ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 86-1052062 | |
(State of incorporation) | (I.R.S. Employer Identification No.) | |
1421 W. Shure Drive, Suite 100, Arlington Heights, IL | 60004 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | o | Accelerated filer | o | Non-accelerated filer | x | Smaller reporting company | o | Emerging growth company | o |
(Do not check if a smaller reporting company) |
Part/Item No | ||
Part I | Page | |
Item 1. | Financial Statements (Unaudited): | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations: | |
Item 3. | ||
Item 4. | ||
Part II | Page | |
Item 1. | ||
Item 5. | ||
Item 6. | ||
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Interest income | $ | 86 | $ | 286 | $ | 193 | $ | 628 | |||||||
Interest expense on debt held by: | |||||||||||||||
Non-affiliates | 58 | 94 | 120 | 201 | |||||||||||
HSBC affiliates | 11 | 52 | 39 | 105 | |||||||||||
Interest expense | 69 | 146 | 159 | 306 | |||||||||||
Net interest income | 17 | 140 | 34 | 322 | |||||||||||
Provision for credit losses | — | 12 | — | 49 | |||||||||||
Net interest income after provision for credit losses | 17 | 128 | 34 | 273 | |||||||||||
Other revenues: | |||||||||||||||
Derivative related income (expense) | 1 | 3 | 3 | (112 | ) | ||||||||||
Gain on debt designated at fair value and related derivatives | 4 | 16 | 16 | 40 | |||||||||||
Servicing and other fees from (to) HSBC affiliates | — | 2 | (27 | ) | 6 | ||||||||||
Lower of amortized cost or fair value adjustment on receivables held for sale | 58 | (56 | ) | 171 | (111 | ) | |||||||||
Gain (loss) on sale of real estate secured receivables | (2 | ) | 423 | 615 | 423 | ||||||||||
Other income | 2 | 4 | 9 | 13 | |||||||||||
Total other revenues | 63 | 392 | 787 | 259 | |||||||||||
Operating expenses: | |||||||||||||||
Salaries and employee benefits | 10 | 34 | 36 | 72 | |||||||||||
Occupancy and equipment expenses, net | 5 | 4 | 7 | 10 | |||||||||||
Real estate owned expenses | — | 2 | 1 | 5 | |||||||||||
Support services from HSBC affiliates | 21 | 38 | 44 | 80 | |||||||||||
Provision for securities litigation liability | — | 575 | — | 575 | |||||||||||
Other expenses | 25 | 60 | 40 | 109 | |||||||||||
Total operating expenses | 61 | 713 | 128 | 851 | |||||||||||
Income (loss) from continuing operations before income tax | 19 | (193 | ) | 693 | (319 | ) | |||||||||
Income tax expense (benefit) | 2 | (63 | ) | 258 | (119 | ) | |||||||||
Income (loss) from continuing operations | 17 | (130 | ) | 435 | (200 | ) | |||||||||
Discontinued operations: | |||||||||||||||
Income (loss) from discontinued operations before income tax | (3 | ) | (2 | ) | 3 | (9 | ) | ||||||||
Income tax expense (benefit) | (1 | ) | 2 | 1 | (1 | ) | |||||||||
Income (loss) from discontinued operations | (2 | ) | (4 | ) | 2 | (8 | ) | ||||||||
Net income (loss) | $ | 15 | $ | (134 | ) | $ | 437 | $ | (208 | ) |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Net income (loss) | $ | 15 | $ | (134 | ) | $ | 437 | $ | (208 | ) | |||||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Net change in unrealized gains (losses), net of tax, on: | |||||||||||||||
Fair value option debt attributable to credit spread | — | — | (5 | ) | — | ||||||||||
Derivatives designated as cash flow hedges | — | 7 | — | 15 | |||||||||||
Pension and postretirement benefit plan adjustments | (9 | ) | (2 | ) | (10 | ) | (3 | ) | |||||||
Other comprehensive income (loss), net of tax | (9 | ) | 5 | (15 | ) | 12 | |||||||||
Total comprehensive income (loss) | $ | 6 | $ | (129 | ) | $ | 422 | $ | (196 | ) |
HSBC Finance Corporation |
June 30, 2017 | December 31, 2016 | ||||||
(in millions, except share data) | |||||||
Assets | |||||||
Cash | $ | 50 | $ | 128 | |||
Interest bearing deposits with banks | — | 1,500 | |||||
Securities purchased under agreements to resell | 5,269 | 2,392 | |||||
Receivables held for sale (including $428 million and $750 million at June 30, 2017 and December 31, 2016, respectively, collateralizing long-term debt) | 1,346 | 5,674 | |||||
Real estate owned | 19 | 31 | |||||
Deferred income taxes, net | 1,662 | 2,897 | |||||
Bank owned life insurance | 823 | 817 | |||||
Other assets | 1,149 | 427 | |||||
