Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table summarizes the amortized cost basis of hedged assets that are designated and qualify as fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded on our unaudited interim consolidated balance sheets as of March 31, 2022:

	March 31, 2022
(Dollars in millions)	Amortized Cost Basis of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (2)
AFS securities (1)	$	9,604	$	(252)

(1)These amounts include 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. At March 31, 2022, the amortized cost basis of the closed portfolios used in these hedging relationships was $9.6 billion, the amounts of the designated hedged items was $5.9 billion and the cumulative basis adjustments associated with these hedging relationships was $258 million.

(2)The balance includes $6 million of hedging adjustments on discontinued hedging relationships at March 31, 2022.

Total Notional or Contractual Amounts, Fair Value, Collateral and Net Exposure of Derivative Financial Instruments

The total notional or contractual amounts and fair value of our derivative financial instruments at March 31, 2022 and December 31, 2021 were as follows:

	March 31, 2022						December 31, 2021
	Notional or Contractual Amount		Fair Value				Notional or Contractual Amount		Fair Value
(Dollars in millions)			Derivative Assets (1)		Derivative Liabilities (1)				Derivative Assets (1)		Derivative Liabilities (1)
Derivatives designated as hedging instruments:
Interest rate risks:
Interest rate swaps (2)	$	5,900	$	—	$	—	$	10,700	$	18	$	—
Interest rate swaps	—		—		—		—		—		—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards and swaps	586		1		—		701		16		—
Foreign exchange forwards and swaps	852		—		6		62		—		2
Other derivative instruments:
Equity warrant assets	334		323		—		322		277		—
Contingent conversion rights	50		7		—		—		—		—
Client foreign exchange forwards and swaps	8,522		168		—		8,245		146		—
Client foreign exchange forwards and swaps	7,915		—		151		7,764		—		126
Total return swaps	46		—		8		—		—		—
Client foreign currency options	556		10		—		688		9		—
Client foreign currency options	556		—		10		688		—		9
Client interest rate derivatives (2)	2,117		51		—		2,178		99		—
Client interest rate derivatives	2,273		—		109		2,315		—		101
Total derivatives not designated as hedging instruments			560		284				547		238
Total derivatives			$	560	$	284			$	565	$	238

(1)Derivative assets and liabilities are included in "accrued interest receivable and other assets" and "other liabilities", respectively, on our consolidated balance sheets.

(2)The amount reported reflects reductions of approximately $313 million and $112 million of derivative assets at March 31, 2022 and December 31, 2021, respectively, reflecting variation margin treated as settlement of the related derivative fair values for legal and accounting purposes as required by central clearing houses.

Summary of Derivative Activity and Related Impact on Consolidated Statements of Income

A summary of our derivative activity and the related impact on our consolidated statements of income for the three months ended March 31, 2022 and 2021 is as follows:

		Three months ended March 31,
(Dollars in millions)	Statement of income location	2022		2021
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from AOCI into income	Interest income - loans	$	15	$	16
Change in fair value of interest rate swaps hedging investment securities	Interest income - investment securities taxable	330		18
Change in fair value of hedged investment securities	Interest income - investment securities taxable	(331)		(17)
Net gains associated with interest rate risk derivatives		$	14	$	17
Derivatives not designated as hedging instruments:
Currency exchange risks:
Gains (losses) on revaluations of internal foreign currency instruments, net	Other noninterest income	$	2	$	(28)
Gains on internal foreign exchange forward contracts, net	Other noninterest income	1		27
Net gains (losses) associated with internal currency risk		$	3	$	(1)
Other derivative instruments:
Losses on revaluations of client foreign currency instruments, net	Other noninterest income	$	(5)	$	(3)
Gains on client foreign exchange forward contracts, net	Other noninterest income	2		3
Net (losses) gains associated with client currency risk		$	(3)	$	—
Losses on total return swaps	Other noninterest income	$	(8)	$	—
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	63	$	222
Net gains on other derivatives	Other noninterest income	$	3	$	5

Offsetting Assets

The following table summarizes our assets subject to enforceable master netting arrangements as of March 31, 2022 and December 31, 2021:

	Gross Amounts of Recognized Assets		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements				Net Amount
(Dollars in millions)							Financial Instruments		Cash Collateral Received (1)
March 31, 2022
Derivative assets:
Foreign exchange forwards and swaps	$	169	$	—	$	169	$	(63)	$	(23)	$	83
Foreign currency options	10		—		10		(7)		—		3
Client interest rate derivatives	51		—		51		(40)		(11)		—
Total derivative assets	230		—		230		(110)		(34)		86
Reverse repurchase, securities borrowing, and similar arrangements	420		—		420		(420)		—		—
Total	$	650	$	—	$	650	$	(530)	$	(34)	$	86
December 31, 2021
Derivative assets:
Interest rate swaps	$	18	$	—	$	18	$	—	$	(13)	$	5
Foreign exchange forwards and swaps	162		—		162		(77)		(32)		53
Foreign currency options	9		—		9		(1)		(7)		1
Client interest rate derivatives	99		—		99		(91)		(8)		—
Total derivative assets	288		—		288		(169)		(60)		59
Reverse repurchase, securities borrowing, and similar arrangements	607		—		607		(607)		—		—
Total	$	895	$	—	$	895	$	(776)	$	(60)	$	59

(1)Cash collateral received from our counterparties in relation to market value exposures of derivative contracts in our favor is recorded as a component of “short-term borrowings” on our consolidated balance sheets.

Offsetting Liabilities

The following table summarizes our liabilities subject to enforceable master netting arrangements as of March 31, 2022 and December 31, 2021:

	Gross Amounts of Recognized Liabilities		Gross Amounts offset in the Statement of Financial Position		Net Amounts of Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position but Subject to Master Netting Arrangements				Net Amount
(Dollars in millions)							Financial Instruments		Cash Collateral Pledged (1)
March 31, 2022
Derivative liabilities:
Foreign exchange forwards and swaps	$	157	$	—	$	157	$	(76)	$	(16)	$	65
Total return swaps	8		—		8		—		(8)		—
Foreign currency options	10		—		10		(3)		—		7
Client interest rate derivatives	109		—		109		(80)		(29)		—
Total derivative liabilities	284		—		284		(159)		(53)		72
Repurchase, securities lending, and similar arrangements	63		—		63		—		—		63
Total	$	347	$	—	$	347	$	(159)	$	(53)	$	135
December 31, 2021
Derivative liabilities:
Foreign exchange forwards and swaps	$	128	$	—	$	128	$	(55)	$	(4)	$	69
Foreign currency options	9		—		9		(2)		—		7
Client interest rate derivatives	101		—		101		(44)		(57)		—
Total derivative liabilities	238		—		238		(101)		(61)		76
Repurchase, securities lending, and similar arrangements	61		—		61		—		—		61
Total	$	299	$	—	$	299	$	(101)	$	(61)	$	137

(1)Cash collateral pledged to our counterparties in relation to market value exposures of derivative contracts in a liability position and repurchase agreements are recorded as a component of “cash and cash equivalents" on our consolidated balance sheets.