Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table summarizes the amortized cost basis of hedged assets that are designated and qualify as fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded on our unaudited interim consolidated balance sheets as of September 30, 2021:

	September 30, 2021
(Dollars in millions)	Amortized Cost Basis of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (2)
AFS securities (1)	$	17,524	$	(13)

(1)These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At September 30, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $13.4 billion, the amounts of the designated hedged items was $7.3 billion and the cumulative basis adjustments associated with these hedging relationships was $13 million.

(2)The balance includes $6 million of hedging adjustments on discontinued hedging relationships at September 30, 2021.

Total Notional or Contractual Amounts, Fair Value, Collateral and Net Exposure of Derivative Financial Instruments

The total notional or contractual amounts and fair value of our derivative financial instruments at September 30, 2021 and December 31, 2020 were as follows:

	September 30, 2021						December 31, 2020
	Notional or Contractual Amount		Fair Value				Notional or Contractual Amount		Fair Value
(Dollars in millions)			Derivative Assets (1)		Derivative Liabilities (1)				Derivative Assets (1)		Derivative Liabilities (1)
Derivatives designated as hedging instruments:
Interest rate risks:
Interest rate swaps (2)	$	9,175	$	14	$	—	$	—	$	—	$	—
Interest rate swaps	2,125		—		—		—		—		—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards and swaps	651		12		—		68		—		—
Foreign exchange forwards and swaps	80		—		1		567		—		20
Other derivative instruments:
Equity warrant assets	309		274		—		253		203		—
Client foreign exchange forwards and swaps	8,974		171		—		8,026		215		—
Client foreign exchange forwards and swaps	8,652		—		155		7,491		—		188
Client foreign currency options	196		2		—		98		2		—
Client foreign currency options	196		—		2		98		—		2
Client interest rate derivatives	2,249		115		—		1,082		68		—
Client interest rate derivatives (2)	2,264		—		116		1,251		—		27
Total derivatives not designated as hedging instruments			574		274				488		237
Total derivatives			$	588	$	274			$	488	$	237

(1)Derivative assets and liabilities are included in "accrued interest receivable and other assets" and "other liabilities", respectively, on our consolidated balance sheets.

(2)The amount reported reflects reductions of approximately $5 million of derivative assets and $45 million of derivative liabilities at September 30, 2021 and December 31, 2020, respectively, reflecting variation margin treated as settlement of the related derivative fair values for legal and accounting purposes as required by central clearing houses.

Summary of Derivative Activity and Related Impact on Consolidated Statements of Income

A summary of our derivative activity and the related impact on our consolidated statements of income for the three and nine months ended September 30, 2021 and 2020 is as follows:

		Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	Statement of income location	2021		2020		2021		2020
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from AOCI into income	Interest income - loans	$	16	$	16	$	47	$	34
Change in fair value of interest rate swaps hedging investment securities	Interest income - investment securities taxable	5		—		18		—
Change in fair value of hedged investment securities	Interest income - investment securities taxable	(6)		—		(19)		—
Net gains associated with interest rate risk derivatives		$	15	$	16	$	46	$	34
Derivatives not designated as hedging instruments:
Currency exchange risks:
(Losses) gains on revaluations of internal foreign currency instruments, net	Other noninterest income	$	(14)	$	17	(35)		$	20
Gains (losses) on internal foreign exchange forward contracts, net	Other noninterest income	14		(19)		35		(20)
Net gains (losses) associated with internal currency risk		$	—	$	(2)	$	—	$	—
Other derivative instruments:
Gains (losses) on revaluations of client foreign currency instruments, net	Other noninterest income	$	1	$	—	$	16	$	(3)
(Losses) gains on client foreign exchange forward contracts, net	Other noninterest income	(5)		2		(15)		2
Net (losses) gains associated with client currency risk		$	(4)	$	2	$	1	$	(1)
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	147	$	54	$	491	$	94
Net gains on other derivatives	Other noninterest income	$	2	$	31	$	4	$	27

Offsetting Assets

The following table summarizes our assets subject to enforceable master netting arrangements as of September 30, 2021 and December 31, 2020:

	Gross Amounts of Recognized Assets		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements				Net Amount
(Dollars in millions)							Financial Instruments		Cash Collateral Received (1)
September 30, 2021
Derivative assets:
Interest rate swaps	$	14	$	—	$	14	$	—	$	(7)	$	7
Foreign exchange forwards and swaps	183		—		183		(71)		(33)		79
Foreign currency options	2		—		2		—		—		2
Client interest rate derivatives	115		—		115		(113)		(2)		—
Total derivative assets	314		—		314		(184)		(42)		88
Reverse repurchase, securities borrowing, and similar arrangements	216		—		216		(216)		—		—
Total	$	530	$	—	$	530	$	(400)	$	(42)	$	88
December 31, 2020
Derivative assets:
Interest rate swaps	$	—	$	—	$	—	$	—	$	—	$	—
Foreign exchange forwards and swaps	215		—		215		(76)		(21)		118
Foreign currency options	2		—		2		(1)		—		1
Client interest rate derivatives	68		—		68		(68)		—		—
Total derivative assets	285		—		285		(145)		(21)		119
Reverse repurchase, securities borrowing, and similar arrangements	227		—		227		(227)		—		—
Total	$	512	$	—	$	512	$	(372)	$	(21)	$	119

(1)Cash collateral received from our counterparties in relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings” on our consolidated balance sheets.

Offsetting Liabilities

The following table summarizes our liabilities subject to enforceable master netting arrangements as of September 30, 2021 and December 31, 2020:

	Gross Amounts of Recognized Liabilities		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements				Net Amount
(Dollars in millions)							Financial Instruments		Cash Collateral Pledged (1)
September 30, 2021
Derivative liabilities:
Interest rate swaps	$	—	$	—	$	—	$	—	$	—	$	—
Foreign exchange forwards and swaps	156		—		156		(66)		(14)		76
Foreign currency options	2		—		2		(1)		(1)		—
Client interest rate derivatives	116		—		116		(50)		(66)		—
Total derivative liabilities	274		—		274		(117)		(81)		76
Repurchase, securities lending, and similar arrangements	97		—		97		—		—		97
Total	$	371	$	—	$	371	$	(117)	$	(81)	$	173
December 31, 2020
Derivative liabilities:
Interest rate swaps	$	—	$	—	$	—	$	—	$	—	$	—
Foreign exchange forwards and swaps	208		—		208		(84)		(45)		79
Foreign currency options	2		—		2		(1)		—		1
Client interest rate derivatives	27		—		27		—		(26)		1
Total derivative liabilities	237		—		237		(85)		(71)		81
Repurchase, securities lending, and similar arrangements	—		—		—		—		—		—
Total	$	237	$	—	$	237	$	(85)	$	(71)	$	81

(1)Cash collateral pledged to our counterparties in relation to market value exposures of derivative contracts in a liability position and repurchase agreements are recorded as a component of “cash and cash equivalents" on our consolidated balance sheets.