Assets of discontinued operations | 1 | 16 | |||||
Total assets | $ | 10,319 | $ | 13,882 | |||
Liabilities | |||||||
Debt: | |||||||
Due to affiliates (including $487 million and $485 million at June 30, 2017 and December 31, 2016, respectively, carried at fair value) | $ | 799 | $ | 3,300 | |||
Long-term debt (including $250 million and $1.3 billion at June 30, 2017 and December 31, 2016, respectively, carried at fair value and $191 million and $404 million at June 30, 2017 and December 31, 2016, respectively, collateralized by receivables) | 3,071 | 4,340 | |||||
Total debt | 3,870 | 7,640 | |||||
Derivative related liabilities | — | 12 | |||||
Liability for postretirement benefits | 127 | 129 | |||||
Other liabilities | 473 | 610 | |||||
Liabilities of discontinued operations | 34 | 57 | |||||
Total liabilities | 4,504 | 8,448 | |||||
Equity | |||||||
Redeemable preferred stock: | |||||||
Series C ($0.01 par value, 1,000 shares authorized; 1,000 shares issued and outstanding at June 30, 2017 and December 31, 2016) | 1,000 | 1,000 | |||||
Common equity: | |||||||
Common stock ($0.01 par value, 100 shares authorized; 68 shares issued and outstanding at June 30, 2017 and December 31, 2016) | — | — | |||||
Additional paid-in capital | 23,093 | 23,138 | |||||
Accumulated deficit | (18,268 | ) | (18,728 | ) | |||
Accumulated other comprehensive income (loss) | (10 | ) | 24 | ||||
Total common equity | 4,815 | 4,434 | |||||
Total equity | 5,815 | 5,434 | |||||
Total liabilities and equity | $ | 10,319 | $ | 13,882 |
HSBC Finance Corporation |
Six Months Ended June 30, | 2017 | 2016 | |||||
(in millions) | |||||||
Preferred stock | |||||||
Balance at beginning of period | $ | 1,000 | $ | 1,575 | |||
Redemption of Series B preferred stock | — | (575 | ) | ||||
Balance at end of period | 1,000 | 1,000 | |||||
Common equity | |||||||
Common stock | |||||||
Balance at beginning and end of period | — | — | |||||
Additional paid-in capital | |||||||
Balance at beginning of period | 23,138 | 23,245 | |||||
Dividends on preferred stock | (43 | ) | (63 | ) | |||
Employee benefit plans, including transfers and other | (2 | ) | 1 | ||||
Balance at end of period | 23,093 | 23,183 | |||||
Accumulated deficit | |||||||
Balance at beginning of period, as previously reported | (18,728 | ) | (18,199 | ) | |||
Reclassification to accumulated other comprehensive income (loss) of cumulative effect adjustment to initially apply new accounting guidance for fair value option debt, net of tax | 19 | — | |||||
Cumulative effect adjustment to initially apply new accounting guidance for previously unrecognized tax benefits on share based plans, net of tax | 4 | — | |||||
Balance at beginning of period, adjusted | (18,705 | ) | (18,199 | ) | |||
Net income (loss) | 437 | (208 | ) | ||||
Balance at end of period | (18,268 | ) | (18,407 | ) | |||
Accumulated other comprehensive income (loss) | |||||||
Balance at beginning of period, as previously reported | 24 | 14 | |||||
Reclassification from accumulated deficit of cumulative effect adjustment to initially apply new accounting guidance for fair value option debt, net of tax | (19 | ) | — | ||||
Balance at beginning of period, adjusted | 5 | 14 | |||||
Other comprehensive income (loss) | (15 | ) | 12 | ||||
Balance at end of period | (10 | ) | 26 | ||||
Total common equity at end of period | 4,815 | 4,802 | |||||
Total equity at end of period | $ | 5,815 | $ | 5,802 |
HSBC Finance Corporation |
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) | |||||||
Six Months Ended June 30, | 2017 | 2016 | |||||
(in millions) | |||||||
Cash flows from operating activities | |||||||
Net income (loss) | $ | 437 | $ | (208 | ) | ||
Income (loss) from discontinued operations | 2 | (8 | ) | ||||
Income (loss) from continuing operations | 435 | (200 | ) | ||||
Adjustments to reconcile income (loss) from continuing operations to net cash used in operating activities: | |||||||
Provision for credit losses | — | 49 | |||||
Lower of amortized cost or fair value adjustment on receivables held for sale | (171 | ) | 111 | ||||
Gain on sale of real estate secured receivables | (615 | ) | (423 | ) | |||
Provision for securities litigation liability | — | 575 | |||||
