XML 36 R23.htm IDEA: XBRL DOCUMENT v3.19.2
Derivative Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2019
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Impact of Derivatives on Consolidated Balance Sheet The following tables summarize the fair values and notional amounts of all derivative instruments at June 30, 2019 and December 31, 2018, and their impact on other comprehensive income and earnings for the three and six months ended June 30, 2019 and 2018.

Impact of Derivatives on Consolidated Balance Sheet

 

 

 

 

 

Cash Flow

 

 

Fair Value(4)

 

 

Trading

 

 

Total

 

(Dollars in millions)

 

Hedged Risk

Exposure

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

Fair Values(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Interest rate

 

$

—

 

 

$

—

 

 

$

239

 

 

$

170

 

 

$

4

 

 

$

3

 

 

$

243

 

 

$

173

 

Cross-currency interest rate

   swaps

 

Foreign currency and

interest rate

 

 

—

 

 

 

—

 

 

 

3

 

 

 

6

 

 

 

—

 

 

 

—

 

 

 

3

 

 

 

6

 

Total derivative assets(2)

 

 

 

 

—

 

 

 

—

 

 

 

242

 

 

 

176

 

 

 

4

 

 

 

3

 

 

 

246

 

 

 

179

 

Derivative Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(34

)

 

 

(24

)

 

 

(45

)

 

 

(24

)

 

 

(79

)

Floor Income Contracts

 

Interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(99

)

 

 

(53

)

 

 

(99

)

 

 

(53

)

Cross-currency interest rate

   swaps

 

Foreign currency and

interest rate

 

 

—

 

 

 

—

 

 

 

(606

)

 

 

(639

)

 

 

—

 

 

 

(26

)

 

 

(606

)

 

 

(665

)

Other(3)

 

Interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2

)

 

 

(4

)

 

 

(2

)

 

 

(4

)

Total derivative liabilities(2)

 

 

 

 

—

 

 

 

—

 

 

 

(606

)

 

 

(673

)

 

 

(125

)

 

 

(128

)

 

 

(731

)

 

 

(801

)

Net total derivatives

 

 

 

$

—

 

 

$

—

 

 

$

(364

)

 

$

(497

)

 

$

(121

)

 

$

(125

)

 

$

(485

)

 

$

(622

)

 

(1)

Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position.  

(2)

The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:

 

 

 

Other Assets

 

 

Other Liabilities

 

(Dollar in millions)

 

June 30, 2019

 

 

December 31, 2018

 

 

June 30, 2019

 

 

December 31, 2018

 

Gross position

 

$

246

 

 

$

179

 

 

$

(731

)

 

$

(801

)

Impact of master netting agreements

 

 

(32

)

 

 

(22

)

 

 

32

 

 

 

22

 

Derivative values with impact of master netting

   agreements (as carried on balance sheet)

 

 

214

 

 

 

157

 

 

 

(699

)

 

 

(779

)

Cash collateral (held) pledged

 

 

(359

)

 

 

(266

)

 

 

164

 

 

 

188

 

Net position

 

$

(145

)

 

$

(109

)

 

$

(535

)

 

$

(591

)

 

(3)

“Other” includes derivatives related to our Total Return Swap Facility.

(4)

The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:

              

 

 

As of June 30, 2019

 

 

As of December 31, 2018

 

(Dollar in millions)

 

Carrying

Value

 

 

Hedge Basis Adjustments

 

 

Carrying

Value

 

 

Hedge Basis Adjustments

 

Short-term borrowings

 

$

1,519

 

 

$

23

 

 

$

664

 

 

$

(3

)

Long-term borrowings

 

 

12,187

 

 

 

(85

)

 

 

13,657

 

 

 

(368

)
Gross Positions with Impact of Master Netting Agreements The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:

 

 

Other Assets

 

 

Other Liabilities

 

(Dollar in millions)

 

June 30, 2019

 

 

December 31, 2018

 

 

June 30, 2019

 

 

December 31, 2018

 

Gross position

 

$

246

 

 

$

179

 

 

$

(731

)

 

$

(801

)

Impact of master netting agreements

 

 

(32

)

 

 

(22

)

 

 

32

 

 

 

22

 

Derivative values with impact of master netting

   agreements (as carried on balance sheet)

 

 

214

 

 

 

157

 

 

 

(699

)

 

 

(779

)

Cash collateral (held) pledged

 

 

(359

)

 

 

(266

)

 

 

164

 

 

 

188

 

Net position

 

$

(145

)

 

$

(109

)

 

$

(535

)

 

$

(591

)

 

(3)

“Other” includes derivatives related to our Total Return Swap Facility.

