Strategic Initiatives

As discussed in our 2019 Form 10-K, in February 2020, our Board of Directors approved a strategic plan to restructure our operations ("Restructuring Plan") in alignment with HSBC’s global strategy to refocus our wholesale operations to better serve our international corporate clients and restructure our retail operations to better meet the needs of globally mobile and affluent clients. We will also streamline our functional and operations support model by removing duplication and reduce the size of our balance sheet to better align with the scope and scale of the U.S. opportunity. We expect to incur pre-tax charges in connection with this Restructuring Plan over a two year period of approximately $350-$400 million ($265-$305 million after-tax).

During the first quarter of 2020, we decided to pause the vast majority of head count reductions due to the extraordinary impact of the coronavirus ("COVID-19") pandemic. However, many elements of our Restructuring Plan are moving forward as planned, including consolidation of our retail branch network and wholesale and retail middle and back office functions, and the creation of our Wealth and Personal Banking business. While we remain committed to our multi-year strategic plan to re-profile our business, the timing of the strategic actions as outlined in our 2019 Form 10-K may be re-sequenced or delayed beyond 24 months as the situation continues to develop. In light of COVID-19, we continue to reassess our strategic plan and may take additional actions in future periods.

The following table summarizes the changes in the liability associated with our Restructuring Plan during the three months ended March 31, 2020:



	Severance and Other Employee Costs⁽¹⁾		Lease Termination and Associated Costs⁽²⁾		Total
	(in millions)
Three Months Ended March 31, 2020
Restructuring liability at beginning of period	$	—	$	—	$	—
Restructuring costs recorded during the period	9		24		33
Restructuring costs paid during the period	—		—		—
Restructuring liability at end of period	$	9	$	24	$	33


⁽¹⁾	Severance and other employee costs are included in salaries and employee benefits in the consolidated statement of income (loss), substantially all of which were reported in the Retail Banking & Wealth Management business segment for segment reporting purposes.


⁽²⁾	Primarily includes real estate taxes, service charges and decommissioning costs. Lease termination and associated costs are included in occupancy expense, net in the consolidated statement of income (loss) and were reported in the Corporate Center business segment for segment reporting purposes.

In connection with the restructuring costs reflected above, during the first quarter of 2020, we determined that we would exit approximately 60 branches (in addition to the approximately 20 branches for which we disclosed plans to exit in the fourth quarter of 2019). As a result, we recorded impairment charges during the first quarter of 2020 to write down the lease ROU assets, net of estimated sublease income, by $52 million and to write down the leasehold improvement assets associated with these branches by $16 million based on their estimated remaining useful lives. These impairment charges are reflected in occupancy expense, net in the consolidated statement of income (loss) and were reported in the Corporate Center business segment for segment reporting purposes.

Our Restructuring Plan also resulted in costs being allocated to us from HSBC Technology & Services ("HTSU") which are reflected in support services from HSBC affiliates in the consolidated statement of income (loss). During the three months ended March 31, 2020, we recorded $8 million of allocated costs from HTSU, primarily including contract cancellation and equipment removal charges associated with the branch exits discussed above.