Derivatives and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

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

Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:


	June 30, 2013						December 31, 2012						June 30, 2012
			Fair Value						Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities

Derivatives designated as hedging instruments:
Interest rate	$	15,670	$	377	$	59	$	19,085	$	579	$	30	$	15,903	$	586	$	32
Foreign exchange		189		3		—		196		—		7		431		2		8

Total		15,859		380		59		19,281		579		37		16,334		588		40
Derivatives not designated as hedging instruments:
Interest rate		45,104		851		812		51,633		1,144		1,122		58,222		1,273		1,278
Foreign exchange		4,934		97		93		5,025		75		68		5,579		105		97
Energy and commodity		1,896		119		114		1,688		156		150		1,691		209		204
Credit		1,118		6		11		955		9		10		2,613		25		24
Equity		—		—		—		7		—		—		18		—		—

Total		53,052		1,073		1,030		59,308		1,384		1,350		68,123		1,612		1,603
Netting adjustments ^(a)		—		(992)		(633)		—		(1,270)		(803)		—		(1,382)		(880)

Net derivatives in the balance sheet		68,911		461		456		78,589		693		584		84,457		818		763
Other collateral ^(b)		—		(87)		(316)		—		(163)		(475)		—		(207)		(538)

Net derivative amounts	$	68,911	$	374	$	140	$	78,589	$	530	$	109	$	84,457	$	611	$	225

(a)	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.

(b)

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, any excess other collateral is not reflected above.

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

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the six-month periods ended June 30, 2013, and 2012, and where they are recorded on the income statement.

Six months ended June 30, 2013

in millions

Income Statement Location of
Net Gains (Losses) on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location of
Net Gains (Losses) on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(156)

Long-term debt

Other income

155

^(a)

Interest rate

Interest expense – Long-term debt

Total

(90)

155

Six months ended June 30, 2012

in millions

Income Statement Location of
Net Gains (Losses) on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location of
Net Gains (Losses) on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(13)

Long-term debt

Other income

^(a)

Interest rate

Interest expense – Long-term debt

Foreign exchange

Other income

Long-term debt

Other income

(6)

^(a)

Foreign exchange

Interest expense – Long-term debt

Long-term debt

Interest expense – Long-term debt

(1)

^(b)

Total

(a)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the six-month periods ended June 30, 2013 and 2012, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

Six months ended June 30, 2013

Net Gains

Income Statement Location

Net Gains

Net Gains (Losses)

(Losses) Reclassified

of Net Gains (Losses)

(Losses) Recognized

Recognized in OCI

Income Statement Location of Net Gains (Losses)

From OCI Into Income

Recognized in Income

in Income

in millions

(Effective Portion)

Reclassified From OCI Into Income (Effective Portion)

(Effective Portion)

(Ineffective Portion)

Cash Flow Hedges

Interest rate

(62)

Interest income – Loans

Other income

—

Interest rate

Interest expense – Long-term debt

(4)

Other income

—

Interest rate

Investment banking and debt placement fees

—

Other income

—

Net Investment Hedges

Foreign exchange contracts

Other Income

(3)

Other income

—

Total

(34)

—

Six months ended June 30, 2012

Net Gains

Income Statement Location

Net Gains

Net Gains (Losses)

(Losses) Reclassified

of Net Gains (Losses)

(Losses) Recognized

Recognized in OCI

Income Statement Location of Net Gains (Losses)

From OCI Into Income

Recognized in Income

in Income

in millions

(Effective Portion)

Reclassified From OCI Into Income (Effective Portion)

(Effective Portion)

(Ineffective Portion)

Cash Flow Hedges

Interest rate

Interest income – Loans

Other income

—

Interest rate

(7)

Interest expense – Long-term debt

(5)

Other income

—

Interest rate

—

Investment banking and debt placement fees

—

Other income

—

Net Investment Hedges

Foreign exchange contracts

(6)

Other Income

—

Other income

—

Total

—

After-Tax Change in AOCI Resulting from Cash Flow Hedges

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

Reclassification

December 31,

2013

of Gains to

June 30,

in millions

2012

Hedging Activity

Net Income

2013

AOCI resulting from cash flow and net investment hedges

(22)

(17)

(21)

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 six month periods ended June 30, 2013, and 2012, and where they are recorded on the income statement.


