Derivatives (Tables)

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional or Contractual Amounts and Fair Values of Derivatives

Table 14.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on our consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined.

Table 14.1: Notional or Contractual Amounts and Fair Values of Derivatives

	March 31, 2021					December 31, 2020
	Notional or		Fair value			Notional or	Fair value
	contractual		Derivative		Derivative	contractual	Derivative	Derivative
(in millions)	amount		assets		liabilities	amount	assets	liabilities
Derivatives designated as hedging instruments
Interest rate contracts	$	169,631	2,144		449	184,090	3,212	789
Foreign exchange contracts	44,756		1,502		551	47,331	1,381	607
Total derivatives designated as qualifying hedging instruments			3,646		1,000		4,593	1,396
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts	251,757		939		945	261,159	341	344
Equity contracts	25,237		1,364		69	25,997	1,363	490
Foreign exchange contracts	63,030		686		1,497	47,106	331	1,515
Credit contracts	72		31		—	73	31	—
Subtotal			3,020		2,511		2,066	2,349
Customer accommodation trading and other derivatives:
Interest rate contracts	9,778,319		29,057		24,058	7,947,941	32,510	25,169
Commodity contracts	72,563		3,758		1,522	65,790	2,036	1,543
Equity contracts	299,633		18,283		18,314	280,195	17,522	21,516
Foreign exchange contracts	424,251		8,131		6,615	412,879	6,891	6,034
Credit contracts	42,380		54		51	34,329	64	58
Subtotal			59,283		50,560		59,023	54,320
Total derivatives not designated as hedging instruments			62,303		53,071		61,089	56,669
Total derivatives before netting			65,949		54,071		65,682	58,065
Netting			(40,520)		(39,141)		(39,836)	(41,556)
Total			$	25,429	14,930		25,846	16,509

Gross Fair Values of Derivative Assets and Liabilities

Table 14.2 provides information on the gross fair values of derivative assets and liabilities, the balance sheet netting adjustments and the resulting net fair value amount recorded on our consolidated balance sheet, as well as the non-cash collateral associated with such arrangements. We execute substantially all of our derivative transactions under master netting arrangements and reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis within the consolidated balance sheet. The “Gross amounts recognized” column in the following table includes $55.9 billion and $48.0 billion of gross derivative assets and liabilities, respectively, at March 31, 2021, and $54.6 billion and $50.1 billion, respectively, at December 31, 2020, with counterparties subject to enforceable master netting arrangements that are eligible for balance sheet netting adjustments. The majority of these amounts are interest rate contracts executed in over-the-counter (OTC) markets. The remaining gross derivative assets and liabilities of $10.0 billion and $6.1 billion, respectively, at March 31, 2021, and $11.1 billion

and $8.0 billion, respectively, at December 31, 2020, include those with counterparties subject to master netting arrangements for which we have not assessed the enforceability because they are with counterparties where we do not currently have positions to offset, those subject to master netting arrangements where we have not been able to confirm the enforceability and those not subject to master netting arrangements. As such, we do not net derivative balances or collateral within the consolidated balance sheet for these counterparties. Cash collateral receivables and payables that have not been offset against our derivatives were $1.6 billion and $2.9 billion, respectively, at March 31, 2021, and $1.8 billion and $984 million, respectively, at December 31, 2020.

We determine the balance sheet netting adjustments based on the terms specified within each master netting arrangement. We disclose the balance sheet netting amounts within the column titled “Gross amounts offset in consolidated balance sheet.” Balance sheet netting adjustments are determined at the counterparty level for which there may be multiple contract

types. For disclosure purposes, we allocate these netting adjustments to the contract type for each counterparty proportionally based upon the “Gross amounts recognized” by counterparty. As a result, the net amounts disclosed by contract type may not represent the actual exposure upon settlement of the contracts.

We do not net non-cash collateral that we receive and pledge on our consolidated balance sheet. For disclosure purposes, we present the fair value of this non-cash collateral in the column titled “Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)” within the table. We determine and allocate the Disclosure-only netting amounts in the same manner as balance sheet netting amounts.

