Derivatives (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional or Contractual Amounts and Fair Values of Derivatives

Table 15.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which interest and other payments are determined.

Table 15.1: Notional or Contractual Amounts and Fair Values of Derivatives

	March 31, 2020							December 31, 2019
	Notional or contractual amount					Fair value		Notional or contractual amount			Fair value
(in millions)			Derivative assets			Derivative liabilities			Derivative assets		Derivative liabilities
Derivatives designated as hedging instruments
Interest rate contracts	$	187,167	3,715			2,199		182,789	2,595		1,237
Foreign exchange contracts	31,800		231			1,812		32,386	341		1,170
Total derivatives designated as qualifying hedging instruments			3,946			4,011			2,936		2,407
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts	358,717		2,732			1,766		235,810	207		160
Equity contracts	16,614		1,969			106		19,263	1,126		224
Foreign exchange contracts	46,486		1,332			233		26,595	118		286
Credit contracts – protection purchased	499		34			—		1,400	27		—
Subtotal			6,067			2,105			1,478		670
Customer accommodation trading and other derivatives:
Interest rate contracts	12,578,353		52,162			43,587		11,117,542	21,245		17,969
Commodity contracts	85,629		2,316			6,838		79,737	1,421		1,770
Equity contracts	316,754		11,181			10,248		272,145	7,410		10,240
Foreign exchange contracts	343,627		7,128			7,979		364,469	4,755		4,791
Credit contracts – protection sold	15,035		13			78		12,215	12		65
Credit contracts – protection purchased	25,144		106			15		24,030	69		18
Subtotal			72,906			68,745			34,912		34,853
Total derivatives not designated as hedging instruments			78,973			70,850			36,390		35,523
Total derivatives before netting			82,919			74,861			39,326		37,930
Netting			(57,896		)	(59,243	)		(25,123	)	(28,851	)
Total			$	25,023		15,618			14,203		9,079

Gross Fair Values of Derivative Assets and Liabilities

Table 15.2 provides information on the gross fair values of derivative assets and liabilities, the balance sheet netting adjustments and the resulting net fair value amount recorded on our balance sheet, as well as the non-cash collateral associated with such arrangements. We execute substantially all of our derivative transactions under master netting arrangements and reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis within the balance sheet. The “Gross amounts recognized” column in the following table includes $73.1 billion and $69.2 billion of gross derivative assets and liabilities, respectively, at March 31, 2020, and $33.7 billion and $33.5 billion, respectively, at December 31, 2019, with counterparties subject to enforceable master netting arrangements that are eligible for balance sheet netting adjustments. The majority of these amounts are interest rate contracts executed in over-the-counter (OTC) markets. The remaining gross derivative assets and liabilities of $9.8 billion and $5.7 billion, respectively, at March 31, 2020, and $5.6 billion and $4.4 billion, respectively, at December 31, 2019, include those with counterparties subject to master netting arrangements for which we have not assessed the enforceability because they are with counterparties where we do not currently have positions to offset, those subject to master netting arrangements where we have not been able to confirm the enforceability and those not subject to master netting arrangements. As such, we do not net derivative balances or collateral within the balance sheet for these counterparties. Cash collateral receivables and payables that have not been offset against our derivatives were $4.4 billion and $6.4 billion, respectively, at March 31, 2020, and $6.3 billion and $1.4 billion, respectively, at December 31, 2019.

We determine the balance sheet netting adjustments based on the terms specified within each master netting arrangement. We disclose the balance sheet netting amounts within the column titled “Gross amounts offset in consolidated balance sheet.” Balance sheet netting adjustments are determined at the counterparty level for which there may be multiple contract types. For disclosure purposes, we allocate these netting adjustments to the contract type for each counterparty proportionally based upon the “Gross amounts recognized” by counterparty. As a result, the net amounts disclosed by contract type may not represent the actual exposure upon settlement of the contracts.

We do not net non-cash collateral that we receive and pledge on the balance sheet. For disclosure purposes, we present the fair value of this non-cash collateral in the column titled “Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)” within the table. We determine and allocate the Disclosure-only netting amounts in the same manner as balance sheet netting amounts.

