Business Segments

6 Months Ended

Jun. 30, 2015

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: Retail Banking and Wealth Management ("RBWM"), Commercial Banking ("CMB"), Global Banking and Markets ("GB&M") and Private Banking ("PB"). There have been no changes in the basis of our segmentation or measurement of segment profit as compared with the presentation in our 2014 Form 10-K.

Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply IFRS and, as a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis (a non-U.S. GAAP financial measure) as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees, are primarily made on this basis. However, we continue to monitor capital adequacy, establish dividend policy and report to regulatory agencies on a U.S. GAAP basis.

We are currently in the process of re-evaluating the financial information used to manage our businesses, including the scope and content of the U.S. GAAP financial data being reported to our Management and our Board. To the extent we make changes to this reporting in 2015, we will evaluate any impact such changes may have on our segment reporting.

A summary of differences between U.S. GAAP and Group Reporting Basis as they impact our results are presented in Note 23, "Business Segments," in our 2014 Form 10-K. There have been no significant changes since December 31, 2014 in the differences between U.S. GAAP and Group Reporting Basis.

The following table summarizes the results for each segment on a Group Reporting Basis, as well as provides a reconciliation of total results under the Group Reporting Basis to U.S. GAAP consolidated totals:

	Group Reporting Basis Consolidated Amounts
	RBWM			CMB		GB&M			PB			Other			Adjustments/ Reconciling Items			Total		Group Reporting Basis Adjustments(4)			Group Reporting Basis Reclassi- fications(5)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended June 30, 2015
Net interest income(1)	$	195		$	211	$	132		$	50		$	(5	)	$	(3	)	$	580	$	(18	)	$	64		$	626
Other operating income	86			71		219			27			75			3			481		(15		)	(63		)	403
Total operating income	281			282		351			77			70			—			1,061		(33		)	1			1,029
Loan impairment charges	15			4		4			(1		)	—			—			22		(27		)	(1		)	(6		)
	266			278		347			78			70			—			1,039		(6		)	2			1,035
Operating expenses(2)	300			185		264			58			50			—			857		(9		)	2			850
Profit (loss) before income tax expense	$	(34	)	$	93	$	83		$	20		$	20		$	—		$	182	$	3		$	—		$	185
Three Months Ended June 30, 2014
Net interest income(1)	$	212		$	202	$	109		$	56		$	78		$	(4	)	$	653	$	(16	)	$	36		$	673
Other operating income	104			64		151			25			(38		)	4			310		(6		)	(43		)	261
Total operating income	316			266		260			81			40			—			963		(22		)	(7		)	934
Loan impairment charges	21			83		40			—			—			—			144		(52		)	(7		)	85
	295			183		220			81			40			—			819		30			—			849
Operating expenses(2)	298			174		239			61			28			—			800		76			—			876
Profit (loss) before income tax expense	$	(3	)	$	9	$	(19	)	$	20		$	12		$	—		$	19	$	(46	)	$	—		$	(27	)
Six Months Ended June 30, 2015
Net interest income(1)	$	392		$	412	$	250		$	99		$	(11	)	$	(8	)	$	1,134	$	(32	)	$	130		$	1,232
Other operating income	173			148		485			51			157			8			1,022		(25		)	(130		)	867
Total operating income	565			560		735			150			146			—			2,156		(57		)	—			2,099
Loan impairment charges	37			14		12			(1		)	—			—			62		(13		)	(2		)	47
	528			546		723			151			146			—			2,094		(44		)	2			2,052
Operating expenses(2)	581			354		523			116			77			—			1,651		(26		)	2			1,627
Profit (loss) before income tax expense	$	(53	)	$	192	$	200		$	35		$	69		$	—		$	443	$	(18	)	$	—		$	425
Balances at end of period:
Total assets	$	19,987		$	31,940	$	181,541		$	8,174		$	779		$	—		$	242,421	$	(45,816	)	$	13		$	196,618
Total loans, net	17,039			30,783		24,489			6,498			—			—			78,809		906			3,254			82,969
Goodwill	581			358		—			325			—			—			1,264		348			—			1,612
Total deposits(3)	30,504			21,844		30,343			12,766			—			—			95,457		(4,512		)	31,602			122,547

	Group Reporting Basis Consolidated Amounts
	RBWM		CMB		GB&M		PB			Other			Adjustments/ Reconciling Items			Total		Group Reporting Basis Adjustments(4)			Group Reporting Basis Reclassi- fications(5)			U.S. GAAP Consolidated Totals
	(in millions)
Six Months Ended June 30, 2014
Net interest income(1)	$	410	$	389	$	206	$	105		$	65		$	(9	)	$	1,166	$	(31	)	$	57		$	1,192
Other operating income	217		132		445		50			(13		)	9			840		(10		)	(69		)	761
Total operating income	627		521		651		155			52			—			2,006		(41		)	(12		)	1,953
Loan impairment charges	23		90		55		(5		)	—			—			163		(48		)	(14		)	101
	604		431		596		160			52			—			1,843		7			2			1,852
Operating expenses(2)	577		332		478		116			53			—			1,556		68			2			1,626
Profit (loss) before income tax expense	$	27	$	99	$	118	$	44		$	(1	)	$	—		$	287	$	(61	)	$	—		$	226
Balances at end of period:
Total assets	$	19,169	$	26,467	$	175,330	$	8,232		$	826		$	—		$	230,024	$	(47,570	)	$	(236	)	$	182,218
Total loans, net	16,315		25,239		19,957		6,069			—			—			67,580		1,693			2,301			71,574
Goodwill	581		358		—		325			—			—			1,264		348			—			1,612
Total deposits(3)	29,138		22,135		30,092		11,822			—			—			93,187		(3,128		)	25,462			115,521

⁽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 Balance Sheet Management and more appropriately reflect the profitability of segments.

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

⁽³⁾  During the second quarter of 2015, we concluded that brokered deposits would be better presented as debt under the Group Reporting Basis. As a result, we reclassified $1.8 billion of brokered deposits in the GB&M segment to debt at June 30, 2014 to conform with current year presentation.

⁽⁴⁾  Represents adjustments associated with differences between the Group Reporting Basis and the U.S. GAAP basis of accounting.

⁽⁵⁾  Represents differences in financial statement presentation between Group Reporting Basis and U.S. GAAP.