Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position

The following table summarizes the amounts of derivative instruments reported on our Condensed Consolidated Balance Sheet. The amounts are presented on a gross basis, are segregated by derivatives that are designated and qualifying as hedging instruments or those that are not, and are further segregated by type of contract within those two categories.

Derivative contracts in a receivable and payable position exclude open trade equity on derivatives cleared through central clearing counterparties. Any associated collateral exchanged with our central clearing counterparties are treated as settlements of the derivative exposure, rather than collateral. Such payments are recognized as settlements of the derivatives contracts in a receivable and payable position on our Condensed Consolidated Balance Sheet.

Notional amounts are reference amounts from which contractual obligations are derived and are not recorded on the balance sheet. In our view, derivative notional is not an accurate measure of our derivative exposure when viewed in isolation from other factors, such as market rate fluctuations and counterparty credit risk.

	September 30, 2019						December 31, 2018
	Derivative contracts in a				Notional amount		Derivative contracts in a				Notional amount
($ in millions)	receivable position		payable position				receivable position		payable position
Derivatives designated as accounting hedges
Interest rate contracts
Swaps	$	—	$	—	$	15,451	$	—	$	—	$	24,203
Purchased options	87		—		11,100		—		—		—
Foreign exchange contracts
Forwards	—		—		141		1		—		136
Total derivatives designated as accounting hedges	87		—		26,692		1		—		24,339
Derivatives not designated as accounting hedges
Interest rate contracts
Futures and forwards	—		—		51		—		—		11
Written options	3		2		935		—		37		6,793
Purchased options	1		—		758		37		—		6,742
Total interest rate risk	4		2		1,744		37		37		13,546
Foreign exchange contracts
Futures and forwards	—		—		117		3		—		181
Total foreign exchange risk	—		—		117		3		—		181
Equity contracts
Written options	—		1		—		—		—		—
Purchased options	3		—		1		—		—		—
Total equity risk	3		1		1		—		—		—
Total derivatives not designated as accounting hedges	7		3		1,862		40		37		13,727
Total derivatives	$	94	$	3	$	28,554	$	41	$	37	$	38,066

Schedule of Fair Value Hedging Instruments, Statements of Financial Performance and Financial Position, Location

The following table presents amounts recorded on our Condensed Consolidated Balance Sheet related to cumulative basis adjustments for fair value hedges.

($ in millions)	Carrying amount of the hedged items				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items
					Total				Discontinued (a)
	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
Assets
Available-for-sale securities (b) (c)	$	1,645	$	1,485	$	26	$	—	$	26	$	(5	)
Finance receivables and loans, net (d)	37,533		40,850		176		24		51		5
Liabilities
Long-term debt	$	12,879	$	13,001	$	120	$	67	$	127	$	67

(a) Represents the fair value hedging adjustment on qualifying hedges for which the hedging relationship was discontinued. This represents a subset of the amounts reported in the total hedging adjustment.

(b) The carrying amount of hedged available-for-sale securities is presented above using amortized cost. Refer to Note 6 for a reconciliation of the amortized cost and fair value of available-for-sale securities.

(c) Includes 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. The amount identified as the last of layer in the open hedge relationship was $100 million and $28 million at September 30, 2019, and December 31, 2018, respectively. There were no basis adjustments associated with the open last-of-layer relationship at both September 30, 2019, and December 31, 2018. The amount that was identified as the last of layer in the discontinued hedge relationship was $100 million as of September 30, 2019. The basis adjustment associated with the discontinued last-of-layer relationship was a $2 million asset as of September 30, 2019, which was allocated across the entire remaining pool upon termination of the hedge relationship.

(d)

The hedged item represents the carrying value of the hedged portfolio of assets. The amount identified as the last of layer in the open hedge relationship was $10.2 billion as of September 30, 2019, and $21.4 billion as of December 31, 2018. The basis adjustment associated with the open last-of-layer relationship was a $126 million asset as of September 30, 2019, and a $19 million asset as of December 31, 2018, which would be allocated across the entire remaining closed pool upon termination or maturity of the hedge relationship. The amount that is identified as the last of layer in the discontinued hedge relationship was $12.8 billion at September 30, 2019. The basis adjustment associated with the discontinued last-of-layer relationship was a $50 million asset as of September 30, 2019, which was allocated across the entire remaining pool upon termination of the hedge relationship.

