markets in the fourth quarter were more challenging, we should not lose sight to the fact that 2018 was a strong year, indeed a record for revenues, net income and EPS, both reported and adjusted for tax reform. Fundamental economic data remains supportive of continued growth, and we're generally constructive on the outlook for 2019. We have good momentum coming into the year and the company and each of our businesses are very well positioned. With that, operator, we can open up the line for Q&A.