Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

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

Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:


	March 31, 2013						December 31, 2012						March 31, 2012
			Fair Value						Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities

Derivatives designated as hedging instruments:
Interest rate	$	20,067	$	499	$	27	$	19,085	$	579	$	30	$	15,368	$	532	$	20
Foreign exchange		202		1		3		196		—		7		—		—		—

Total		20,269		500		30		19,281		579		37		15,368		532		20
Derivatives not designated as hedging instruments:
Interest rate		47,334		1,027		1,000		51,633		1,144		1,122		61,369		1,190		1,193
Foreign exchange		4,925		70		65		5,025		75		68		6,316		94		84
Energy and commodity		1,801		120		114		1,688		156		150		1,632		271		267
Credit		1,056		7		11		955		9		10		3,382		35		34
Equity		—		—		—		7		—		—		18		3		3

Total		55,116		1,224		1,190		59,308		1,384		1,350		72,717		1,593		1,581
Netting adjustments ^(a)		—		(1,115)		(696)		—		(1,270)		(803)		—		(1,295)		(847)

Net derivatives in the balance sheet		75,385		609		524		78,589		693		584		88,085		830		754
Other collateral^(b)		—		(123)		(436)		—		(163)		(475)		—		(174)		(620)

Net derivative amounts	$	75,385	$	486	$	88	$	78,589	$	530	$	109	$	88,085	$	656	$	134

(a)

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. The net basis takes into account the impact of bilateral collateral and 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.

(b)

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, any excess other collateral is not reflected above.

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

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the three-month periods ended March 31, 2013, and 2012, and where they are recorded on the income statement.

Three months ended March 31, 2013

in millions

Income Statement Location
of Net Gains (Losses)
on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location
of Net Gains (Losses)
on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(38)

Long-term debt

Other income

^(a)

Interest rate

Interest expense –

Long-term debt

Total

(5)

Three months ended March 31, 2012

in millions

Income Statement Location
of Net Gains (Losses)
on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location
of Net Gains (Losses)
on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(55)

Long-term debt

Other income

^(a)

Interest rate

Interest expense –

Long-term debt

Foreign exchange

Other income

Long-term debt

Other income

(5)

^(a)

Foreign exchange

Interest expense –

Long-term debt

Interest expense –

Long-term debt

(1)

^(b)

Total

(4)

(a)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the three month periods ended March 31, 2013 and 2012, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.


	Three months ended March 31, 2013
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)

Cash Flow Hedges
Interest rate	$	(4)	Interest income – Loans	$	22	Other income		—
Interest rate		3	Interest expense – Long-term debt		(3)	Other income		—
Interest rate		(1)	Investment banking and debt placement fees		—	Other income		—

Net Investment Hedges
Foreign exchange contracts		5	Other Income		(3)	Other income		—

Total	$	3		$	16			—


	Three months ended March 31, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)		Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)

Interest rate	$	23	Interest income – Loans	$	13	Other income		—
Interest rate		6	Interest expense – Long-term debt		(2)	Other income		—
Interest rate		—	Investment banking and debt placement fees		—	Other income		—

Total	$	29		$	11			—

After-Tax Change in AOCI Resulting from Cash Flow Hedges

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:


in millions	December 31, 2012		2013 Hedging Activity		Reclassification of Gains to Net Income		March 31, 2013


AOCI resulting from cash flow and net investment hedges	$	18	$	2	$	(10)	$	10

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, 2013, and 2012, and where they are recorded on the income statement.


	Three months ended March 31, 2013						Three months ended March 31, 2012
in millions	Corporate Services Income		Other Income		Total		Corporate Services Income		Other Income		Total

NET GAINS (LOSSES)
Interest rate	$	4		—	$	4	$	6		—	$	6
Foreign exchange		12		—		12		9		—		9
Energy and commodity		1		—		1		5		—		5
Credit		—	$	(3)		(3)		—	$	(4)		(4)

Total net gains (losses)	$	17	$	(3)	$	14	$	20	$	(4)	$	16

Largest Exposure to Individual Counterparty

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Largest gross exposure (derivative asset) to an individual counterparty	$	166	$	182	$	179
Collateral posted by this counterparty		58		66		57
Derivative liability with this counterparty		169		191		233
Collateral pledged to this counterparty		67		82		119
Net exposure after netting adjustments and collateral		6		7		7

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type. 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.


in millions	March 31, 2013		December 31, 2012		March 31, 2012

Interest rate	$	984	$	1,114	$	1,117
Foreign exchange		18		23		34
Energy and commodity		45		47		121
Credit		2		3		6
Equity		—		—		2

Derivative assets before collateral		1,049		1,187		1,280
Less: Related collateral		440		494		450

Total derivative assets	$	609	$	693	$	830

Fair Value of Credit Derivatives Purchased and Sold

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of March 31, 2013, December 31, 2012 and March 31, 2012. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.


	March 31, 2013						December 31, 2012						March 31, 2012
in millions	Purchased		Sold		Net		Purchased		Sold		Net		Purchased		Sold		Net

Single name credit default swaps	$	(3)	$	1	$	(2)	$	(1)	$	1		—	$	(12)	$	7	$	(5)
Traded credit default swap indices		(1)		—		(1)		—		—		—		—		6		6
Other		—		(1)		(1)		—		(1)	$	(1)		1		(1)		—

Total credit derivatives	$	(4)	$	—	$	(4)	$	(1)	$	—	$	(1)	$	(11)	$	12	$	1

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, 2013, December 31, 2012, and March 31, 2012. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. 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 directly correlated to the probability that we will have to make a payment under the credit derivative contracts.


	March 31, 2013							December 31, 2012							March 31, 2012
dollars in millions	Notional Amount		Average Term (Years)		Payment / Performance Risk			Notional Amount		Average Term (Years)		Payment / Performance Risk			Notional Amount		Average Term (Years)		Payment / Performance Risk

Single name credit default swaps	$	82		1.23		7.89	%	$	146		0.92		11.62	%	$	973		2.26		4.53	%
Traded credit default swap indices		—		—		—			—		—		—			497		2.78		2.09
Other		19		5.38		10.09			23		5.35		10.77			16		5.77		10.29

Total credit derivatives sold	$	101		—		—		$	169		—		—		$	1,486		—		—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of March 31, 2013, December 31, 2012, and March 31, 2012. 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, 2013, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $3 million would have been required as of March 31, 2013, and December 31, 2012. Additional collateral would not have been required as of March 31, 2012.


	March 31, 2013				December 31, 2012				March 31, 2012
in millions	Moody’s		S&P		Moody’s		S&P		Moody’s		S&P

KeyBank’s long-term senior unsecured credit ratings		A3		A-		A3		A-		A3		A-

One rating downgrade	$	6	$	6	$	6	$	6	$	6	$	6
Two rating downgrades		11		11		11		11		11		11
Three rating downgrades		11		11		11		11		11		11