Schedule of Derivative Instruments Not Designated as Accounting Hedge

The following table summarizes the location and amounts of gains and losses on derivative instruments not designated as accounting hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Three months ended September 30,					Nine months ended September 30,
($ in millions)	2019		2018			2019			2018
Gain (loss) recognized in earnings
Interest rate contracts
Gain on mortgage and automotive loans, net	$	—	$	—		$	1		$	—
Other income, net of losses	—		—			(7		)	—
Total interest rate contracts	—		—			(6		)	—
Foreign exchange contracts
Other income, net of losses	1		(1		)	(2		)	5
Total foreign exchange contracts	1		(1		)	(2		)	5
Gain (loss) recognized in earnings	$	1	$	(1	)	$	(8	)	$	5

Schedule of Location and Amounts of Gains and Losses on Derivative Instruments

The following tables summarize the location and amounts of gains and losses on derivative instruments designated as fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans						Interest and dividends on investment securities and other earning assets						Interest on deposits					Interest on long-term debt
Three months ended September 30, ($ in millions)	2019			2018			2019			2018			2019			2018		2019			2018
(Loss) gain on fair value hedging relationships
Interest rate contracts
Hedged fixed-rate unsecured debt	$	—		$	—		$	—		$	—		$	—		$	—	$	(36	)	$	20
Derivatives designated as hedging instruments on fixed-rate unsecured debt	—			—			—			—			—			—		36			(20		)
Hedged fixed-rate FHLB advances	—			—			—			—			—			—		—			10
Derivatives designated as hedging instruments on fixed-rate FHLB advances	—			—			—			—			—			—		—			(10		)
Hedged available-for-sale securities	—			—			17			(2		)	—			—		—			—
Derivatives designated as hedging instruments on available-for-sale securities	—			—			(17		)	2			—			—		—			—
Hedged fixed-rate consumer automotive loans	32			(9		)	—			—			—			—		—			—
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	(32		)	9			—			—			—			—		—			—
Total gain on fair value hedging relationships	—			—			—			—			—			—		—			—
(Loss) gain on cash flow hedging relationships
Interest rate contracts
Hedged deposit liabilities
Reclassified from accumulated other comprehensive income into income (loss)	—			—			—			—			(2		)	—		—			—
Hedged variable-rate borrowings
Reclassified from accumulated other comprehensive income into income (loss)	—			—			—			—			—			—		4			—
Total (loss) gain on cash flow hedging relationships	$	—		$	—		$	—		$	—		$	(2	)	$	—	$	4		$	—
Total amounts presented in the Condensed Consolidated Statement of Comprehensive Income	$	1,859		$	1,708		$	237		$	198		$	658		$	462	$	378		$	451

	Interest and fees on finance receivables and loans						Interest and dividends on investment securities and other earning assets						Interest on deposits					Interest on long-term debt
Nine months ended September 30, ($ in millions)	2019			2018			2019			2018			2019			2018		2019			2018
(Loss) gain on fair value hedging relationships
Interest rate contracts
Hedged fixed-rate unsecured debt	$	—		$	—		$	—		$	—		$	—		$	—	$	(55	)	$	64
Derivatives designated as hedging instruments on fixed-rate unsecured debt	—			—			—			—			—			—		55			(63		)
Hedged fixed-rate FHLB advances	—			—			—			—			—			—		—			53
Derivatives designated as hedging instruments on fixed-rate FHLB advances	—			—			—			—			—			—		—			(53		)
Hedged available-for-sale securities	—			—			29			(7		)	—			—		—			—
Derivatives designated as hedging instruments on available-for-sale securities	—			—			(29		)	7			—			—		—			—
Hedged fixed-rate consumer automotive loans	173			(60		)	—			—			—			—		—			—
Derivatives designated as hedging instruments on fixed-rate consumer automotive loans	(173		)	60			—			—			—			—		—			—
Total gain on fair value hedging relationships	—			—			—			—			—			—		—			1
(Loss) gain on cash flow hedging relationships
Interest rate contracts
Hedged deposit liabilities
Reclassified from accumulated other comprehensive income into income	—			—			—			—			(1		)	—		—			—
Hedged variable-rate borrowings
Reclassified from accumulated other comprehensive income into income	—			—			—			—			—			—		12			—
Total (loss) gain on cash flow hedging relationships	$	—		$	—		$	—		$	—		$	(1	)	$	—	$	12		$	—
Total amounts presented in the Condensed Consolidated Statement of Comprehensive Income	$	5,526		$	4,898		$	721		$	562		$	1,901		$	1,212	$	1,204		$	1,296

Schedule of Derivative Instruments

The following tables summarize the location and amounts of gains and losses related to interest and amortization on derivative instruments designated as fair value and cash flow hedges reported in our Condensed Consolidated Statement of Comprehensive Income.