The “Net amounts” column within Table 14.2 represents the aggregate of our net exposure to each counterparty after considering the balance sheet and Disclosure-only netting adjustments. We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty-specific credit risk limits, using master netting arrangements and obtaining collateral. Derivative contracts executed in OTC markets include bilateral contractual arrangements that are not cleared through a central clearing organization but are typically subject to master netting arrangements. The proportion of these derivative contracts relative to our total derivative assets and liabilities are presented in the “Percent exchanged in over-the-counter market” column in Table 14.2. In addition to the netting amounts included in the table, we also have balance sheet netting related to resale and repurchase agreements that are disclosed within Note 12 (Pledged Assets and Collateral).

Table 14.2: Gross Fair Values of Derivative Assets and Liabilities

(in millions)	Gross amounts recognized		Gross amounts offset in consolidated balance sheet (1)	Net amounts in consolidated balance sheet	Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)	Net amounts	Percent exchanged in over-the-counter market
March 31, 2021
Derivative assets
Interest rate contracts	$	32,140	(21,206)	10,934	(1,155)	9,779	93	%
Commodity contracts	3,758		(1,015)	2,743	(3)	2,740	90
Equity contracts	19,647		(10,886)	8,761	(730)	8,031	71
Foreign exchange contracts	10,319		(7,356)	2,963	(33)	2,930	100
Credit contracts	85		(57)	28	(1)	27	92
Total derivative assets	$	65,949	(40,520)	25,429	(1,922)	23,507
Derivative liabilities
Interest rate contracts	$	25,452	(20,904)	4,548	(1,712)	2,836	89	%
Commodity contracts	1,522		(753)	769	(5)	764	58
Equity contracts	18,383		(11,868)	6,515	(710)	5,805	75
Foreign exchange contracts	8,663		(5,581)	3,082	(507)	2,575	100
Credit contracts	51		(35)	16	(3)	13	93
Total derivative liabilities	$	54,071	(39,141)	14,930	(2,937)	11,993
December 31, 2020
Derivative assets
Interest rate contracts	$	36,063	(21,968)	14,095	(1,274)	12,821	96	%
Commodity contracts	2,036		(940)	1,096	(4)	1,092	84
Equity contracts	18,885		(10,968)	7,917	(737)	7,180	74
Foreign exchange contracts	8,603		(5,887)	2,716	(141)	2,575	100
Credit contracts	95		(73)	22	(1)	21	90
Total derivative assets	$	65,682	(39,836)	25,846	(2,157)	23,689
Derivative liabilities
Interest rate contracts	$	26,302	(21,934)	4,368	(2,219)	2,149	95	%
Commodity contracts	1,543		(819)	724	—	724	69
Equity contracts	22,006		(12,283)	9,723	(837)	8,886	78
Foreign exchange contracts	8,156		(6,481)	1,675	(529)	1,146	100
Credit contracts	58		(39)	19	(3)	16	91
Total derivative liabilities	$	58,065	(41,556)	16,509	(3,588)	12,921

(1)Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in the consolidated balance sheet, including related cash collateral and portfolio level counterparty valuation adjustments. Counterparty valuation adjustments related to derivative assets were $293 million and $399 million and debit valuation adjustments related to derivative liabilities were $205 million and $201 million as of March 31, 2021, and December 31, 2020, respectively. Cash collateral totaled $5.8 billion and $4.5 billion, netted against derivative assets and liabilities, respectively, at March 31, 2021, and $5.5 billion and $7.5 billion, respectively, at December 31, 2020.

Gains (Losses) Recognized on Fair Value Hedging Relationships

Table 14.3 and Table 14.4 show the net gains (losses) related to derivatives in fair value and cash flow hedging relationships, respectively.

