Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional and Fair Values of Derivative Instruments

The following table summarizes the notional and fair values of our derivative instruments on as of June 30, 2017 and December 31, 2016, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further segregated by type of contract within those two categories. The total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged.

Table 9.1: Derivative Assets and Liabilities at Fair Value



	June 30, 2017								December 31, 2016
	Notional or Contractual Amount		Derivative⁽¹⁾⁽⁵⁾						Notional or Contractual Amount		Derivative⁽¹⁾
(Dollars in millions)	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts:
Fair value hedges	$	51,592	$	124		$	89		$	40,480	$	295		$	569
Cash flow hedges	58,700		30			89			50,400		151			287
Total interest rate contracts	110,292		154			178			90,880		446			856
Foreign exchange contracts:
Cash flow hedges	5,802		0			143			5,620		108			9
Net investment hedges	2,716		1			101			2,396		163			0
Total foreign exchange contracts	8,518		1			244			8,016		271			9
Total derivatives designated as accounting hedges	118,810		155			422			98,896		717			865
Derivatives not designated as accounting hedges:
Interest rate contracts covering:
MSRs⁽²⁾	1,491		11			2			1,696		17			21
Customer accommodation	42,657		571			437			39,474		670			530
Other interest rate exposures⁽³⁾	2,837		36			12			1,105		33			8
Total interest rate contracts	46,985		618			451			42,275		720			559
Other contracts	1,055		0			6			1,767		57			14
Total derivatives not designated as accounting hedges	48,040		618			457			44,042		777			573
Total derivatives	$	166,850	$	773		$	879		$	142,938	$	1,494		$	1,438
Less: netting adjustment⁽⁴⁾			(309		)	(355		)			(539		)	(336		)
Total derivative assets/liabilities			$	464		$	524				$	955		$	1,102

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⁽¹⁾	Derivative assets and liabilities presented above exclude valuation adjustments related to non-performance risk. As of June 30, 2017 and December 31, 2016, the cumulative CVA balances were $4 million and $6 million, respectively, and the cumulative DVA balances were less than $1 million as of both June 30, 2017 and December 31, 2016.


⁽²⁾	Includes interest rate swaps and to-be-announced contracts.


⁽³⁾	Includes mortgage-related derivatives.


⁽⁴⁾	Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty. See Table 9.2 for further information.


⁽⁵⁾	Reflects a reduction of derivative assets of $58 million and a reduction of derivative liabilities of $348 million on our consolidated balance sheets as of June 30, 2017 as a result of adoption of the CME variation margin rule change in the second quarter of 2017.

Offsetting Assets

The following table presents as of June 30, 2017 and December 31, 2016 the gross and net fair values of our derivative assets and liabilities and repurchase agreements, as well as the related offsetting amounts permitted under U.S. GAAP. The table also includes cash and non-cash collateral received or pledged associated with such arrangements. The collateral amounts shown are limited to the extent of the related net derivative fair values or outstanding balances, thus instances of over-collateralization are not shown.

Table 9.2: Offsetting of Financial Assets and Financial Liabilities



	Gross Amounts		Gross Amounts Offset in the Balance Sheet						Net Amounts as Recognized		Securities Collateral Held Under Master Netting Agreements
(Dollars in millions)	Gross Amounts		Financial Instruments			Cash Collateral Received			Net Amounts as Recognized		Securities Collateral Held Under Master Netting Agreements			Net Exposure
As of June 30, 2017
Derivatives assets⁽¹⁾⁽²⁾	$	773	$	(117	)	$	(192	)	$	464	$	0		$	464
As of December 31, 2016
Derivatives assets⁽¹⁾⁽²⁾	1,494		(152		)	(387		)	955		(11		)	944

Offsetting Liabilities



	Gross Amounts		Gross Amounts Offset in the Balance Sheet						Net Amounts as Recognized		Securities Collateral Pledged Under Master Netting Agreements
(Dollars in millions)	Gross Amounts		Financial Instruments			Cash Collateral Pledged			Net Amounts as Recognized					Net Exposure
As of June 30, 2017
Derivatives liabilities⁽¹⁾⁽²⁾	$	879	$	(117	)	$	(238	)	$	524	$	0		$	524
Repurchase agreements⁽³⁾	958		0			0			958		(958		)	0
As of December 31, 2016
Derivatives liabilities⁽¹⁾⁽²⁾	1,438		(152		)	(184		)	1,102		0			1,102
Repurchase agreements	992		0			0			992		(992		)	0

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⁽¹⁾	Reflects a reduction of derivative assets of $58 million and a reduction of derivative liabilities of $348 million on our consolidated balance sheets as of June 30, 2017 as a result of adoption of the CME variation margin rule change in the second quarter of 2017.

