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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Impact of Derivatives on Balance Sheet

Summary of Derivative Financial Statement Impact

The following tables summarize the fair values and notional amounts of all derivative instruments and their impact on net income and other comprehensive income

Impact of Derivatives on Balance Sheet

				Cash Flow								Fair Value(4)								Trading								Total
(Dollars in millions)		Hedged Risk Exposure		Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020
Fair Values(1)
Derivative Assets:
Interest rate swaps		Interest rate		$	—			$	—			$	260			$	323			$	3			$	6			$	263			$	329
Cross-currency interest rate    swaps		Foreign currency and interest rate			—				—				13				28				—				—				13				28
Total derivative assets(2)					—				—				273				351				3				6				276				357
Derivative Liabilities:
Interest rate swaps		Interest rate			—				—				—				—				(9	)			(14	)			(9	)			(14	)
Floor Income Contracts		Interest rate			—				—				—				—				(139	)			(197	)			(139	)			(197	)
Cross-currency interest rate    swaps		Foreign currency and interest rate			—				—				(121	)			(322	)			—				—				(121	)			(322	)
Other(3)		Interest rate			—				—				—				—				—				—				—				—
Total derivative liabilities(2)					—				—				(121	)			(322	)			(148	)			(211	)			(269	)			(533	)
Net total derivatives				$	—			$	—			$	152			$	29			$	(145	)		$	(205	)		$	7			$	(176	)

⁽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⁾ 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)		June 30, 2021				December 31, 2020				June 30, 2021				December 31, 2020
Gross position		$	276			$	357			$	(269	)		$	(533	)
Impact of master netting agreements			(30	)			(50	)			30				50
Derivative values with impact of master netting    agreements (as carried on balance sheet)			246				307				(239	)			(483	)
Cash collateral (held) pledged			(285	)			(336	)			183				234
Net position		$	(39	)		$	(29	)		$	(56	)		$	(249	)

^{(3) “Other” includes derivatives related to our Total Return Swap Facility.}

^{(4) The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:}

		As of June 30, 2021								As of December 31, 2020
(Dollar in millions)		Carrying Value				Hedge Basis Adjustments				Carrying Value				Hedge Basis Adjustments
Short-term borrowings		$	1,685			$	30			$	631			$	4
Long-term borrowings		$	8,271			$	465			$	11,017			$	541

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)		June 30, 2021				December 31, 2020				June 30, 2021				December 31, 2020
Gross position		$	276			$	357			$	(269	)		$	(533	)
Impact of master netting agreements			(30	)			(50	)			30				50
Derivative values with impact of master netting    agreements (as carried on balance sheet)			246				307				(239	)			(483	)
Cash collateral (held) pledged			(285	)			(336	)			183				234
Net position		$	(39	)		$	(29	)		$	(56	)		$	(249	)

^{(3) “Other” includes derivatives related to our Total Return Swap Facility.}

^{(4) The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:}

Carrying Value and Related Fair Value Hedging Adjustments of Liabilities

The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:

		As of June 30, 2021								As of December 31, 2020
(Dollar in millions)		Carrying Value				Hedge Basis Adjustments				Carrying Value				Hedge Basis Adjustments
Short-term borrowings		$	1,685			$	30			$	631			$	4
Long-term borrowings		$	8,271			$	465			$	11,017			$	541

Derivative Notional Values

		Cash Flow								Fair Value								Trading								Total
(Dollars in billions)		Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020				Jun 30, 2021				Dec 31, 2020
Notional Values:
Interest rate swaps		$	16.4			$	16.7			$	7.3			$	7.5			$	31.2			$	26.8			$	54.9			$	51.0
Floor Income Contracts			—				—				—				—				12.5				17.0				12.5				17.0
Cross-currency interest rate swaps			—				—				2.2				3.7				—				—				2.2				3.7
Total derivatives		$	16.4			$	16.7			$	9.5			$	11.2			$	43.7			$	43.8			$	69.6			$	71.7

Mark-to-Market Impact of Derivatives on Statements of Income

Mark-to-Market Impact of Derivatives on Statements of Income

		Total Gains (Losses)
		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2021				2020				2021				2020
Fair Value Hedges:
Interest Rate Swaps
Gains (losses) recognized in net income on derivatives		$	22			$	15			$	(175	)		$	424
Gains (losses) recognized in net income on hedged items			(21	)			(27	)			191				(455	)
Net fair value hedge ineffectiveness gains (losses)			1				(12	)			16				(31	)
Cross currency interest rate swaps
Gains (losses) recognized in net income on derivatives			117				60				186				(31	)
Gains (losses) recognized in net income on hedged items			(102	)			(54	)			(141	)			47
Net fair value hedge ineffectiveness gains (losses)			15				6				45				16
Total fair value hedges(1)(2)			16				(6	)			61				(15	)
Cash Flow Hedges:
Total cash flow hedges(2)			—				—				—				—
Trading:
Interest rate swaps			(7	)			(6	)			15				(47	)
Floor income contracts			(3	)			(24	)			11				(206	)
Cross currency interest rate swaps			—				—				—				—
Other			—				—				—				—
Total trading derivatives(3)			(10	)			(30	)			26				(253	)
Mark-to-market gains (losses) recognized		$	6			$	(36	)		$	87			$	(268	)

⁽¹⁾  Recorded in interest expense in the consolidated statements of income.

⁽²⁾  The accrued interest income (expense) on fair value hedges and cash flow hedges is recorded in interest expense and is excluded from this table.

⁽³⁾  Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income.

Impact of Derivatives on Other Comprehensive Income (Equity)

Impact of Derivatives on Other Comprehensive Income (Equity)

		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in millions)		2021				2020				2021				2020
Total gains (losses) on cash flow hedges		$	(5	)		$	(28	)		$	22			$	(237	)
Reclassification adjustments for derivative (gains) losses     included in net income (interest expense)(1)			22				11				43				11
Net changes in cash flow hedges, net of tax		$	17			$	(17	)		$	65			$	(226	)

⁽¹⁾ Includes net settlement income/expense.  

Collateral Held and Pledged

The following table details collateral held and pledged related to derivative exposure between us and our derivative counterparties:

(Dollars in millions)		June 30, 2021				December 31, 2020
Collateral held:
Cash (obligation to return cash collateral is recorded in short-term borrowings)		$	285			$	336
Securities at fair value — corporate derivatives (not recorded in financial    statements)(1)			—				—
Securities at fair value — on-balance sheet securitization derivatives (not    recorded in financial statements)(2)			45				78
Total collateral held		$	330			$	414
Derivative asset at fair value including accrued interest		$	293			$	351
Collateral pledged to others:
Cash (right to receive return of cash collateral is recorded in investments)		$	183			$	234
Total collateral pledged		$	183			$	234
Derivative liability at fair value including accrued interest and premium    receivable		$	254			$	504

⁽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.

Schedule of Credit Exposure Related to Our Derivative Counterparties

The table below highlights credit exposure related to our derivative counterparties at June 30, 2021.

(Dollars in millions)		Corporate Contracts				Securitization Trust Contracts
Exposure, net of collateral		$	14			$	13
Percent of exposure to counterparties with credit ratings    below S&P AA- or Moody’s Aa3			100	%			—	%
Percent of exposure to counterparties with credit ratings    below S&P A- or Moody’s A3			17	%			—	%

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