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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Impact of Derivatives on Consolidated Balance Sheet

Impact of Derivatives on Consolidated Balance Sheet

						Cash Flow								Fair Value								Trading								Total
(Dollars in millions)		Hedged Risk Exposure				Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016
Fair Values(1)
Derivative Assets:
Interest rate swaps			Interest rate			$	70			$	78			$	391			$	465			$	10			$	22			$	471			$	565
Cross-currency interest rate swaps			Foreign currency and interest rate				—				—				—				—				—				—				—				—
Other(2)			Interest rate				—				—				—				—				—				—				—				—
Total derivative assets(3)							70				78				391				465				10				22				471				565
Derivative Liabilities:
Interest rate swaps			Interest rate				(56	)			(76	)			(72	)			(62	)			(66	)			(70	)			(194	)			(208	)
Floor Income Contracts			Interest rate				—				—				—				—				(164	)			(184	)			(164	)			(184	)
Cross-currency interest rate swaps			Foreign currency and interest rate				—				—				(1,125	)			(1,243	)			(41	)			(53	)			(1,166	)			(1,296	)
Other(2)			Interest rate				—				—				—				—				(16	)			(13	)			(16	)			(13	)
Total derivative liabilities(3)							(56	)			(76	)			(1,197	)			(1,305	)			(287	)			(320	)			(1,540	)			(1,701	)
Net total derivatives						$	14			$	2			$	(806	)		$	(840	)		$	(277	)		$	(298	)		$	(1,069	)		$	(1,136	)

⁽¹⁾  Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements, and classified in other assets or other liabilities depending on whether in a net positive or negative position.

⁽²⁾  “Other” includes embedded derivatives bifurcated from securitization debt as well as derivatives related to our Total Return Swap Facility.

⁽³⁾  The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:

Gross Positions with Impact of Master Netting Agreements

The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:

		Other Assets								Other Liabilities
(Dollar in millions)		March 31, 2017				December 31, 2016				March 31, 2017				December 31, 2016
Gross position		$	471			$	565			$	(1,540	)		$	(1,701	)
Impact of master netting agreements			(48	)			(31	)			48				31
Derivative values with impact of master netting agreements (as carried on balance sheet)			423				534				(1,492	)			(1,670	)
Cash collateral (held) pledged			(317	)			(345	)			282				319
Net position		$	106			$	189			$	(1,210	)		$	(1,351	)

Derivative Notional Values

		Cash Flow								Fair Value								Trading								Total
(Dollars in billions)		Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016				Mar. 31, 2017				Dec. 31, 2016
Notional Values:
Interest rate swaps		$	15.6			$	15.2			$	12.3			$	11.8			$	30.3			$	23.8			$	58.2			$	50.8
Floor Income Contracts			—				—				—				—				21.4				18.5				21.4				18.5
Cross-currency interest rate swaps			—				—				7.6				8.5				.3				.3				7.9				8.8
Other(1)			—				—				—				—				2.3				2.6				2.3				2.6
Total derivatives		$	15.6			$	15.2			$	19.9			$	20.3			$	54.3			$	45.2			$	89.8			$	80.7

⁽¹⁾  “Other” includes embedded derivatives bifurcated from securitization debt as well as derivatives related to our Total Return Swap Facility.

Impact of Derivatives on Consolidated Statements of Income

Impact of Derivatives on Consolidated Statements of Income

		Three Months Ended March 31,
		Unrealized Gain (Loss) on Derivatives(1)(2)								Realized Gain (Loss) on Derivatives(3)								Unrealized Gain (Loss) on Hedged Item(1)								Total Gain (Loss)
(Dollars in millions)		2017				2016				2017				2016				2017				2016				2017				2016
Fair Value Hedges:
Interest rate swaps		$	(84	)		$	244			$	54			$	71			$	61			$	(280	)		$	31			$	35
Cross-currency interest rate swaps			118				374				(29	)			(16	)			(162	)			(306	)			(73	)			52
Total fair value derivatives			34				618				25				55				(101	)			(586	)			(42	)			87
Cash Flow Hedges:
Interest rate swaps			—				—				(16	)			—				—				—				(16	)			—
Total cash flow derivatives			—				—				(16	)			—				—				—				(16	)			—
Trading:
Interest rate swaps			(7	)			53				20				10				—				—				13				63
Floor Income Contracts			53				27				(20	)			(138	)			—				—				33				(111	)
Cross-currency interest rate swaps			12				20				(1	)			(1	)			—				—				11				19
Other			(4	)			(2	)			(2	)			—				—				—				(6	)			(2	)
Total trading derivatives			54				98				(3	)			(129	)			—				—				51				(31	)
Total			88				716				6				(74	)			(101	)			(586	)			(7	)			56
Less: realized gains (losses) recorded in interest expense			—				—				9				55				—				—				9				55
Gains (losses) on derivative and hedging activities, net		$	88			$	716			$	(3	)		$	(129	)		$	(101	)		$	(586	)		$	(16	)		$	1

⁽¹⁾  Recorded in “Gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

⁽²⁾  Represents ineffectiveness related to cash flow hedges.

⁽³⁾  For fair value and cash flow hedges, recorded in interest expense. For trading derivatives, recorded in “Gains (losses) on derivative and hedging activities, net.”

Collateral Held and Pledged

Collateral held and pledged related to derivative exposures between us and our derivative counterparties are detailed in the following table:

(Dollars in millions)		March 31, 2017				December 31, 2016
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)		$	317			$	345
Securities at fair value — corporate derivatives (not recorded in financial statements)(1)			97				193
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)(2)			237				230
Total collateral held		$	651			$	768
Derivative asset at fair value including accrued interest		$	526			$	689
Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)		$	282			$	319
Total collateral pledged		$	282			$	319
Derivative liability at fair value including accrued interest and premium receivable		$	1,510			$	1,670

⁽¹⁾  The Company has the ability to sell or re-pledge securities it holds as collateral.

⁽²⁾  The trusts do not have the ability to sell or re-pledge securities they hold as collateral.

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Tabular disclosure of derivative and other financial assets that are subject to offsetting, including master netting arrangements.

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Tabular disclosure of financial instruments held by the entity for its own account for trading or investment purposes that are carried at fair value and pledged to counterparties as collateral for financing transactions. Description may include equity, fixed income, debt or other securities.

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