Table 14.3: Gains (Losses) Recognized on Fair Value Hedging Relationships

	Net interest income				Noninterest income	Total recorded in net income	Total recorded in OCI
(in millions)	Debt securities		Deposits	Long-term debt	Other	Derivative gains (losses)	Derivative gains (losses)
Quarter ended March 31, 2021
Total amounts presented in the consolidated statement of income and other comprehensive income	$	2,312	(112)	(1,026)	523	N/A	47
Interest contracts
Amounts related to interest settlements on derivatives	(67)		91	550	—	574
Recognized on derivatives	1,294		(123)	(7,071)	—	(5,900)	—
Recognized on hedged items	(1,258)		119	6,944	—	5,805
Total gains (losses) (pre-tax) on interest rate contracts	(31)		87	423	—	479	—
Foreign exchange contracts
Amounts related to interest settlements on derivatives	28		—	(1)	—	27
Recognized on derivatives	1		—	(227)	307	81	25
Recognized on hedged items	(1)		—	194	(317)	(124)
Total gains (losses) (pre-tax) on foreign exchange contracts	28		—	(34)	(10)	(16)	25
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(3)	87	389	(10)	463	25
Quarter ended March 31, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,472	(1,742)	(1,240)	863	N/A	182
Interest contracts
Amounts related to interest settlements on derivatives	(46)		70	174	—	198
Recognized on derivatives	(1,871)		530	9,775	—	8,434	—
Recognized on hedged items	1,856		(511)	(9,426)	—	(8,081)
Total gains (losses) (pre-tax) on interest rate contracts	(61)		89	523	—	551	—
Foreign exchange contracts
Amounts related to interest settlements on derivatives	6		—	(85)	—	(79)
Recognized on derivatives	(1)		—	107	(785)	(679)	144
Recognized on hedged items	2		—	(174)	764	592
Total gains (losses) (pre-tax) on foreign exchange contracts	7		—	(152)	(21)	(166)	144
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(54)	89	371	(21)	385	144

Gains (Losses) Recognized on Cash Flow Hedging Relationships

Table 14.4: Gains (Losses) Recognized on Cash Flow Hedging Relationships

	Net interest income			Total recorded in net income	Total recorded in OCI
(in millions)	Loans		Long-term debt	Derivative gains (losses)	Derivative gains (losses)
Quarter ended March 31, 2021
Total amounts presented in the consolidated statement of income and other comprehensive income	$	7,191	(1,026)	N/A	47
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(52)		—	(52)	52
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(20)
Total gains (losses) (pre-tax) on interest rate contracts	(52)		—	(52)	32
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(1)	(1)	1
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(11)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(1)	(1)	(10)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(52)	(1)	(53)	22
Quarter ended March 31, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	10,065	(1,240)	N/A	182
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(56)		—	(56)	56
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	—
Total gains (losses) (pre-tax) on interest rate contracts	(56)		—	(56)	56
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(2)	(2)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(20)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(2)	(2)	(18)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(56)	(2)	(58)	38

Hedged Items in Fair Value Hedging Relationships

Table 14.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.

Table 14.5: Hedged Items in Fair Value Hedging Relationship

	Hedged items currently designated			Hedged items no longer designated (1)
(in millions)	Carrying amount of assets/(liabilities) (2)(4)		Hedge accounting basis adjustment assets/(liabilities) (3)	Carrying amount of assets/(liabilities) (4)	Hedge accounting basis adjustment assets/(liabilities)
March 31, 2021
Available-for-sale debt securities (5)	$	28,215	(462)	16,946	1,050
Deposits	(16,276)		(358)	—	—
Long-term debt	(146,687)		(4,956)	(5,236)	14
December 31, 2020
Available-for-sale debt securities (5)	$	29,538	827	17,091	1,111
Deposits	(22,384)		(477)	—	—
Long-term debt	(156,907)		(12,466)	(14,468)	31

(1)Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.

(2)Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded for debt securities is $15.3 billion and for long-term debt is $(4.5) billion as of March 31, 2021, and $17.6 billion for debt securities and $(4.7) billion for long-term debt as of December 31, 2020.

(3)The balance includes $202 million and $153 million of debt securities and long-term debt cumulative basis adjustments as of March 31, 2021, respectively, and $205 million and $130 million of debt securities and long-term debt cumulative basis adjustments as of December 31, 2020, respectively, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.

(4)Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.

(5)Carrying amount represents the amortized cost.

