Strategic Initiatives

3 Months Ended

Mar. 31, 2021

Restructuring and Related Activities [Abstract]

As discussed in our 2020 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. Our Restructuring Plan also includes streamlining our functional and operations support model by removing duplication and reducing 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 largely over the two year period of 2020-2021 of approximately $520-$590 million ($390-$450 million after-tax). The following table presents a summary of the total pre-tax charges we expect to incur by reportable segment:


	Expected Charges in Connection with Restructuring Plan
	Minimum		Maximum
	(in millions)
Wealth and Personal Banking	$	50	$	56
Commercial Banking	10		14
Global Banking and Markets	115		135
Corporate Center(1)	345		385
Total	$	520	$	590

(1)Includes restructuring charges primarily related to lease impairment and other related costs, support service project costs and severance costs associated with certain centralized activities and functions.

Throughout 2020 and into the first quarter of 2021, we continued to progress our Restructuring Plan, including consolidation of our wholesale and retail middle and back office functions, each under a single operations structure, simplification of our support service functions and the exit or transfer of certain derivative contracts. In 2020, we also completed the consolidation of our retail branch network and the creation of our Wealth and Personal Banking business. During the three months ended March 31, 2021, we recorded pre-tax charges in connection with our Restructuring Plan totaling $18 million compared with pre-tax charges totaling $109 million during the three months ended March 31, 2020. In total, we have recorded $298 million of pre-tax charges in connection with our Restructuring Plan. We remain committed to our multi-year strategic plan to re-profile our business, and continue to explore strategic options with respect to our retail operations to focus on our high net worth client base and wealth management products.

The following table summarizes the changes in the liability associated with our Restructuring Plan during the three months ended March 31, 2021 and 2020:


	Severance and Other Employee Costs(1)		Lease Termination and Associated Costs(2)		Other(3)		Total
	(in millions)












Three Months Ended March 31, 2021
Restructuring liability at beginning of period	$	10	$	23	$	—	$	33
Restructuring costs accrued during the period	—		—		2		2
Restructuring costs paid during the period	(8)		(1)		(2)		(11)
Restructuring liability at end of period	$	2	$	22	$	—	$	24

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). The majority of these costs were reported in the Wealth and Personal Banking and the Global Banking and Markets business segments. Not included in these costs are allocated severance costs from HSBC Technology & Services ("HTSU") discussed further below.

(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.

(3)Primarily includes professional fees, which are included in other expenses in the consolidated statement of income (loss).

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 2019). As a result, we recorded impairment charges during the first quarter of 2020 to write-down the lease right-of-use ("ROU") assets, net of estimated sublease income, by $52 million (which was increased to $67 million during the fourth quarter of 2020) and to write-down the leasehold improvement assets associated with these branches by $16 million based on their estimated remaining useful lives. The branches targeted for exit were closed by the end of the second quarter of 2020. 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.

In addition, during the first quarter of 2021, we recorded $4 million of trading losses associated with the continued exit of certain derivative contracts as part of our Restructuring Plan. These losses are included in trading revenue in the consolidated statement of income (loss) and were reported in the Global Banking and Markets business segment. During the first quarter of 2021, as part of our Restructuring Plan, we also continued to transfer interest rate derivative contracts associated with Fixed Income activities to HSBC Bank plc. These activities are being consolidated in and operated from HSBC Bank plc to better utilize HSBC Group's global scale, which allows us to record revenue as a business introducer and hold fewer assets on our balance sheet. Transfers of interest rate derivative contracts with a notional value of $14.8 billion were completed during the first quarter of 2021 with the remainder of these contracts with a current notional value of up to $59.8 billion expected to be completed during the remainder of 2021. The transferred derivatives were substantially fully collateralized which resulted in an immaterial impact on our consolidated balance sheet.

Our Restructuring Plan also resulted in costs being allocated to us from HTSU, primarily severance costs and support service project costs, which are reflected in support services from HSBC affiliates in the consolidated statement of income (loss). During the first quarter of 2021, we recorded $12 million of allocated costs from HTSU related to restructuring activities compared with $8 million of allocated costs during the first quarter of 2020. These costs were reported in the Corporate Center business segment.

HSBC Group Restructuring Separate from the charges related to our Restructuring Plan as detailed above, during the first quarter of 2021, we also recorded $7 million of allocated costs from other HSBC affiliates related to the HSBC Group's restructuring activities, primarily support service project costs and severance costs. These costs are reflected in support services from HSBC affiliates in the consolidated statement of income (loss) and were reported in the Corporate Center business segment.