The “Net amounts” column within Table 15.2 represents the aggregate of our net exposure to each counterparty after considering the balance sheet and Disclosure-only netting adjustments. We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty specific credit risk limits, using master netting arrangements and obtaining collateral. Derivative contracts executed in OTC markets include bilateral contractual arrangements that are not cleared through a central clearing organization but are typically subject to master netting arrangements. Other derivative contracts that are settled through a central clearing organization whether OTC or exchange-traded, are excluded from that percentage. In addition to the netting amounts included in the table, we also have balance sheet netting related to resale and repurchase agreements that are disclosed within Note 13 (Guarantees, Pledged Assets and Collateral, and Other Commitments).

Table 15.2: Gross Fair Values of Derivative Assets and Liabilities

(in millions)	Gross amounts recognized		Gross amounts offset in consolidated balance sheet (1)		Net amounts in consolidated balance sheet	Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)		Net amounts	Percent exchanged in over-the-counter market
March 31, 2020
Derivative assets
Interest rate contracts	$	58,609	(39,677	)	18,932	(1,302	)	17,630	87	%
Commodity contracts	2,316		(1,534	)	782	(3	)	779	62
Equity contracts	13,150		(9,929	)	3,221	(802	)	2,419	66
Foreign exchange contracts	8,691		(6,660	)	2,031	(107	)	1,924	100
Credit contracts – protection sold	13		(13	)	—	—		—	44
Credit contracts – protection purchased	140		(83	)	57	(3	)	54	85
Total derivative assets	$	82,919	(57,896	)	25,023	(2,217	)	22,806
Derivative liabilities
Interest rate contracts	$	47,552	(42,276	)	5,276	(995	)	4,281	87	%
Commodity contracts	6,838		(1,689	)	5,149	(2	)	5,147	90
Equity contracts	10,354		(7,546	)	2,808	(164	)	2,644	56
Foreign exchange contracts	10,024		(7,661	)	2,363	(99	)	2,264	100
Credit contracts – protection sold	78		(68	)	10	—		10	87
Credit contracts – protection purchased	15		(3	)	12	—		12	69
Total derivative liabilities	$	74,861	(59,243	)	15,618	(1,260	)	14,358
December 31, 2019
Derivative assets
Interest rate contracts	$	24,047	(14,878	)	9,169	(445	)	8,724	95	%
Commodity contracts	1,421		(888	)	533	(2	)	531	80
Equity contracts	8,536		(5,570	)	2,966	(69	)	2,897	65
Foreign exchange contracts	5,214		(3,722	)	1,492	(22	)	1,470	100
Credit contracts – protection sold	12		(9	)	3	—		3	84
Credit contracts – protection purchased	96		(56	)	40	(1	)	39	97
Total derivative assets	$	39,326	(25,123	)	14,203	(539	)	13,664
Derivative liabilities
Interest rate contracts	$	19,366	(16,595	)	2,771	(545	)	2,226	94	%
Commodity contracts	1,770		(677	)	1,093	(2	)	1,091	82
Equity contracts	10,464		(6,647	)	3,817	(319	)	3,498	81
Foreign exchange contracts	6,247		(4,866	)	1,381	(169	)	1,212	100
Credit contracts – protection sold	65		(60	)	5	(3	)	2	98
Credit contracts – protection purchased	18		(6	)	12	—		12	93
Total derivative liabilities	$	37,930	(28,851	)	9,079	(1,038	)	8,041

(1)

Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in the consolidated balance sheet, including related cash collateral and portfolio level counterparty valuation adjustments. Counterparty valuation adjustments related to derivative assets were $877 million and $231 million and debit valuation adjustments related to derivative liabilities were $280 million and $100 million at March 31, 2020, and December 31, 2019, respectively. Cash collateral totaled $9.8 billion and $11.7 billion, netted against derivative assets and liabilities, respectively, at March 31, 2020, and $2.9 billion and $6.8 billion, respectively, at December 31, 2019.

Gains (Losses) Recognized on Fair Value Hedging Relationships

Table 15.3 and Table 15.4 show the net gains (losses) related to derivatives in fair value and cash flow hedging relationships, respectively.