Mark-to-market on debt designated at fair value and related derivatives | — | (13 | ) | ||||
Foreign exchange and derivative movements on long-term debt and net change in non-fair value option related derivative assets and liabilities | 42 | 114 | |||||
Net change in other assets | 513 | (102 | ) | ||||
Net change in other liabilities | (137 | ) | (28 | ) | |||
Other, net | 20 | 8 | |||||
Cash provided by operating activities – continuing operations | 87 | 91 | |||||
Cash used in operating activities – discontinued operations | (6 | ) | (26 | ) | |||
Cash provided by operating activities | 81 | 65 | |||||
Cash flows from investing activities | |||||||
Net change in securities purchased under agreements to resell | (2,877 | ) | (47 | ) | |||
Net change in interest bearing deposits with banks | 1,500 | — | |||||
Receivables: | |||||||
Net collections | 231 | 962 | |||||
Proceeds from sales of receivables | 4,863 | 4,667 | |||||
Proceeds from sales of real estate owned | 29 | 74 | |||||
Sales of properties and equipment, net | — | 2 | |||||
Cash provided by investing activities – continuing operations | 3,746 | 5,658 | |||||
Cash provided by investing activities – discontinued operations | — | — | |||||
Cash provided by investing activities | 3,746 | 5,658 | |||||
HSBC Finance Corporation |
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Continued) | |||||||
Six Months Ended June 30, | 2017 | 2016 | |||||
(in millions) | |||||||
Cash flows from financing activities | |||||||
Debt: | |||||||
Net change in due to affiliates | (2,503 | ) | (501 | ) | |||
Long-term debt retired | (1,332 | ) | (4,439 | ) | |||
Debt prepayment fees | (28 | ) | — | ||||
Redemption of preferred stock | — | (575 | ) | ||||
Dividends | (43 | ) | (63 | ) | |||
Cash used in financing activities – continuing operations | (3,906 | ) | (5,578 | ) | |||
Cash used in financing activities – discontinued operations | — | — | |||||
Cash used in financing activities | (3,906 | ) | (5,578 | ) | |||
Net change in cash | (79 | ) | 145 | ||||
Cash at beginning of period(1) | 135 | 136 | |||||
Cash at end of period(2) | $ | 56 | $ | 281 | |||
Supplemental Noncash Investing and Capital Activities: | |||||||
Fair value of properties added to real estate owned | $ | 16 | $ | 44 | |||
Transfer of receivables to held for sale | — | 293 |
(1) | Cash at beginning of period includes $7 million and $12 million for discontinued operations at January 1, 2017 and 2016, respectively. |
(2) | Cash at end of period includes $6 million and $10 million for discontinued operations at June 30, 2017 and 2016, respectively. |
HSBC Finance Corporation |
Note | Page | Note | Page | |||
1 | 8 | |||||
2 | 9 | |||||
3 | 10 | |||||
4 | 11 | |||||
5 | 12 | |||||
6 | 13 | |||||
7 |
1. | Organization and Basis of Presentation |
HSBC Finance Corporation |
2. | Receivables Held for Sale |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Real estate secured receivables held for sale: | |||||||
First lien | $ | 1,302 | $ | 4,699 | |||
Second lien | 44 | 975 | |||||
Total real estate secured receivables held for sale(1)(2) | $ | 1,346 | $ | 5,674 |
(1) | At June 30, 2017 and December 31, 2016, receivables held for sale includes $428 million and $750 million, respectively, of closed-end real estate secured receivables which are part of a collateralized funding transaction. These receivables will be sold when they are contractually released as collateral under the public trust and become available for sale. See Note 10, "Variable Interest Entities," for further discussion of our collateralized funding transactions. |
(2) | At June 30, 2017 and December 31, 2016, contractually delinquent real estate secured receivables held for sale includes $172 million and $235 million, respectively, that are in the process of foreclosure. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Unpaid principal balance at the time of sale | $ | 621 | $ | 4,722 | $ | 4,984 | $ | 4,722 | |||||||
Aggregate cash consideration received | $ | 556 | $ | 4,667 | $ | 4,863 | $ | 4,667 | |||||||
Aggregate carrying value at the time of sale | 554 | 4,219 | 4,219 | 4,219 | |||||||||||
Transaction costs | 4 | 25 | 29 | 25 | |||||||||||
