Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of March 31, 2022, and December 31, 2021. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the balance sheet, as follows:

	March 31, 2022						December 31, 2021
			Fair Value(a)						Fair Value(a)
Dollars in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	35,791	$	(4)	$	(49)	$	38,654	$	39	$	4
Derivatives not designated as hedging instruments:
Interest rate	75,463		335		611		72,088		768		249
Foreign exchange	9,125		102		96		9,073		81		76
Commodity	17,643		2,613		2,613		14,151		1,330		1,335
Credit	204		1		6		465		1		12
Other (a)	2,813		22		10		3,330		27		11
Total	105,248		3,073		3,336		99,107		2,207		1,683
Netting adjustments (b)	—		(330)		(2,689)		—		(284)		(1,526)
Net derivatives in the balance sheet	141,039		2,739		598		137,761		1,962		161
Other collateral (c)	—		—		—		—		(1)		—
Net derivative amounts	$	141,039	$	2,739	$	598	$	137,761	$	1,961	$	161

(a)We take into account bilateral collateral and master netting agreements that allow us to settle all derivative contracts held with a single counterparty on a net basis, and to offset the net derivative position with the related cash collateral when recognizing derivative assets and liabilities. As a result, we could have derivative contracts with negative fair values included in derivative assets and contracts with positive fair values included in derivative liabilities.

(b)Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when-issued securities, and other customized derivative contracts.

(c)Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(d)Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following tables summarize the amounts that were recorded on the balance sheet as of March 31, 2022, and December 31, 2021, related to cumulative basis adjustments for fair value hedges.

	March 31, 2022
Dollars in millions	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	7,454	$	(102)
Interest rate contracts	Securities Available for Sale(c)	2,805		119
	December 31, 2021
	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	7,553	$	138
Interest rate contracts	Securities Available for Sale(c)	6,280		134

(a)The carrying amount represents the portion of the liability designated as the hedged item.

(b)Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $7 million and $7 million at March 31, 2022, and December 31, 2021, respectively,

(c)These amounts are designed as fair value hedges under the last-of-layer method. The carrying amount represents the amortized costs basis of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the relationship. At March 31, 2022, and December 31, 2021, the amortized costs of the closed portfolios in these hedging relationships was $3.5 billion and $7.7 billion, respectively.

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three-month periods ended March 31, 2022, and March 31, 2021.

	Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
Dollars in millions	Interest expense – long-term debt		Interest income – loans		Interest Income - securities		Investment banking and debt placement fees
Three months ended March 31, 2022
Total amounts presented in the consolidated statement of income	$	49	$	837	$	173	$	163
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	240	$	—	$	(276)	$	—
Recognized on derivatives designated as hedging instruments	(216)		—		282		—
Net income (expense) recognized on fair value hedges	$	24	$	—	$	6	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	64	$	—	$	2
Net income (expense) recognized on cash flow hedges	$	(1)	$	64	$	—	$	2
Three months ended March 31, 2021
Total amounts presented in the consolidated statement of income	$	60	$	889	$	130	$	162
Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	204	$	—	$	(266)	$	—
Recognized on derivatives designated as hedging instruments	(166)		—		267		—
Net income (expense) recognized on fair value hedges	$	38	$	—	$	1	$	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	89	$	—	$	1
Net income (expense) recognized on cash flow hedges	$	(1)	$	89	$	—	$	1

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following tables summarize the pre-tax net gains (losses) on our cash flow hedges for the three-month periods ended March 31, 2022, and March 31, 2021, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.

Dollars in millions	Net Gains (Losses) Recognized in OCI		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income
Three months ended March 31, 2022
Cash Flow Hedges
Interest rate	$	(670)	Interest income — Loans	$	64
Interest rate	3		Interest expense — Long-term debt	(1)
Interest rate	9		Investment banking and debt placement fees	2
Total	$	(658)		$	65
Three months ended March 31, 2021
Cash Flow Hedges
Interest rate	$	(203)	Interest income — Loans	$	89
Interest rate	3		Interest expense — Long-term debt	(1)
Interest rate	10		Investment banking and debt placement fees	1
Total	$	(190)		$	89

Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three-month periods ended March 31, 2022, and March 31, 2021, and where they are recorded on the income statement.

	Three months ended March 31, 2022								Three months ended March 31, 2021
Dollars in millions	Corporate services income		Consumer mortgage income		Other income		Total		Corporate services income		Consumer mortgage income		Other income		Total
NET GAINS (LOSSES)
Interest rate	$	13	$	—	$	9	$	22	$	6	$	—	$	—	$	6
Foreign exchange	13		—		—		13		11		—		—		11
Commodity	5		—		—		5		4		—		—		4
Credit	2		—		(10)		(8)		5		—		(9)		(4)
Other	—		(4)		7		3		—		1		(22)		(21)
Total net gains (losses)	$	33	$	(4)	$	6	$	35	$	26	$	1	$	(31)	$	(4)

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.

Dollars in millions	March 31, 2022		December 31, 2021
Interest rate	$	241	$	696
Foreign exchange	42		31
Commodity	2,285		1,108
Credit	—		—
Other	22		27
Derivative assets before collateral	2,590		1,862
Plus(Less): Related collateral	149		100
Total derivative assets	$	2,739	$	1,962

Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at March 31, 2022, and December 31, 2021. The notional amount represents the amount that the seller could

be required to pay. The payment/performance risk shown in the table represents a weighted average of the default

probabilities for all reference entities in the respective portfolios. These default probabilities are implied from

observed credit indices in the credit default swap market, which are mapped to reference entities based on Key’s

internal risk rating.

	March 31, 2022					December 31, 2021
Dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk
Other	$	75	15.08	4.02	%	$	149	13.86	3.15	%
Total credit derivatives sold	$	75	—	—		$	149	—	—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2022, and December 31, 2021. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of March 31, 2022, and December 31, 2021, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of March 31, 2022, and December 31, 2021. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.

	March 31, 2022				December 31, 2021
Dollars in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	2	$	2	$	3	$	3
Two rating downgrades	2		2		3		3
Three rating downgrades	2		2		3		3