Table 15.3: Gains (Losses) Recognized on Fair Value Hedging Relationships

	Net interest income									Noninterest income		Total recorded in net income		Total recorded in OCI
(in millions)	Debt securities			Mortgage loans held for sale		Deposits		Long-term debt		Other		Derivative gains (losses)		Derivative gains (losses)
Quarter ended March 31, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,472		197		(1,742	)	(1,240	)	372		N/A		182
Interest contracts:
Amounts related to interest settlements on derivatives	(46		)	—		70		174		—		198
Recognized on derivatives	(1,871		)	(50	)	530		9,775		—		8,384		—
Recognized on hedged items	1,856			50		(511	)	(9,426	)	—		(8,031	)
Total gains (losses) (pre-tax) on interest rate contracts	(61		)	—		89		523		—		551		—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	6			—		—		(85	)	—		(79	)
Recognized on derivatives	(1		)	—		—		107		(785	)	(679	)	144
Recognized on hedged items	2			—		—		(174	)	764		592
Total gains (losses) (pre-tax) on foreign exchange contracts	7			—		—		(152	)	(21	)	(166	)	144
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(54	)	—		89		371		(21	)	385		144

Quarter ended March 31, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,941		152		(2,026	)	(1,927	)	574		N/A		44
Interest contracts:
Amounts related to interest settlements on derivatives	16			—		(23	)	(7	)	—		(14	)
Recognized on derivatives	(814		)	(8	)	207		1,986		—		1,371		—
Recognized on hedged items	817			7		(190	)	(1,947	)	—		(1,313	)
Total gains (losses) (pre-tax) on interest rate contracts	19			(1	)	(6	)	32		—		44		—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	10			—		—		(142	)	—		(132	)
Recognized on derivatives	(4		)	—		—		292		(402	)	(114	)	(26	)
Recognized on hedged items	5			—		—		(266	)	391		130
Total gains (losses) (pre-tax) on foreign exchange contracts	11			—		—		(116	)	(11	)	(116	)	(26	)
Total gains (losses) (pre-tax) recognized on fair value hedges	$	30		(1	)	(6	)	(84	)	(11	)	(72	)	(26	)

Gains (Losses) Recognized on Cash Flow Hedging Relationships

Table 15.4: Gains (Losses) Recognized on Cash Flow Hedging Relationships

	Net interest Income					Total recorded in net income		Total recorded in OCI
(in millions)	Loans			Long-term debt		Derivative gains (losses)		Derivative gains (losses)
Quarter ended March 31, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	10,065		(1,240	)	N/A		182
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(56		)	—		(56	)	56
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A			N/A		N/A		—
Total gains (losses) (pre-tax) on interest rate contracts	(56		)	—		(56	)	56
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—			(2	)	(2	)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A			N/A		N/A		(20	)
Total gains (losses) (pre-tax) on foreign exchange contracts	—			(2	)	(2	)	(18	)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(56	)	(2	)	(58	)	38
Quarter ended March 31, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	11,354		(1,927	)	N/A		44
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(78		)	—		(78	)	78
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A			N/A		N/A		—
Total gains (losses) (pre-tax) on interest rate contracts	(78		)	—		(78	)	78
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—			(1	)	(1	)	1
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A			N/A		N/A		(9	)
Total gains (losses) (pre-tax) on foreign exchange contracts	—			(1	)	(1	)	(8	)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(78	)	(1	)	(79	)	70

Hedged Items in Fair Value Hedging Relationships

Table 15.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge

accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.

Table 15.5: Hedged Items in Fair Value Hedging Relationship

	Hedged Items Currently Designated					Hedged Items No Longer Designated (1)
(in millions)	Carrying Amount of Assets/(Liabilities) (2)(4)			Hedge Accounting Basis Adjustment Assets/(Liabilities) (3)		Carrying Amount of Assets/(Liabilities) (4)		Hedge Accounting Basis Adjustment Assets/(Liabilities)
March 31, 2020
Available-for-sale debt securities (5)	$	34,959		2,750		9,567		261
Mortgage loans held for sale	514			24		—		—
Deposits	(41,081		)	(837	)	(35	)	2
Long-term debt	(147,069		)	(15,325	)	(21,214	)	131
December 31, 2019
Available-for-sale debt securities (5)	$	36,896		1,110		9,486		278
Mortgage loans held for sale	961			(12	)	—		—
Deposits	(43,716		)	(324	)	—		—
Long-term debt	(127,423		)	(5,827	)	(25,750	)	173

(1) Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.

(2) Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded $3.0 billion for debt securities and $(5.0) billion for long-term debt as of March 31, 2020, and $1.2 billion for debt securities and $(5.2) billion for long-term debt as of December 31, 2019.

(3) The balance includes $649 million and $136 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of March 31, 2020, and $790 million and $109 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of December 31, 2019, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.

(4) Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.

