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Derivative Instruments and Hedging Activities (Tables)
 3 Months Ended
Mar. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Assets and Liabilities at Fair Value The following table summarizes the notional and fair values of our derivative instruments as of March 31, 2019 and December 31, 2018, 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. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets.
Table 9.1: Derivative Assets and Liabilities at Fair Value
 
 
March 31, 2019
 
December 31, 2018
 
 
Notional or
Contractual
Amount
 
Derivative(1)
 
Notional or
Contractual
Amount
 
Derivative(1)
(Dollars in millions)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivatives designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges
 
$
52,735

 
$
24

 
$
67

 
$
53,413

 
$
64

 
$
28

Cash flow hedges
 
84,600

 
138

 
44

 
81,200

 
83

 
70

Total interest rate contracts
 
137,335

 
162

 
111

 
134,613

 
147

 
98

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
5,523

 
42

 
21

 
5,745

 
184

 
2

Net investment hedges
 
2,648

 
32

 
6

 
2,607

 
178

 
0

Total foreign exchange contracts
 
8,171

 
74

 
27

 
8,352

 
362

 
2

Total derivatives designated as accounting hedges
 
145,506

 
236

 
138

 
142,965

 
509

 
100

Derivatives not designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Customer accommodation:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
50,554

 
295

 
160

 
49,386

 
190

 
256

Commodity contracts
 
11,529

 
553

 
527

 
10,673

 
797

 
786

Foreign exchange and other contracts
 
1,698

 
18

 
15

 
1,418

 
12

 
11

Total customer accommodation
 
63,781

 
866

 
702

 
61,477

 
999

 
1,053

Other interest rate exposures(2)
 
6,065

 
30

 
24

 
6,427

 
29

 
36

Other contracts
 
3,621

 
89

 
11

 
1,636

 
2

 
12

Total derivatives not designated as accounting hedges
 
73,467

 
985

 
737

 
69,540

 
1,030

 
1,101

Total derivatives
 
$
218,973

 
$
1,221

 
$
875

 
$
212,505

 
$
1,539

 
$
1,201

Less: netting adjustment(3)
 
(512
)
 
(421
)
 
 
 
(1,079
)
 
(287
)
Total derivative assets/liabilities
 
$
709

 
$
454

 
 
 
$
460

 
$
914

__________
(1) 
Derivative assets and liabilities presented above exclude valuation adjustments related to non-performance risk. As of March 31, 2019 and December 31, 2018, the cumulative CVA balances were $7 million and $3 million, respectively. The cumulative DVA balance was approximately $1 million as of both March 31, 2019 and December 31, 2018.
(2) 
Other interest rate exposures include commercial mortgage-related derivatives and interest rate swaps.
(3) 
Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty.
Hedged Item in Fair Value Hedging Relationship The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of March 31, 2019 and December 31, 2018.
Table 9.2: Hedged Items in Fair Value Hedging Relationships
 
 
March 31, 2019
 
December 31, 2018
 
 
Carrying Amount
Assets/(Liabilities)
 
Cumulative Amount of Basis Adjustments Included in the Carrying Amount
 
Carrying Amount
Assets/(Liabilities)
 
Cumulative Amount of Basis Adjustments Included in the Carrying Amount
(Dollars in millions)
 
 
Total
Assets/(Liabilities)
 
Discontinued-Hedging Relationships
 
 
Total
Assets/(Liabilities)
 
Discontinued-Hedging Relationships
Line item on our consolidated balance sheets in which the hedged item is included:
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale(1)(2)
 
$
12,519

 
$
145

 
$
1

 
$
14,067

 
$
(6
)
 
$
(2
)
Interest-bearing deposits
 
(13,136
)
 
155

 
0

 
(13,101
)
 
247

 
0

Securitized debt obligations
 
(5,928
)
 
111

 
118

 
(5,887
)
 
168

 
143

Senior and subordinated notes
 
(25,128
)
 
(5
)
 
355

 
(23,572
)
 
315

 
392

__________
(1) 
These amounts include the amortized cost basis of our investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The amortized cost basis of this portfolio was $8.7 billion and $8.3 billion, the amount of the designated hedged items was $4.2 billion and $4.0 billion, and the cumulative basis adjustment associated with these hedges was $71 million and $26 million as of March 31, 2019 and December 31, 2018, respectively.
(2) 
Carrying value represents amortized cost.
Offsetting Assets The following table presents as of March 31, 2019 and December 31, 2018 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 in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 9.3: 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)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
$
1,221

 
$
(265
)
 
$
(247
)
 
$
709

 
$
0

 
$
709

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,539

 
(205
)
 
(874
)
 
460

 
0

 
460

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
$
875

 
$
(265
)
 
$
(156
)
 
$
454

 
$
0

 
$
454

Repurchase agreements(2)
 
335

 
0

 
0

 
335

 
(335
)
 
0

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,201

 
(205
)
 
(82
)
 
914

 
0

 
914

Repurchase agreements(2)
 
352

 
0

 
0

 
352

 
(352
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $440 million and $925 million as of March 31, 2019 and December 31, 2018, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both March 31, 2019 and December 31, 2018, which we have the ability to re-pledge. We posted $695 million and $633 million of cash collateral as of March 31, 2019 and December 31, 2018, respectively.
(2) 
Represents customer repurchase agreements that mature the next business day. As of March 31, 2019 and December 31, 2018, we pledged collateral with a fair value of $342 million and $359 million, respectively, under these customer repurchase agreements, which were primarily agency RMBS securities.
Offsetting Liabilities The following table presents as of March 31, 2019 and December 31, 2018 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 in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 9.3: 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)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
$
1,221