Gains (Losses) on Derivatives Not Designated as Hedging Instruments

Table 14.6 shows the net gains (losses), recognized by income statement lines, related to derivatives not designated as hedging instruments.

Table 14.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments

	Noninterest income					Noninterest expense
(in millions)	Mortgage banking		Net gains (losses) on trading and securities	Other	Total	Personnel expense
Quarter ended March 31, 2021
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	(375)	—	(20)	(395)	—
Equity contracts	—		425	5	430	(160)
Foreign exchange contracts	—		—	71	71	—
Credit contracts	—		—	—	—	—
Subtotal	(375)		425	56	106	(160)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	(531)		1,924	—	1,393	—
Commodity contracts	—		80	—	80	—
Equity contracts	—		(1,163)	(89)	(1,252)	—
Foreign exchange contracts	—		464	—	464	—
Credit contracts	—		(28)	—	(28)	—
Subtotal	(531)		1,277	(89)	657	—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	(906)	1,702	(33)	763	(160)
Quarter ended March 31, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,471	—	29	2,500	—
Equity contracts	—		1,219	(28)	1,191	—
Foreign exchange contracts	—		—	627	627	—
Credit contracts	—		—	16	16	—
Subtotal	2,471		1,219	644	4,334	—
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	553		(2,463)	—	(1,910)	—
Commodity contracts	—		112	—	112	—
Equity contracts	—		4,749	73	4,822	—
Foreign exchange contracts	—		(557)	—	(557)	—
Credit contracts	—		281	—	281	—
Subtotal	553		2,122	73	2,748	—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	3,024	3,341	717	7,082	—

(1)Mortgage banking amounts for first quarter 2021 are comprised of gains (losses) of $(1.6) billion related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $1.3 billion related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for first quarter 2020 are comprised of gains (losses) of $3.4 billion offset by gains (losses) of $(929) million.

Sold and Purchased Credit Derivatives

Table 14.7 provides details of sold and purchased credit derivatives.

Table 14.7: Sold and Purchased Credit Derivatives

				Notional amount
(in millions)	Fair value asset		Fair value liability	Protection sold (A)	Protection sold – non-investment grade	Protection purchased with identical underlyings (B)	Net protection sold (A)-(B)	Other protection purchased	Range of maturities
March 31, 2021
Credit default swaps on:
Corporate bonds	$	6	2	4,727	1,188	3,297	1,430	3,587	2021 - 2029
Structured products	—		3	16	16	15	1	82	2034 - 2047
Credit protection on:
Default swap index	1		1	3,552	1,165	2,688	864	4,066	2021 - 2030
Commercial mortgage-backed securities index	2		18	290	36	265	25	75	2047 - 2072
Asset-backed securities index	—		7	41	41	40	1	1	2045 - 2046
Other	—		2	8,098	7,992	—	8,098	11,612	2021 - 2040
Total credit derivatives	$	9	33	16,724	10,438	6,305	10,419	19,423
December 31, 2020
Credit default swaps on:
Corporate bonds	$	7	2	3,767	971	2,709	1,058	3,012	2021 - 2029
Structured products	—		5	20	20	19	1	84	2034 - 2047
Credit protection on:
Default swap index	—		—	1,582	731	559	1,023	3,925	2021 - 2030
Commercial mortgage-backed securities index	3		21	297	42	272	25	75	2047 - 2072
Asset-backed securities index	—		7	41	41	40	1	1	2045 - 2046
Other	—		4	6,378	6,262	—	6,378	11,621	2021 - 2040
Total credit derivatives	$	10	39	12,085	8,067	3,599	8,486	18,718

Credit-Risk Contingent Features

Table 14.8 illustrates our exposure to OTC bilateral derivative contracts with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.

Table 14.8: Credit-Risk Contingent Features

(in billions)	Mar 31, 2021		Dec 31, 2020
Net derivative liabilities with credit-risk contingent features	$	10.3	10.5
Collateral posted	9.1		9.0
Additional collateral to be posted upon a below investment grade credit rating (1)	1.2		1.5

(1)Any credit rating below investment grade requires us to post the maximum amount of collateral.