Derivatives and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2014

Derivatives and Hedging Activities (Tables) [Abstract]

Schedule of derivative instruments in statement of financial position, fair value

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of September 30, 2014 and December 31, 2013:

		Other Assets				Other Liabilities
		Fair Value				Fair Value
(Millions)		2014		2013		2014		2013
Derivatives designated as hedging instruments:
Interest rate contracts
	Fair value hedges	$	309	$	455	$	27	$	2
Total return contract
	Fair value hedge		―		8		―		―
Foreign exchange contracts
	Net investment hedges		384		174		57		116
Total derivatives designated as hedging instruments			693		637		84		118
Derivatives not designated as hedging instruments:
	Foreign exchange contracts, including certain embedded derivatives(a)		129		64		162		95
Total derivatives, gross			822		701		246		213
Less: Cash collateral netting(b)			(125)		(336)		(27)		―
Derivative asset and derivative liability netting(c)			(126)		(36)		(126)		(36)
Total derivatives, net(d)		$	571	$	329	$	93	$	177

• Includes foreign currency derivatives embedded in certain operating agreements.
• Represents the offsetting of derivative instruments and the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) executed with the same counterparty under an enforceable master netting arrangement. Additionally, the Company received noncash collateral from a counterparty in the form of security interest in U.S. Treasury securities with a fair value of $111 million and nil as of September 30, 2014 and December 31, 2013, respectively, none of which was sold or repledged. Such noncash collateral economically reduces the Company’s risk exposure to $460 million as of September 30, 2014, but does not reduce the net exposure on the Company’s Consolidated Balance Sheets. Additionally, the Company posted $97 million and $26 million as of September 30, 2014 and December 31, 2013, respectively, as initial margin on its centrally cleared interest rate swaps; such amounts are recorded within other receivables on the Company’s Consolidated Balance Sheets and are not netted against the derivative balances.
• Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.
• The Company has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. The total net derivative assets and derivative liabilities are presented within Other assets and Other liabilities on the Company’s Consolidated Balance Sheets.

Effect of fair value hedges on results of operations

The following table summarizes the impact on the Consolidated Statements of Income associated with the Company’s hedges of its fixed-rate long-term debt and its investment in ICBC for the three and nine months endedSeptember 30:

For the Three Months Ended September 30: (Millions)
	Gains (losses) recognized in income
	Derivative contract					Hedged item					Net hedge
		Amount					Amount				ineffectiveness
Derivative relationship	Income Statement Line Item	2014		2013		Income Statement Line Item	2014		2013		2014		2013
Interest rate contracts	Other expenses	$	(109)	$	(11)	Other expenses	$	112	$	5	$	3	$	(6)
Total return contract	Other non-interest revenues		―		(21)	Other non-interest revenues		―		21		―		―

For the Nine Months Ended September 30: (Millions)
	Gains (losses) recognized in income
	Derivative contract					Hedged item					Net hedge
		Amount					Amount				ineffectiveness
Derivative relationship	Income Statement Line Item	2014		2013		Income Statement Line Item	2014		2013		2014		2013
Interest rate contracts	Other expenses	$	(170)	$	(305)	Other expenses	$	176	$	295	$	6	$	(10)
Total return contract	Other non-interest revenues		11		(10)	Other non-interest revenues		(11)		10		―		―

Derivative instruments gain loss recognized in income

The following table summarizes the impact on pretax earnings of derivatives not designated as hedges, as reported on the Consolidated Statements of Income for the three and nine months endedSeptember 30:

		Pretax gains
		For the Three Months Ended				For the Nine Months Ended
		September 30,				September 30,
		Amount				Amount
Description (Millions)	Income Statement Line Item	2014		2013		2014		2013
Interest rate contracts	Other expenses	$	―	$	1	$	―	$	1
Foreign exchange contracts(a)	Other expenses		2		25		84		108
	Cost of Card Member services		―		―		4		―
Total		$	2	$	26	$	88	$	109

• Foreign exchange contracts include forwards and embedded foreign currency derivatives.