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Business Segments
9 Months Ended
Sep. 30, 2016
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").
We previously announced that with effect from January 1, 2016, a portion of our Business Banking client group, generally representing those small business customers with $3 million or less in annual revenue (now referred to as Retail Business Banking), would be better managed as part of RBWM rather than CMB given the similarities in their banking activities with the RBWM customer base. Therefore, to coincide with the change in our management reporting effective beginning in the first quarter of 2016, we have included the results of Retail Business Banking in the RBWM segment for all periods presented. As a result, loss before tax for the RBWM segment increased $9 million and $25 million during the three and nine months ended September 30, 2015, respectively. There have been no other changes in the basis of our segmentation or measurement of segment profit as compared with the presentation in our 2015 Form 10-K.
During the first half of 2016, we determined that a portion of our Large Corporate client group, generally representing those large business customers with more complex banking activities which require the levels of support routinely provided by relationship managers in GB&M, would be better managed as part of GB&M rather than CMB, effective October 1, 2016. Therefore, beginning in the fourth quarter of 2016, we will include the results of the transferred client relationships in the GB&M segment for all periods presented. We currently expect this transfer will result in an increase to loans and deposits for the GB&M segment of approximately $3.4 billion and $2.4 billion, respectively. The profit before tax associated with these relationships was approximately $83 million and $54 million during the years ended December 31, 2015 and 2014, respectively.
Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply IFRSs as issued by the IASB and as endorsed by the EU, and, as a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis 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 and report to regulatory agencies on a U.S. GAAP basis.
We continue to review the financial information used to manage our businesses, including the scope and content of the financial data, including the U.S. GAAP financial data, being reported to our Management and our Board. To the extent we make changes to this reporting in the future, we will evaluate any impact such changes may have on our segment reporting.
A summary of differences between U.S. GAAP and the Group Reporting Basis as they impact our results are presented in Note 22, "Business Segments," in our 2015 Form 10-K. There have been no significant changes since December 31, 2015 in the differences between U.S. GAAP and the 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(3)
 
Group Reporting Basis
Reclassi-
fications(4)
 
U.S. GAAP
Consolidated
Totals
 
(in millions)
Three Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income(1)
$
204

 
$
205

 
$
156

 
$
53

 
$
(10
)
 
$

 
$
608

 
$
(18
)
 
$
14

 
$
604

Other operating income
72

 
66

 
188

 
22

 
9

 

 
357

 
(27
)
 
(10
)
 
320

Total operating income
276

 
271

 
344

 
75

 
(1
)
 

 
965

 
(45
)
 
4

 
924

Loan impairment charges
27

 
(19
)
 
33

 
1

 

 

 
42

 
16

 
4

 
62

 
249

 
290

 
311

 
74

 
(1
)
 

 
923

 
(61
)
 

 
862

Operating expenses(2)
283

 
167

 
241

 
56

 
67

 

 
814

 
(11
)
 

 
803

Profit (loss) before income tax expense
$
(34
)
 
$
123

 
$
70

 
$
18

 
$
(68
)
 
$

 
$
109

 
$
(50
)
 
$

 
$
59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income(1)
$
197

 
$
209

 
$
142

 
$
49

 
$
(5
)
 
$
(1
)
 
$
591

 
$
(19
)
 
$
45

 
$
617

Other operating income
85

 
82

 
287

 
26

 
109

 
1

 
590

 
(11
)
 
(48
)
 
531

Total operating income
282

 
291

 
429

 
75

 
104

 

 
1,181

 
(30
)
 
(3
)
 
1,148

Loan impairment charges
15

 
23

 
5

 
(1
)
 

 

 
42

 
4

 
1

 
47

 
267

 
268

 
424

 
76

 
104

 

 
1,139

 
(34
)
 
(4
)
 
1,101

Operating expenses(2)
280

 
171

 
247

 
62

 
37

 

 
797

 
(7
)
 
(4
)
 
786

Profit (loss) before income tax expense
$
(13
)
 