	Interest and fees on finance receivables and loans						Interest and dividends on investment securities and other earning assets					Interest on deposits				Interest on long-term debt
Three months ended September 30, ($ in millions)	2019			2018			2019			2018		2019		2018		2019			2018
Gain (loss) on fair value hedging relationships
Interest rate contracts
Amortization of deferred unsecured debt basis adjustments	$	—		$	—		$	—		$	—	$	—	$	—	$	6		$	13
Interest for qualifying accounting hedges of unsecured debt	—			—			—			—		—		—		—			3
Amortization of deferred secured debt basis adjustments (FHLB advances)	—			—			—			—		—		—		(6		)	(6		)
Interest for qualifying accounting hedges of secured debt (FHLB advances)	—			—			—			—		—		—		—			2
Amortization of deferred basis adjustments of available-for-sale securities	—			—			(1		)	—		—		—		—			—
Interest for qualifying accounting hedges of available-for-sale securities	—			—			2			—		—		—		—			—
Amortization of deferred loan basis adjustments	(8		)	(3		)				—		—		—		—			—
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	10			7			—			—		—		—		—			—
Total gain on fair value hedging relationships	2			4			1			—		—		—		—			12
Gain on cash flow hedging relationships
Interest rate contracts
Interest for qualifying accounting hedges of variable-rate borrowings	—			—			—			—		—		—		—			3
Interest for qualifying accounting hedges of deposit liabilities	—			—			—			—		—		2		—			—
Total gain on cash flow hedging relationships	$	—		$	—		$	—		$	—	$	—	$	2	$	—		$	3

	Interest and fees on finance receivables and loans						Interest and dividends on investment securities and other earning assets						Interest on deposits				Interest on long-term debt
Nine months ended September 30, ($ in millions)	2019			2018			2019			2018			2019		2018		2019			2018
Gain (loss) on fair value hedging relationships
Interest rate contracts
Amortization of deferred unsecured debt basis adjustments	$	—		$	—		$	—		$	—		$	—	$	—	$	18		$	42
Interest for qualifying accounting hedges of unsecured debt	—			—			—			—			—		—		—			7
Amortization of deferred secured debt basis adjustments (FHLB advances)	—			—			—			—			—		—		(17		)	(12		)
Interest for qualifying accounting hedges of secured debt (FHLB advances)	—			—			—			—			—		—		—			6
Amortization of deferred basis adjustments of available-for-sale securities	—			—			(2		)	—			—		—		—			—
Interest for qualifying accounting hedges of available-for-sale securities	—			—			2			(1		)	—		—		—			—
Amortization of deferred loan basis adjustments	(21		)	(11		)	—			—			—		—		—			—
Interest for qualifying accounting hedges of consumer automotive loans held-for-investment	27			5			—			—			—		—		—			—
Total gain (loss) on fair value hedging relationships	6			(6		)	—			(1		)	—		—		1			43
Gain on cash flow hedging relationships
Interest rate contracts
Interest for qualifying accounting hedges of variable-rate borrowings	—			—			—			—			—		—		—			6
Interest for qualifying accounting hedges of deposit liabilities	—			—			—			—			—		2		—			—
Total gain on cash flow hedging relationships	$	—		$	—		$	—		$	—		$	—	$	2	$	—		$	6

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the effect of cash flow hedges on accumulated other comprehensive income (loss).

	Three months ended September 30,					Nine months ended September 30,
($ in millions)	2019		2018			2019		2018
Interest rate contracts
Gain (loss) recognized in other comprehensive income (loss)	$	2	$	(1	)	$	14	$	22

Schedule of Net Investment Hedges in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the effect of net investment hedges on accumulated other comprehensive income (loss) and the Condensed Consolidated Statement of Comprehensive Income.

	Three months ended September 30,					Nine months ended September 30,
($ in millions)	2019		2018			2019			2018
Foreign exchange contracts (a) (b)
Gain (loss) recognized in other comprehensive income (loss)	$	2	$	(2	)	$	(3	)	$	5

(a) There were no amounts excluded from effectiveness testing for the three months and nine months ended September 30, 2019, or 2018.

(b)

Gains and losses reclassified from accumulated other comprehensive income (loss) are reported as other income, net of losses, in the Condensed Consolidated Statement of Comprehensive Income. There were no amounts reclassified for the three months and nine months ended September 30, 2019, or 2018.