Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2019, and December 31, 2018. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the balance sheet, as follows:

	March 31, 2019								December 31, 2018
			Fair Value								Fair Value
in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	32,840	$	24		$	10		$	28,546	$	50		$	(10	)
Foreign exchange	122		—			—			122		2			—
Total	32,962		24			10			28,668		52			(10		)
Derivatives not designated as hedging instruments:
Interest rate	65,136		505			227			63,454		365			307
Foreign exchange	5,664		76			68			6,829		104			95
Commodity	6,622		233			223			2,002		333			323
Credit	415		1			3			226		1			1
Other (a)	3,266		11			8			1,466		9			7
Total	81,103		826			529			73,977		812			733
Netting adjustments (b)	—		(324		)	(336		)	—		(333		)	(337		)
Net derivatives in the balance sheet	114,065		526			203			102,645		531			386
Other collateral (c)	—		(2		)	(46		)	—		(2		)	(33		)
Net derivative amounts	$	114,065	$	524		$	157		$	102,645	$	529		$	353

(a) Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when-issued securities, and other customized derivative contracts.

(b) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c)

Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following tables summarize the amounts that were recorded on the balance sheet as of March 31, 2019, and December 31, 2018, related to cumulative basis adjustments for fair value hedges.

	March 31, 2019
in millions	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	9,400	$	87
Interest rate contracts	Certificate of deposit ($100,000 or more)	340		—
Interest rate contracts	Other time deposits	176		—
	December 31, 2018
	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	9,363	$	(6	)
Interest rate contracts	Certificate of deposit ($100,000 or more)	343		(1		)
Interest rate contracts	Other time deposits	178		—

(a) The carrying amount represents the portion of the liability designated as the hedged item.

(b)

Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $10 million and $10 million at March 31, 2019, and December 31, 2018, respectively,

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three-month periods ended March 31, 2019, and March 31, 2018.

	Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships (a)
in millions	Interest expense – long-term debt			Interest income – loans			Interest expense - deposits			Other income
Three months ended March 31, 2019
Total amounts presented in the consolidated statement of income	$	(120	)	$	1,066		$	(202	)	$	10
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	(93		)	—			—			—
Recognized on derivatives designated as hedging instruments	82			—			—			—
Net income (expense) recognized on fair value hedges	(11		)	—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	(1		)	(24		)	—			—
Net income (expense) recognized on cash flow hedges	$	(1	)	$	(24	)	—			—
Three months ended March 31, 2018
Total amounts presented in the consolidated statement of income	$	(92	)	$	940		$	(91	)	$	21
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	71			—			—			—
Recognized on derivatives designated as hedging instruments	(69		)	—			—			—
Net income (expense) recognized on fair value hedges	2			—			—			—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	(1		)	(2		)	—			—
Net income (expense) recognized on cash flow hedges	$	(1	)	$	(2	)	—			—

(a) Prior period gain or loss amounts were not restated to conform to the new hedge accounting guidance adopted in 2018.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following tables summarize the pre-tax net gains (losses) on our cash flow and net investment hedges for the three-month periods ended March 31, 2019, and March 31, 2018, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.

in millions	Net Gains (Losses) Recognized in OCI			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income			Net Gains (Losses) Recognized in Other Income
Three months ended March 31, 2019
Cash Flow Hedges
Interest rate	$	115		Interest income — Loans	$	(24	)	$	—
Interest rate	(1		)	Interest expense — Long-term debt	(1		)	—
Interest rate	(5		)	Investment banking and debt placement fees	—			—
Net Investment Hedges
Foreign exchange contracts	(3		)	Other Income	—			—
Total	$	106			$	(25	)	$	—
Three months ended March 31, 2018
Cash Flow Hedges
Interest rate	$	(88	)	Interest income — Loans	$	(2	)	—
Interest rate	2			Interest expense — Long-term debt	(1		)	—
Net Investment Hedges
Foreign exchange contracts	—			Other Income	—			—
Total	$	(86	)		$	(3	)	—

Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2019, and March 31, 2018, and where they are recorded on the income statement.

	Three months ended March 31, 2019									Three months ended March 31, 2018
in millions	Corporate services income		Consumer mortgage income	Other income			Total			Corporate services income		Consumer mortgage income	Other income			Total
NET GAINS (LOSSES)
Interest rate	$	8	—	$	(2	)	$	6		$	9	—	$	2		$	11
Foreign exchange	10		—	—			10			11		—	—			11
Commodity	1		—	—			1			3		—	—			3
Credit	1		—	(7		)	(6		)	2		—	(5		)	(3		)
Other	—		—	1			1			—		—	(4		)	(4		)
Total net gains (losses)	$	20	—	$	(8	)	$	12		$	25	—	$	(7	)	$	18

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

in millions	March 31, 2019		December 31, 2018
Interest rate	$	438	$	308
Foreign exchange	49		60
Commodity	96		187
Credit	—		—
Other	11		9
Derivative assets before collateral	594		564
Less: Related collateral	68		33
Total derivative assets	$	526	$	531

Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2019, and December 31, 2018. The sold credit derivatives represented in the following table include only Risk Participation Agreements; there were no traded indexes sold. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment at March 31, 2019, is based on the internal probability of default of the reference entity consistent with our Fair Value Methodology. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	March 31, 2019					December 31, 2018
dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	64	14.06	2.98	%	$	22	13.43	17.18	%
Total credit derivatives sold	$	64	—	—		$	22	—	—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2019, and December 31, 2018. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of March 31, 2019, and December 31, 2018, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of March 31, 2019, and December 31, 2018. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

	March 31, 2019				December 31, 2018
in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	2	$	2	$	2	$	2
Two rating downgrades	2		2		2		2
Three rating downgrades	2		2		2		2