Business Segments

We have five distinct business segments that we utilize for management reporting and analysis purposes, which are aligned with HSBC's global business strategy: Retail Banking and Wealth Management ("RBWM"), Commercial Banking ("CMB"), Global Banking and Markets ("GB&M"), Private Banking ("PB") and a Corporate Center ("CC"). There have been no changes in the basis of our segmentation as compared with the presentation in our 2019 Form 10-K.

Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for a funding charge or credit that includes both interest rate and liquidity components. 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 that incorporate both repricing (interest rate risk) and tenor (liquidity) characteristics. The objective of these charges/credits is to transfer interest rate risk from the segments to one centralized unit in Balance Sheet Management, recognize term funding costs/benefits and more appropriately reflect the profitability of the segments.

Certain other revenue and operating expense amounts are also apportioned among the business segments based upon the benefits derived from this activity or the relationship of this activity to other segment activity. These inter-segment transactions have not been eliminated, and we generally account for them as if they were with third parties.

Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply IFRSs as issued by the IASB and 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. We continue, however, to monitor capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

There have been no changes in the measurement of segment profit as compared with the presentation in our 2019 Form 10-K.

A summary of significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 24, "Business Segments," in our 2019 Form 10-K. Other than the changes discussed below, there have been no other significant changes since December 31, 2019 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

Expected credit losses - As discussed further in Note 21, "New Accounting Pronouncements," on January 1, 2020, we adopted new accounting guidance under U.S. GAAP which requires entities to recognize an allowance for credit losses based on lifetime ECL. However, under the Group Reporting Basis for the requirements of IFRS 9, "Financial Instruments" ("IFRS 9"), only financial assets which are considered to have experienced a significant increase in credit risk or for which there is objective evidence of impairment require an allowance based on lifetime ECL. Under the Group Reporting Basis, financial assets which have not experienced a significant increase in credit risk since initial recognition only require an allowance based on expected credit losses resulting from default events that are possible within the next 12 months. Principally as a result of this difference, the allowance for credit losses remains higher under U.S. GAAP than under the Group Reporting Basis. In addition, the new guidance requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral-dependent assets) under U.S. GAAP, which results in an impact to earnings substantially consistent with the Group Reporting Basis. Prior to January 1, 2020, these expected recoveries were not recognized under U.S. GAAP.

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			CC			Total			Group Reporting Basis Adjustments⁽¹⁾			Group Reporting Basis Reclassi- fications⁽²⁾			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2020
Net interest income	$	195		$	208		$	81		$	31		$	4		$	519		$	3		$	(18	)	$	504
Other operating income	59			58			264			16			(26		)	371			(4		)	20			387
Total operating income	254			266			345			47			(22		)	890			(1		)	2			891
Expected credit losses / provision for credit losses	140			123			115			—			1			379			347			—			726
	114			143			230			47			(23		)	511			(348		)	2			165
Operating expenses	660			146			187			370			146			1,509			94			2			1,605
Profit (loss) before income tax	$	(546	)	$	(3	)	$	43		$	(323	)	$	(169	)	$	(998	)	$	(442	)	$	—		$	(1,440	)
Balances at end of period:
Total assets	$	18,954		$	31,540		$	114,802		$	7,159		$	97,154		$	269,609		$	(64,532	)	$	—		$	205,077
Total loans, net	17,701			30,370			22,461			6,084			2,039			78,655			(4,596		)	6,738			80,797
Goodwill	—			358			—			—			—			358			100			—			458
Total deposits	39,083			32,309			40,417			8,201			4,305			124,315			(7,066		)	19,474			136,723

Three Months Ended March 31, 2019
Net interest income	$	221		$	201		$	151		$	37		$	14		$	624		$	6		$	(68	)	$	562
Other operating income	65			58			175			16			24			338			(17		)	69			390
Total operating income	286			259			326			53			38			962			(11		)	1			952
Expected credit losses / provision for credit losses	21			6			(17		)	(1		)	1			10			41			7			58
	265			253			343			54			37			952			(52		)	(6		)	894
Operating expenses	311			138			206			53			40			748			8			(6		)	750
Profit (loss) before income tax	$	(46	)	$	115		$	137		$	1		$	(3	)	$	204		$	(60	)	$	—		$	144
Balances at end of period:
Total assets	$	18,733		$	25,612		$	78,899		$	6,686		$	79,715		$	209,645		$	(28,724	)	$	—		$	180,921
Total loans, net	16,885			24,447			20,068			5,584			2,230			69,214			(1,797		)	3,034			70,451
Goodwill	581			358			—			321			—			1,260			347			—			1,607
Total deposits	33,459			22,323			28,274			7,540			6,629			98,225			(2,827		)	18,241			113,639


⁽¹⁾	Represents adjustments associated with differences between U.S. GAAP and the Group Reporting Basis.


⁽²⁾	Represents differences in financial statement presentation between U.S. GAAP and the Group Reporting Basis.