Business Segments

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Business Segments

Business Segments

We have four distinct business segments that we utilize for management reporting and analysis purposes, which are aligned with HSBC's global businesses and business strategy. There have been no changes in the basis of our segmentation or measurement of segment profit as compared with the presentation in our 2013 Form 10-K.

Our segment results are presented in accordance with IFRSs (a non-U.S. GAAP financial measure) on a legal entity basis ("IFRSs Basis") as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees are made almost exclusively on an IFRSs basis since we report financial information to our parent, HSBC, in accordance with IFRSs. We continue to monitor capital adequacy, establish dividend policy and report to regulatory agencies on a U.S. GAAP legal entity basis.

A summary of the significant differences between U.S. GAAP and IFRSs as they impact our results are presented in Note 25, "Business Segments," in our 2013 Form 10-K. There have been no significant changes since December 31, 2013 in the differences between U.S. GAAP and IFRSs impacting our results.

The following table summarizes the results for each segment on an IFRSs basis, as well as provides a reconciliation of total results under IFRSs to U.S. GAAP consolidated totals.

	IFRSs Consolidated Amounts
	RBWM			CMB		GB&M		PB			Other			Adjustments/ Reconciling Items			Total		IFRSs Adjustments(4)			IFRSs Reclassi- fications(5)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2014
Net interest income(1)	$	198		$	187	$	97	$	49		$	(13	)	$	(5	)	$	513	$	(15	)	$	21		$	519
Other operating income	113			68		294		25			25			5			530		(4		)	(26		)	500
Total operating income	311			255		391		74			12			—			1,043		(19		)	(5		)	1,019
Loan impairment charges(3)	2			7		15		(5		)	—			—			19		4			(7		)	16
	309			248		376		79			12			—			1,024		(23		)	2			1,003
Operating expenses(2)	279			158		239		55			25			—			756		(8		)	2			750
Profit before income tax expense	$	30		$	90	$	137	$	24		$	(13	)	$	—		$	268	$	(15	)	$	—		$	253
Balances at end of period:
Total assets	$	19,143		$	25,594	$	181,545	$	8,231		$	723		$	—		$	235,236	$	(47,888	)	$	(174	)	$	187,174
Total loans, net	16,177			24,509		17,485		6,022			—			—			64,193		1,411			2,719			68,323
Goodwill	581			358		—		325			—			—			1,264		348			—			1,612
Total deposits	30,206			21,254		30,126		12,529			—			—			94,115		(3,247		)	14,663			105,531
Three Months Ended March 31, 2013
Net interest income(1)	$	215		$	170	$	109	$	45		$	(14	)	$	(4	)	$	521	$	(17	)	$	1		$	505
Other operating income	107			65		382		28			(17		)	4			569		26			(3		)	592
Total operating income	322			235		491		73			(31		)	—			1,090		9			(2		)	1,097
Loan impairment charges(3)	32			14		3		1			—			—			50		(23		)	(6		)	21
	290			221		488		72			(31		)	—			1,040		32			4			1,076
Operating expenses(2)	291			162		230		60			21			—			764		—			4			768
Profit before income tax expense	$	(1	)	$	59	$	258	$	12		$	(52	)	$	—		$	276	$	32		$	—		$	308
Balances at end of period:
Total assets	$	19,634		$	20,919	$	204,160	$	7,831		$	164		$	—		$	252,708	$	(63,415	)	$	92		$	189,385
Total loans, net	16,747			19,449		17,063		5,722			—			—			58,981		1,194			2,189			62,364
Goodwill	581			358		480		325			—			—			1,744		484			—			2,228
Total deposits	34,253			21,464		32,476		12,941			—			—			101,134		(5,319		)	21,234			117,049

⁽¹⁾  Net interest income of each segment represents the difference between actual interest earned on assets and interest paid on liabilities of the segment adjusted for a funding charge or credit. Segments are charged a cost to fund assets (e.g. customer loans) and receive a funding credit for funds provided (e.g. customer deposits) based on equivalent market rates. The objective of these charges/credits is to transfer interest rate risk from the segments to one centralized unit in Treasury and more appropriately reflect the profitability of segments.

⁽²⁾  Expenses for the segments include fully apportioned corporate overhead expenses.

⁽³⁾  The provision assigned to the segments is based on the segments' net charge offs and the change in allowance for credit losses.

⁽⁴⁾  Represents adjustments associated with differences between IFRSs and U.S. GAAP bases of accounting.

⁽⁵⁾  Represents differences in financial statement presentation between IFRSs and U.S. GAAP.