$
97

 
$
177

 
$
14

 
$
67

 
$

 
$
342

 
$
(27
)
 
$

 
$
315

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Group Reporting Basis Consolidated Amounts
 
 
 
 
 
 
  
RBWM
 
CMB
 
GB&M
 
PB
 
Other
 
Adjustments/
Reconciling
Items
 
Total
 
Group Reporting Basis
Adjustments(3)
 
Group Reporting Basis
Reclassi-
fications(4)
 
U.S. GAAP
Consolidated
Totals
 
(in millions)
Nine Months Ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income(1)
$
609

 
$
623

 
$
522

 
$
153

 
$
(20
)
 
$
(2
)
 
$
1,885

 
$
(59
)
 
$
70

 
$
1,896

Other operating income
229

 
206

 
585

 
67

 
167

 
2

 
1,256

 
(111
)
 
(70
)
 
1,075

Total operating income
838

 
829

 
1,107

 
220

 
147

 

 
3,141

 
(170
)
 

 
2,971

Loan impairment charges
52

 
12

 
387

 

 

 

 
451

 
(72
)
 
(26
)
 
353

 
786

 
817

 
720

 
220

 
147

 

 
2,690

 
(98
)
 
26

 
2,618

Operating expenses(2)
810

 
495

 
714

 
173

 
156

 

 
2,348

 
(22
)
 
26

 
2,352

Profit (loss) before income tax expense
$
(24
)
 
$
322

 
$
6

 
$
47

 
$
(9
)
 
$

 
$
342

 
$
(76
)
 
$

 
$
266

Balances at end of period:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
20,719

 
$
28,832

 
$
195,803

 
$
8,149

 
$
471

 
$

 
$
253,974

 
$
(45,673
)
 
$
9

 
$
208,310

Total loans, net
17,727

 
27,740

 
21,730

 
6,433

 

 

 
73,630

 
(447
)
 
3,382

 
76,565

Goodwill
581

 
358

 

 
325

 

 

 
1,264

 
348

 

 
1,612

Total deposits
31,702

 
24,926

 
30,151

 
13,216

 

 

 
99,995

 
(4,919
)
 
36,006

 
131,082

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income(1)
$
597

 
$
613

 
$
392

 
$
148

 
$
(16
)
 
$
(9
)
 
$
1,725

 
$
(51
)
 
$
175

 
$
1,849

Other operating income
260

 
228

 
772

 
77

 
266

 
9

 
1,612

 
(36
)
 
(178
)
 
1,398

Total operating income
857

 
841

 
1,164

 
225

 
250

 

 
3,337

 
(87
)
 
(3
)
 
3,247

Loan impairment charges
52

 
37

 
17

 
(2
)
 

 

 
104

 
(9
)
 
(1
)
 
94

 
805

 
804

 
1,147

 
227

 
250

 

 
3,233

 
(78
)
 
(2
)
 
3,153

Operating expenses(2)
887

 
499

 
770

 
178

 
114

 

 
2,448

 
(33
)
 
(2
)
 
2,413

Profit (loss) before income tax expense
$
(82
)
 
$
305

 
$
377

 
$
49

 
$
136

 
$

 
$
785

 
$
(45
)
 
$

 
$
740

Balances at end of period:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
20,177

 
$
32,143

 
$
196,535

 
$
8,491

 
$
787

 
$

 
$
258,133

 
$
(54,496
)
 
$
729

 
$
204,366

Total loans, net
17,217

 
30,905

 
25,025

 
6,711

 

 

 
79,858

 
286

 
4,120

 
84,264

Goodwill
581

 
358

 

 
325

 

 

 
1,264

 
348

 

 
1,612

Total deposits
31,260

 
22,580

 
31,621

 
13,137

 

 

 
98,598

 
(5,167
)
 
38,019

 
131,450

 
(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) 
Represents adjustments associated with differences between U.S. GAAP and the Group Reporting Basis.
(4) 
Represents differences in financial statement presentation between U.S. GAAP and the Group Reporting Basis.