⁽²⁾

We received cash collateral from derivative counterparties totaling $234 million and $448 million as of June 30, 2017 and December 31, 2016, respectively. We also received securities from derivative counterparties with a fair value of $1 million and $16 million as of June 30, 2017 and December 31, 2016, respectively, which we have the ability to re-pledge. We posted $837 million and $1.5 billion of cash collateral as of June 30, 2017 and December 31, 2016, respectively.


⁽³⁾	Represents customer repurchase agreements that mature the next business day. As of June 30, 2017, we pledged collateral with a fair value of $977 million under these customer repurchase agreements, which were primarily agency RMBS securities.

Fair Value Hedging and Free-Standing Derivatives

Derivative Instruments, Gain (Loss) [Line Items]

Derivative Instruments, Gain (Loss)

The net gains (losses) recognized in earnings related to derivatives in fair value hedging relationships and free-standing derivatives are presented below for the three and six months ended June 30, 2017 and 2016.

Table 9.3: Gains and Losses on Fair Value Hedges and Free-Standing Derivatives



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in millions)	2017			2016			2017			2016
Derivatives designated as accounting hedges:⁽¹⁾
Fair value interest rate contracts:
Gains recognized in earnings on derivatives	$	138		$	182		$	93		$	390
Losses recognized in earnings on hedged items	(132		)	(175		)	(93		)	(367		)
Net fair value hedge ineffectiveness gains (losses)	6			7			0			23
Derivatives not designated as accounting hedges:⁽¹⁾
Interest rate contracts covering:
MSRs	3			8			3			18
Customer accommodation	6			7			16			12
Other interest rate exposures	14			16			21			31
Total interest rate contracts	23			31			40			61
Other contracts	0			(9		)	0			(9		)
Total gains on derivatives not designated as accounting hedges	23			22			40			52
Net derivative gains recognized in earnings	$	29		$	29		$	40		$	75

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⁽¹⁾	Amounts are recorded in our consolidated statements of income in other non-interest income.

Cash Flow Hedging and Net Investment Hedging

Derivative Instruments, Gain (Loss) [Line Items]

Derivative Instruments, Gain (Loss)

The table below shows the net gains (losses) related to derivatives designated as cash flow hedges and net investment hedges for the three and six months ended June 30, 2017 and 2016.

Table 9.4: Gains and Losses on Derivatives Designated as Cash Flow Hedges and Net Investment Hedges



	Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in millions)	2017			2016		2017			2016
Gains (losses) recorded in AOCI:
Cash flow hedges:
Interest rate contracts	$	69		$	192	$	39		$	618
Foreign exchange contracts	5			0		9			0
Subtotal	74			192		48			618
Net investment hedges:
Foreign exchange contracts	(58		)	122		(80		)	163
Net derivatives gains (losses) recognized in AOCI	$	16		$	314	$	(32	)	$	781
Gains (losses) recorded in earnings:
Cash flow hedges:
Gains (losses) reclassified from AOCI into earnings:
Interest rate contracts⁽¹⁾	$	24		$	48	$	61		$	98
Foreign exchange contracts⁽²⁾	5			1		8			0
Subtotal	29			49		69			98
Gains (losses) recognized in earnings due to ineffectiveness:
Interest rate contracts⁽²⁾	4			0		3			3
Net derivative gains (losses) recognized in earnings	$	33		$	49	$	72		$	101

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⁽¹⁾	Amounts reclassified are recorded in our consolidated statements of income in interest income or interest expense.


⁽²⁾	Amounts are recorded in our consolidated statements of income in other non-interest income or other interest income.