	Six months ended June 30, 2013						Six months ended June 30, 2012
	Corporate						Corporate
	Services		Other				Services		Other
in millions	Income		Income		Total		Income		Income		Total

NET GAINS (LOSSES)
Interest rate	$	8		—	$	8	$	12	$	(2)	$	10
Foreign exchange		21		—		21		19		—		19
Energy and commodity		3		—		3		6		—		6
Credit		1	$	(7)		(6)		—		(9)		(9)

Total net gains (losses)	$	33	$	(7)	$	26	$	37	$	(11)	$	26

Largest Exposure to Individual Counterparty

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.


in millions	June 30, 2013		December 31, 2012		June 30, 2012

Largest gross exposure (derivative asset) to an individual counterparty	$	136	$	182	$	196
Collateral posted by this counterparty		48		66		70
Derivative liability with this counterparty		132		191		217
Collateral pledged to this counterparty		52		82		93
Net exposure after netting adjustments and collateral		8		7		2

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type. 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	June 30, 2013		December 31, 2012		June 30, 2012

Interest rate	$	775	$	1,114	$	1,221
Foreign exchange		24		23		22
Energy and commodity		28		47		82
Credit		2		3		6

Derivative assets before collateral		829		1,187		1,331
Less: Related collateral		368		494		513

Total derivative assets	$	461	$	693	$	818

Fair Value of Credit Derivatives Purchased and Sold

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of June 30, 2013, December 31, 2012 and June 30, 2012. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.


	June 30, 2013						December 31, 2012						June 30, 2012
in millions	Purchased		Sold		Net		Purchased		Sold		Net		Purchased		Sold		Net

Single name credit default swaps	$	(4)	$	1	$	(3)	$	(1)	$	1		—	$	(4)	$	1	$	(3)
Traded credit default swap indices		(1)		—		(1)		—		—		—		—		3		3
Other		—		—		—		—		(1)	$	(1)		1		(1)		—

Total credit derivatives	$	(5)	$	1	$	(4)	$	(1)		—	$	(1)	$	(3)	$	3		—

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 June 30, 2013, December 31, 2012, and June 30, 2012. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.


	June 30, 2013							December 31, 2012							June 30, 2012
			Average		Payment /					Average		Payment /					Average		Payment /
dollars in millions	Notional Amount		Term (Years)		Performance Risk			Notional Amount		Term (Years)		Performance Risk			Notional Amount		Term (Years)		Performance Risk

Single name credit default swaps	$	77		1.05		8.84	%	$	146		0.92		11.62	%	$	550		2.42		4.40	%
Traded credit default swap indices		—		—		—			—		—		—			478		2.76		1.87
Other		14		5.52		10.31			23		5.35		10.77			23		5.48		9.74

Total credit derivatives sold	$	91		—		—		$	169		—		—		$	1,051		—		—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of June 30, 2013, December 31, 2012, and June 30, 2012. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two or three ratings as of June 30, 2013, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $3 million would have been required as of June 30, 2013, December 31, 2012, and June 30, 2012.


		June 30, 2013					December 31, 2012					June 30, 2012
in millions		Moody’s		S&P			Moody’s		S&P			Moody’s		S&P

KeyBank’s long-term senior unsecured credit ratings			A3		A-			A3		A-			A3		A-

One rating downgrade	$		6	$	6	$		6	$	6	$		6	$	6
Two rating downgrades			11		11			11		11			11		11
Three rating downgrades			12		12			11		11			17		17