 
$
(265
)
 
$
(247
)
 
$
709

 
$
0

 
$
709

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,539

 
(205
)
 
(874
)
 
460

 
0

 
460

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
$
875

 
$
(265
)
 
$
(156
)
 
$
454

 
$
0

 
$
454

Repurchase agreements(2)
 
335

 
0

 
0

 
335

 
(335
)
 
0

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,201

 
(205
)
 
(82
)
 
914

 
0

 
914

Repurchase agreements(2)
 
352

 
0

 
0

 
352

 
(352
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $440 million and $925 million as of March 31, 2019 and December 31, 2018, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both March 31, 2019 and December 31, 2018, which we have the ability to re-pledge. We posted $695 million and $633 million of cash collateral as of March 31, 2019 and December 31, 2018, respectively.
(2) 
Represents customer repurchase agreements that mature the next business day. As of March 31, 2019 and December 31, 2018, we pledged collateral with a fair value of $342 million and $359 million, respectively, under these customer repurchase agreements, which were primarily agency RMBS securities.
Effects of Fair Value and Cash Flow Hedge Accounting The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the three months ended March 31, 2019 and 2018.
Table 9.4: Effects of Fair Value and Cash Flow Hedge Accounting
 
 
Three Months Ended March 31, 2019
 
 
Net Interest Income
(Dollars in millions)
 
Investment Securities
 
Loans, Including Loans Held for Sale
 
Other
 
Interest-bearing Deposits
 
Securitized Debt Obligations
 
Senior and Subordinated Notes
Total amounts presented in our consolidated statements of income
 
$
655

 
$
6,368

 
$
69

 
$
(817
)
 
$
(143
)
 
$
(314
)
Fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Interest recognized on derivatives
 
2

 
0

 
0

 
(36
)
 
(6
)
 
(11
)
Gains (losses) recognized on derivatives
 
(111
)
 
0

 
0

 
95

 
33

 
281

Gains (losses) recognized on hedged items(1)
 
110

 
0

 
0

 
(92
)
 
(57
)
 
(320
)
Net income (expense) recognized on fair value hedges
 
1

 
0

 
0

 
(33
)
 
(30
)
 
(50
)
Cash flow hedging relationships:(2)
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses reclassified from AOCI into net income
 
(4
)
 
(56
)
 
0

 
0

 
0

 
0

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains reclassified from AOCI into net income(3)
 
0

 
0

 
12

 
0

 
0

 
0

Net income (expense) recognized on cash flow hedges
 
$
(4
)
 
$
(56
)
 
$
12

 
$
0

 
$
0

 
$
0

 
 
Three Months Ended March 31, 2018
 
 
Net Interest Income
(Dollars in millions)
 
Investment Securities
 
Loans, Including Loans Held for Sale
 
Other
 
Interest-bearing Deposits
 
Securitized Debt Obligations
 
Senior and Subordinated Notes
Total amounts presented in our consolidated statements of income
 
$
452

 
$
6,134

 
$
51

 
$
(539
)
 
$
(107
)
 
$
(251
)
Fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Interest recognized on derivatives
 
(8
)
 
0

 
0

 
(2
)
 
(5
)
 
10

Gains (losses) recognized on derivatives
 
100

 
0

 
0

 
(160
)
 
(101
)
 
(357
)
Gains (losses) recognized on hedged items(1)
 
(99
)
 
0

 
0

 
155

 
98

 
325

Net income (expense) recognized on fair value hedges
 
$
(7
)
 
$
0

 
$
0

 
$
(7
)
 
$
(8
)
 
$
(22
)
Cash flow hedging relationships:(2)
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) reclassified from AOCI into net income
 
$
(2
)
 
$
8

 
$
0

 
$
0

 
$
0

 
$
0

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains reclassified from AOCI into net income(3)
 
0

 
0

 
8

 
0

 
0

 
0

Net income (expense) recognized on cash flow hedges
 
$
(2
)
 
$
8

 
$
8

 
$
0

 
$
0

 
$
0

__________
(1) 
Includes amortization of $61 million and $10 million for the three months ended March 31, 2019 and 2018, respectively, related to basis adjustments on discontinued hedges.
(2) 
See “Note 10—Stockholders’ Equity” for the effects of cash flow and net investment hedges on AOCI and amounts reclassified to net income, net of tax.
(3) 
We recognized a loss of $172 million and a gain of $75 million on foreign exchange contracts reclassified from AOCI for the three months ended March 31, 2019 and 2018, respectively. These amounts were entirely offset by the foreign currency transaction gains (losses) on our foreign currency denominated inter-company borrowings included non-interest income.
Gains (Losses) on Free-Standing Derivatives The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the three months ended March 31, 2019 and 2018. These gains or losses are recognized in other non-interest income on our consolidated statements of income.Table 9.5: Gains (Losses) on Free-Standing Derivatives
 
 
Three Months Ended March 31,
(Dollars in millions)
 
2019
 
2018
Gains (losses) recognized in other non-interest income:
 
 
 
 
Customer accommodation:
 
 
 
 
Interest rate contracts
 
$
6

 
$
4

Commodity contracts
 
2

 
4

Foreign exchange and other contracts
 
3

 
2

Total customer accommodation
 
11

 
10

Other interest rate exposures
 
0

 
12

Other contracts
 
(2
)
 
(20
)
Total
 
$
9

 
$
2