(4)

The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:
Carrying Value and Related Fair Value Hedging Adjustments of Liabilities The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:

              

 

 

As of June 30, 2019

 

 

As of December 31, 2018

 

(Dollar in millions)

 

Carrying

Value

 

 

Hedge Basis Adjustments

 

 

Carrying

Value

 

 

Hedge Basis Adjustments

 

Short-term borrowings

 

$

1,519

 

 

$

23

 

 

$

664

 

 

$

(3

)

Long-term borrowings

 

 

12,187

 

 

 

(85

)

 

 

13,657

 

 

 

(368

)
Derivative Notional Values

 

 

Cash Flow

 

 

Fair Value

 

 

Trading

 

 

Total

 

(Dollars in billions)

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

 

Jun 30, 2019

 

 

Dec 31, 2018

 

Notional Values:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

22.4

 

 

$

21.4

 

 

$

9.6

 

 

$

10.3

 

 

$

63.1

 

 

$

66.9

 

 

$

95.1

 

 

$

98.6

 

Floor Income Contracts

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

21.2

 

 

 

27.9

 

 

 

21.2

 

 

 

27.9

 

Cross-currency interest rate swaps

 

 

—

 

 

 

—

 

 

 

4.2

 

 

 

4.5

 

 

 

—

 

 

 

.2

 

 

 

4.2

 

 

 

4.7

 

Other(1)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

.1

 

 

 

.2

 

 

 

.1

 

 

 

.2

 

Total derivatives

 

$

22.4

 

 

$

21.4

 

 

$

13.8

 

 

$

14.8

 

 

$

84.4

 

 

$

95.2

 

 

$

120.6

 

 

$

131.4

 

 

(1)

“Other” includes derivatives related to our Total Return Swap Facility.

Mark-to-Market Impact of Derivatives on Consolidated Statements of Income

Mark-to-Market Impact of Derivatives on Consolidated Statements of Income

 

 

Total Gains (Losses)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(Dollars in millions)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Fair Value Hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Rate Swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (losses) recognized in net income on

   derivatives

 

$

186

 

 

$

(71

)

 

$

290

 

 

$

(258

)

Gains (losses) recognized in net income on hedged

   items

 

 

(200

)

 

 

66

 

 

 

(317

)

 

 

290

 

Net fair value hedge ineffectiveness gains (losses)

 

 

(14

)

 

 

(5

)

 

 

(27

)

 

 

32

 

Cross currency interest rate swaps

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (losses) recognized in net income on

   derivatives

 

 

41

 

 

 

(283

)

 

 

29

 

 

 

(207

)

Gains (losses) recognized in net income on hedged

   items

 

 

(20

)

 

 

257

 

 

 

7

 

 

 

128

 

Net fair value hedge ineffectiveness gains (losses)

 

 

21

 

 

 

(26

)

 

 

36

 

 

 

(79

)

Total fair value hedges(1)(2)

 

 

7

 

 

 

(31

)

 

 

9

 

 

 

(47

)

Cash Flow Hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cash flow hedges(2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Trading:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

16

 

 

 

(4

)

 

 

23

 

 

 

18

 

Floor income contracts

 

 

(49

)

 

 

10

 

 

 

(48

)

 

 

33

 

Cross currency interest rate swaps

 

 

1

 

 

 

(14

)

 

 

(2

)

 

 

2

 

Other

 

 

—

 

 

 

(1

)

 

 

2

 

 

 

2

 

Total trading derivatives(3)

 

 

(32

)

 

 

(9

)

 

 

(25

)

 

 

55

 

Mark-to-market gains (losses) recognized

 

$

(25

)

 

$

(40

)

 

$

(16

)

 

$

8

 

 

(1) 

Recorded in interest expense in the consolidated statements of income for 2019 with the adoption of ASU No, 2017-12. Recorded in “gains (losses) on derivatives and hedging activities, net” in the consolidated statements of income in 2018.  

(2) 

The accrued interest income (expense) on fair value hedges and cash flow hedges is recorded in interest expense and is excluded from this table.

(3) 

Recorded in “gains (losses) on derivatives and hedging activities, net” in the consolidated statements of income.

 
Collateral Held and Pledged

Collateral held and pledged related to derivative exposures between us and our derivative counterparties are detailed in the following table:

 

(Dollars in millions)

 

June 30, 2019

 

 

December 31, 2018

 

Collateral held:

 

 

 

 

 

 

 

 

Cash (obligation to return cash collateral is recorded in short-term borrowings)

 

$

359

 

 

$

266

 

Securities at fair value — corporate derivatives (not recorded in financial

   statements)(1)

 

 

—

 

 

 

—

 

Securities at fair value — on-balance sheet securitization derivatives (not

   recorded in financial statements)(2)

 

 

79

 

 

 

90

 

Total collateral held

 

$

438

 

 

$

356

 

Derivative asset at fair value including accrued interest

 

$

307

 

 

$

210

 

Collateral pledged to others:

 

 

 

 

 

 

 

 

Cash (right to receive return of cash collateral is recorded in investments)

 

$

164

 

 

$

188

 

Total collateral pledged

 

$

164

 

 

$

188

 

Derivative liability at fair value including accrued interest and premium

   receivable

 

$

713

 

 

$

752

 

 

(1) 

The Company has the ability to sell or re-pledge securities it holds as collateral.

(2) 

The trusts do not have the ability to sell or re-pledge securities they hold as collateral.