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Business Segments
 9 Months Ended
Sep. 30, 2020
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 business strategy: Wealth and Personal Banking ("WPB") which was created in the second quarter of 2020 and is discussed further below, Commercial Banking ("CMB"), Global Banking and Markets ("GB&M") and a Corporate Center ("CC").
We previously announced as part of our Restructuring Plan that we would combine our Retail Banking and Wealth Management ("RBWM") and Private Banking ("PB") businesses to create a single WPB business. During the second quarter of 2020, we implemented a change to our internal management reporting to begin reporting what was historically RBWM and PB together within a newly created WPB segment and, as a result, we have aligned our segment reporting to reflect this change for all periods presented.
During the second quarter of 2020, we also decided to implement a change to our internal management reporting to begin allocating Balance Sheet Management ("BSM"), which was historically reported within the CC segment, to the WPB, CMB and GB&M businesses to better align the revenue and expense to the businesses generating or utilizing this activity. As a result, we have aligned our segment reporting to reflect this change for all periods presented.
The following table summarizes the impact of these changes on reported segment profit (loss) before tax, total assets and total deposits as of and for the three months and nine months ended September 30, 2019:
As
Previously
Reported		After
Reporting
Changes
(in millions)
Segment profit (loss) before tax during the three months ended September 30, 2019:
RBWM$(275)NR
WPBNR$(257)
CMB111 118 
GB&M124 157 
PB— NR
CC7 (51)
Segment profit (loss) before tax during the nine months ended September 30, 2019:
RBWM$(347)NR
WPBNR$(291)
CMB332 354 
GB&M355 452 
PB(3)NR
CC23 (155)
Segment total assets at September 30, 2019:
RBWM(1)
$19,128 NR
WPBNR$52,334 
CMB27,734 36,968 
GB&M89,154 130,708 
PB(1)
7,042 NR
CC79,457 2,505 
Segment total deposits at September 30, 2019:
RBWM$34,877 NR
WPBNR$43,974 
CMB25,489 25,975 
GB&M32,002 34,015 
PB7,720 NR
CC3,876 — 
(1)Segment total assets at September 30, 2019 included goodwill that was previously allocated to RBWM and PB of $372 million and $321 million, respectively.
NR Not Reported
There have been no additional 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 to one centralized unit in BSM. BSM income statement and balance sheet results are allocated to each of the global businesses based upon tangible equity levels and levels of any surplus liabilities.
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.
Other long-lived assets impairment - Under US GAAP, a long-lived asset group is tested for impairment when events or changes in circumstances indicate that the carrying amount of a long-lived asset group might not be recoverable. If impairment testing is required, long-lived assets are grouped at the lowest level for which there are identifiable cash flows. If the estimated undiscounted cash flows of the long-lived asset group exceed its carrying amount, an impairment is not recognized. However, if the estimated undiscounted cash flows are less than the carrying amount of the long-lived asset group, a second step is performed to determine fair value and an impairment loss is required if the carrying amount of the long-lived asset group exceeds fair value. Under the Group Reporting Basis, there is no separate undiscounted cash flow test and an impairment loss is recognized if the carrying amount of the cash generating unit exceeds the higher of its value in use or fair value less costs to sell.
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   
WPBCMBGB&MCCTotal
Group Reporting Basis
Adjustments(1)
Group Reporting Basis
Reclassi-
fications(2)
U.S. GAAP
Consolidated
Totals
 (in millions)
Three Months Ended September 30, 2020
Net interest income$200 $202 $92 $(9)$485 $1 $62 $548 
Other operating income110 66 217 40 433 (22)(55)356 
Total operating income310 268 309 31 918 (21)7 904 
Expected credit losses /
provision for credit losses		12 (21)(6)— (15)(90)— (105)
298 289 315 31 933 69 7 1,009 
Operating expenses527 150 251 126 1,054 (276)7 785 
Profit (loss) before income tax$(229)$139 $64 $(95)$(121)$345 $— $224 
 Group Reporting Basis Consolidated Amounts   
WPBCMBGB&MCCTotal
Group Reporting Basis
Adjustments(1)
Group Reporting Basis
Reclassi-
fications(2)
U.S. GAAP
Consolidated
Totals
 (in millions)
Three Months Ended September 30, 2019
Net interest income$253 $216 $85 $(11)$543 $1 $(41)$503 
Other operating income99 66 269 4 438 2 46 486 
Total operating income352 282 354 (7)981 3 5 989 
Expected credit losses /
provision for credit losses		52 19 (3)— 68 25 1 94 
300 263 357 (7)913 (22)4 895 
Operating expenses557 145 200 44 946 156 4 1,106 
Profit (loss) before income tax$(257)$118 $157 $(51)$(33)$(178)$— $(211)
Nine Months Ended September 30, 2020
Net interest income$629 $616 $304 $(29)$1,520 $6 $64 $1,590 
Other operating income283 176 743 101 1,303 (45)(51)1,207 
Total operating income912 792 1,047 72 2,823 (39)13 2,797 
Expected credit losses /
provision for credit losses		188 283 129 — 600 240 — 840 
724 509 918 72 2,223 (279)13 1,957 
Operating expenses1,888 439 644 324 3,295 (191)13 3,117 
Profit (loss) before income tax$(1,164)$70 $274 $(252)$(1,072)$(88)$— $(1,160)
Balances at end of period:
Total assets$56,728 $38,096 $136,478 $1,565 $232,867 $(31,921)$— $200,946 
Total loans, net23,821 25,852 14,122 — 63,795 (1,682)3,212 65,325 
Goodwill— 358 — — 358 100 — 458 
Total deposits48,477 39,736 51,566 — 139,779 (5,198)15,747 150,328 
Nine Months Ended September 30, 2019
Net interest income$791 $628 $414 $(56)$1,777 $10 $(182)$1,605 
Other operating income293 187 648 13 1,141 (18)189 1,312 
Total operating income1,084 815 1,062 (43)2,918 (8)7 2,917 
Expected credit losses /
provision for credit losses		86 34 (17)— 103 89 6 198 
998 781 1,079 (43)2,815 (97)1 2,719 
Operating expenses1,289 427 627 112 2,455 174 1 2,630 
Profit (loss) before income tax$(291)$354 $452 $(155)$360 $(271)$— $89 
Balances at end of period:
Total assets$52,334 $36,968 $130,708 $2,505 $222,515 $(37,755)$— $184,760 
Total loans, net23,908 26,459 18,808 — 69,175 (1,965)3,450 70,660 
Goodwill693 358 — — 1,051 191 — 1,242 
Total deposits43,974 25,975 34,015 — 103,964 (4,036)19,873 119,801 
(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.