Discontinued Operations

12 Months Ended

Dec. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

Discontinued Operations

2011 Discontinued Operations:

Sale of Certain Credit Card Operations to Capital OneOn August 10, 2011, HSBC, through its wholly-owned subsidiaries HSBC Finance, HSBC USA and other wholly-owned affiliates, entered into an agreement to sell its Card and Retail Services business to Capital One Financial Corporation ("Capital One"). This transaction was completed on May 1, 2012. The sale included our General Motors ("GM") and Union Plus ("UP") credit card receivables as well as our private label credit card and closed-end receivables, all of which were purchased from HSBC Finance. Prior to completing the transaction, we recorded lower of amortized cost or fair value adjustments on these receivables, which prior to the sale were classified as held for sale on our balance sheet as a component of assets of discontinued operations, which totaled $1.0 billion, of which $440 million was recorded in 2012 and $604 million was recorded in 2011, and is reflected in net interest income and other revenues in the table below. These fair value adjustments were largely offset by held for sale accounting adjustments in which loan impairment charges and premium amortization were no longer recorded. The total final cash consideration allocated to us was approximately $19.2 billion, which did not result in the recognition of a gain or loss upon completion of the sale as the receivables were recorded at fair value. The sale to Capital One did not include credit card receivables associated with HSBC Bank USA's legacy credit card program and, therefore, are excluded from the table below. However a portion of these receivables were included as part of the branch sale to First Niagara Bank, N.A ("First Niagara") in 2012 and HSBC Bank USA continues to offer credit cards to its customers. No significant one-time closure costs were incurred as a result of exiting these portfolios. In connection with the sale of our credit card portfolio to Capital One, we entered into an outsourcing arrangement with Capital One with respect to the servicing of our remaining credit card portfolio. In September 2013, the outsourcing arrangement with Capital One ended and we resumed the servicing of our remaining credit card portfolio.

Because the credit card and private label receivables sold were classified as held for sale prior to disposition and the operations and cash flows from these receivables were eliminated from our ongoing operations post-disposition without any significant continuing involvement, we determined we had met the requirements to report the results of these credit card and private label card receivables sold as discontinued operations for all periods presented.

Following the completion of the sale in May of 2012, there was no remaining impact on our results related to the discontinued credit cards operations. The following table summarizes the results of our discontinued credit card operations for the periods presented:

Year Ended December 31,	2014		2013		2012
	(in millions)
Net interest income and other revenues (1)	$	—	$	—	$	541
Income from discontinued operations before income tax	—		—		315

⁽¹⁾  Interest expense was allocated to discontinued operations in accordance with our existing internal transfer pricing policy. This policy uses match funding based on the expected lives of the assets and liabilities of the business at the time of origination, subject to periodic review, as demonstrated by the expected cash flows and re-pricing characteristics of the underlying assets.

At December 31, 2014 and 2013 there were no remaining assets and liabilities of our discontinued credit cards operations reported on our consolidated balance sheet.

Disposals that do not qualify for Discontinued Operations reporting:

On December 19, 2014, we sold our Global Banking and Markets ("GB&M") London precious metals custody and clearing business to HSBC Bank plc. As the sale of this business was between affiliates under common control, the consideration received in excess of our carrying value resulted in an increase to additional paid-in-capital, net of tax, of $60 million. The sale resulted in a decrease of approximately $3.0 billion of trading assets, $320 million of loans, $440 million of deposits, $370 million of short-term borrowings and $3.0 billion of trading liabilities from September 30, 2014 levels. Income before taxes of this business was $20 million, $30 million and $49 million for 2014, 2013 and 2012, respectively.