Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2022 and December 31, 2021:

			Cumulative Amount of Fair Value Hedging Adjustment Included in the Amortized Cost Basis of the Hedged Assets
(Dollars in millions)	Amortized Cost Basis of the Hedged Assets		Active		Terminated
September 30, 2022
AFS securities	$	8,773	$	—	$	(301)
December 31, 2021
AFS securities (1)	$	15,260	$	(131)	$	6

(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 December 31, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $11.2 billion, the amounts of the designated hedged items was $6.7 billion and the cumulative basis adjustments associated with these hedging relationships was $83 million.

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 September 30, 2022 and December 31, 2021 were as follows:

	September 30, 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)	$	—	$	—	$	—	$	10,700	$	18	$	—
Currency exchange risks:
Foreign exchange contracts	1,546		94		—		—		—		—
Total derivatives designated as hedging instruments			94		—				18		—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange contracts	2,860		46		—		701		16		—
Foreign exchange contracts	308		—		13		62		—		2
Other derivative instruments:
Equity warrant assets	353		351		—		322		277		—
Contingent conversion rights	52		6		—		—		—		—
Client foreign exchange contracts	10,658		500		—		8,245		146		—
Client foreign exchange contracts	10,615		—		499		7,764		—		126
Total return swaps	110		25		—		—		—		—
Client foreign currency options	266		11		—		688		9		—
Client foreign currency options	266		—		11		688		—		9
Client interest rate derivatives (2)	2,248		128		—		2,178		99		—
Client interest rate derivatives	2,447		—		235		2,315		—		101
Total derivatives not designated as hedging instruments			1,067		758				547		238
Total gross derivatives			1,161		758				565		238
Less: netting adjustment (3)			(495)		(234)				(137)		(120)
Total derivatives			$	666	$	524			$	428	$	118

(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 $117 million and $112 million of derivative assets at September 30, 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.

(3)For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with that counterparty. There was approximately $6 million of cash collateral in excess of net derivative receivables and $1 million of cash collateral in excess of net derivative payables balances not included in the netting adjustment at September 30, 2022, and December 31, 2021, respectively.

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 and nine months ended September 30, 2022 and 2021 is as follows:

		Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	Statement of income location	2022		2021		2022		2021
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from AOCI into income	Interest income - loans	$	14	$	16	$	43	$	47
Change in fair value of interest rate swaps hedging investment securities	Interest income - investment securities taxable	(2)		5		384		18
Change in fair value of hedged investment securities	Interest income - investment securities taxable	1		(6)		(385)		(19)
Net gains associated with interest rate risk derivatives		$	13	$	15	$	42	$	46
Derivatives not designated as hedging instruments:
Currency exchange risks:
Gains (losses) on revaluations of internal foreign currency instruments, net	Other noninterest income	$	47	$	(14)	26		$	(35)
(Losses) gains on internal foreign exchange forward contracts, net	Other noninterest income	(51)		14		(31)		35
Net losses associated with internal currency risk		$	(4)	$	—	$	(5)	$	—
Other derivative instruments:
Gains on revaluations of client foreign currency instruments, net	Other noninterest income	$	12	$	1	$	7	$	16
(Losses) gains on client foreign exchange forward contracts, net	Other noninterest income	(2)		(5)		5		(15)
Net gains (losses) associated with client currency risk		$	10	$	(4)	$	12	$	1
(Losses) gains on total return swaps	Other noninterest income	$	(2)	$	—	$	25	$	—
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	40	$	147	$	120	$	491
Net gains on other derivatives	Other noninterest income	$	2	$	2	$	8	$	4

Offsetting Assets

The following table summarizes our assets subject to enforceable master netting arrangements as of September 30, 2022 and December 31, 2021:

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position (1)				Net Amounts of Assets Presented in the Statement of Financial Position (1)		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
(Dollars in millions)			Financial Instruments		Cash Collateral Received
September 30, 2022
Derivatives	$	597	$	(229)	$	(266)	$	102	$	—	$	102
Reverse repurchase, securities borrowing, and similar arrangements	397		—		—		397		(397)		—
Total	$	994	$	(229)	$	(266)	$	499	$	(397)	$	102
December 31, 2021
Derivatives	$	165	$	(87)	$	(50)	$	28	$	—	$	28
Reverse repurchase, securities borrowing, and similar arrangements	607		—		—		607		(607)		—
Total	$	772	$	(87)	$	(50)	$	635	$	(607)	$	28

(1)During the third quarter of 2022, we changed our accounting policy to report the fair values of our derivative assets and liabilities subject to ISDA master netting arrangements on a net basis where a right of setoff exists. The net derivative fair values have been further adjusted for cash collateral received/pledged. The change in accounting policy was applied retrospectively, and prior periods have been revised to conform with current period presentation.

Offsetting Liabilities

The following table summarizes our liabilities subject to enforceable master netting arrangements as of September 30, 2022 and December 31, 2021:

	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position (1)				Net Amounts of Liabilities Presented in the Statement of Financial Position (1)		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
(Dollars in millions)			Financial Instruments		Cash Collateral Pledged
September 30, 2022
Derivatives	$	256	$	(229)	$	(5)	$	22	$	—	$	22
Repurchase, securities lending, and similar arrangements	36		—		—		36		—		36
Total	$	292	$	(229)	$	(5)	$	58	$	—	$	58
December 31, 2021
Derivatives	$	148	$	(87)	$	(33)	$	28	$	—	$	28
Repurchase, securities lending, and similar arrangements	61		—		—		61		—		61
Total	$	209	$	(87)	$	(33)	$	89	$	—	$	89

(1)During the third quarter of 2022, we changed our accounting policy to report the fair values of our derivative assets and liabilities subject to ISDA master netting arrangements on a net basis where a right of setoff exists. The net derivative fair values have been further adjusted for cash collateral received/pledged. The change in accounting policy was applied retrospectively, and prior periods have been revised to conform with current period presentation.