(5)

Carrying amount represents the amortized cost.

Gains (Losses) on Derivatives Not Designated as Hedging Instruments

Table 15.6 shows the net gains (losses) recognized by income statement lines, related to derivatives not designated as hedging instruments.

Table 15.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments

	Noninterest income
(in millions)	Mortgage banking		Net gains (losses) from equity securities	Net gains (losses) from trading activities		Other		Total
Quarter ended March 31, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,471	—	—		29		2,500
Equity contracts	—		1,219	—		(28	)	1,191
Foreign exchange contracts	—		—	—		627		627
Credit contracts	—		—	—		16		16
Subtotal (2)	2,471		1,219	—		644		4,334
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts (3)	553		—	(2,463	)	—		(1,910	)
Commodity contracts	—		—	112		—		112
Equity contracts	—		—	4,749		73		4,822
Foreign exchange contracts	—		—	(557	)	—		(557	)
Credit contracts	—		—	281		—		281
Subtotal	553		—	2,122		73		2,748
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	3,024	1,219	2,122		717		7,082

	Noninterest income
(in millions)	Mortgage banking		Net gains (losses) from equity securities		Net gains (losses) from trading activities		Other		Total
Quarter ended March 31, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	811	—		—		5		816
Equity contracts	—		(885	)	—		7		(878	)
Foreign exchange contracts	—		—		—		(24	)	(24	)
Credit contracts	—		—		—		15		15
Subtotal	811		(885	)	—		3		(71	)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	118		—		(284	)	—		(166	)
Commodity contracts	—		—		51		—		51
Equity contracts	—		—		(2,149	)	(273	)	(2,422	)
Foreign exchange contracts	—		—		14		—		14
Credit contracts	—		—		(44	)	—		(44	)
Subtotal	118		—		(2,412	)	(273	)	(2,567	)
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	929	(885	)	(2,412	)	(270	)	(2,638	)

(1) Mortgage banking amounts for first quarter 2020 are comprised of gains (losses) of $3.4 billion related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $(929) million related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for first quarter 2019 are comprised of gains (losses) of $962 million offset by gains (losses) of $(151) million, respectively.

Sold and Purchased Credit Derivatives

Table 15.7 provides details of sold and purchased credit derivatives.

Table 15.7: Sold and Purchased Credit Derivatives

				Notional amount
(in millions)	Fair value asset		Fair value liability	Protection sold (A)	Protection sold – non- investment grade	Protection purchased with identical underlyings (B)	Net protection sold (A) - (B)	Other protection purchased	Range of maturities
March 31, 2020
Credit default swaps on:
Corporate bonds	$	11	11	3,602	825	2,492	1,110	2,753	2020 - 2029
Structured products	—		13	37	37	36	1	110	2034 - 2047
Credit protection on:
Default swap index	2		1	4,339	1,118	1,577	2,762	5,497	2020 - 2029
Commercial mortgage-backed securities index	—		28	318	60	293	25	50	2047 - 2058
Asset-backed securities index	—		8	41	41	41	—	1	2045 - 2046
Other	—		17	6,698	6,230	—	6,698	12,793	2020 - 2049
Total credit derivatives	$	13	78	15,035	8,311	4,439	10,596	21,204
December 31, 2019
Credit default swaps on:
Corporate bonds	$	8	1	2,855	707	1,885	970	2,447	2020 - 2029
Structured products	—		25	74	69	63	11	111	2022 - 2047
Credit protection on:
Default swap index	1		—	2,542	120	550	1,992	8,105	2020 - 2029
Commercial mortgage-backed securities index	3		26	322	67	296	26	50	2047 - 2058
Asset-backed securities index	—		8	41	41	41	—	1	2045 - 2046
Other	—		5	6,381	5,738	—	6,381	11,881	2020 - 2049
Total credit derivatives	$	12	65	12,215	6,742	2,835	9,380	22,595

Credit-Risk Contingent Features

Table 15.8 illustrates our exposure to such derivatives with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.

Table 15.8: Credit-Risk Contingent Features

(in billions)	Mar 31, 2020		Dec 31, 2019
Net derivative liabilities with credit-risk contingent features	$	16.1	10.4
Collateral posted	13.9		9.1
Additional collateral to be posted upon a below investment grade credit rating (1)	2.2		1.3

(1) Any credit rating below investment grade requires us to post the maximum amount of collateral.