Gain (loss) on sale of real estate secured receivables | $ | (2 | ) | $ | 423 | $ | 615 | $ | 423 |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Real estate secured receivables held for sale at beginning of period | $ | 1,911 | $ | 8,185 | $ | 5,674 | $ | 8,265 | |||||||
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value(1)(2) | — | 63 | — | 293 | |||||||||||
Real estate secured receivable sales | (554 | ) | (4,219 | ) | (4,219 | ) | (4,219 | ) | |||||||
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale subsequent to initial transfer to held for sale | 58 | (54 | ) | 171 | (105 | ) | |||||||||
Carrying value of real estate secured receivables held for sale transferred to real estate owned ("REO") | (6 | ) | (20 | ) | (17 | ) | (34 | ) | |||||||
Carrying value of real estate secured receivables held for sale settled through short sale | (7 | ) | (10 | ) | (15 | ) | (18 | ) | |||||||
Change in real estate secured receivable balance, including collections | (56 | ) | (149 | ) | (248 | ) | (386 | ) | |||||||
Real estate secured receivables held for sale at end of period(3) | $ | 1,346 | $ | 3,796 | $ | 1,346 | $ | 3,796 |
(1) | During the three and six months ended June 30, 2016, the initial lower of amortized cost or fair value adjustment recorded on receivables transferred into held for sale totaled $8 million and $25 million, respectively. |
(2) | Amount includes any accrued interest associated with the receivable. |
(3) | Real estate secured receivables held for sale in the table above are presented net of the valuation allowance. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Balance at beginning of period | $ | 61 | $ | 86 | $ | 174 | $ | 13 | |||||||
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period | — | 2 | — | 6 | |||||||||||
Increase (decrease) in valuation allowance resulting from changes in fair value | (55 | ) | 62 | (163 | ) | 130 | |||||||||
Change in valuation allowance for collections, charged-off, transferred to REO or short sale | (3 | ) | — | (8 | ) | 1 | |||||||||
Balance at end of period | $ | 3 | $ | 150 | $ | 3 | $ | 150 |
HSBC Finance Corporation |
Lower of Amortized Cost or Fair Value Adjustments Associated With | |||||||||||
(Income)/Expense | Fair Value | Settlement(1) | Total | ||||||||
(in millions) | |||||||||||
Three Months Ended June 30, 2017: | |||||||||||
Lower of amortized cost or fair value adjustment recorded through other revenues(2) | $ | (55 | ) | $ | (3 | ) | $ | (58 | ) | ||
Total lower of amortized cost or fair value adjustment | $ | (55 | ) | $ | (3 | ) | $ | (58 | ) | ||
Three Months Ended June 30, 2016: | |||||||||||
Lower of amortized cost or fair value adjustments recorded as a component of: | |||||||||||
Provision for credit losses(3) | $ | 6 | $ | — | $ | 6 | |||||
Other revenues: | |||||||||||
Initial lower of amortized cost or fair value adjustment(4) | 2 | — | 2 | ||||||||
Subsequent to initial transfer to held for sale | 62 | (8 | ) | 54 | |||||||
Lower of amortized cost or fair value adjustment recorded through other revenues | 64 | (8 | ) | 56 | |||||||
Total lower of amortized cost or fair value adjustment | $ | 70 | $ | (8 | ) | $ | 62 | ||||
Six Months Ended June 30, 2017: | |||||||||||
Lower of amortized cost or fair value adjustment recorded through other revenues(2) | $ | (163 | ) | $ | (8 | ) | $ | (171 | ) | ||
Total lower of amortized cost or fair value adjustment | $ | (163 | ) | $ | (8 | ) | $ | (171 | ) | ||
Six Months Ended June 30, 2016: | |||||||||||
Lower of amortized cost or fair value adjustments recorded as a component of: | |||||||||||
Provision for credit losses(3) | $ | 19 | $ | — | $ | 19 | |||||
Other revenues: | |||||||||||
Initial lower of amortized cost or fair value adjustment(4) | 6 | — | 6 | ||||||||
Subsequent to initial transfer to held for sale | 130 | (25 | ) | 105 | |||||||
Lower of amortized cost or fair value adjustment recorded through other revenues | 136 | (25 | ) | 111 | |||||||
Total lower of amortized cost or fair value adjustment | $ | 155 | $ | (25 | ) | $ | 130 |
(1) | Reflects receivable settlements due to either receivable payoffs (including short sales) or transfers of receivables to REO and reflects either a reversal of the non-credit fair value adjustment previously recorded on these receivables or an additional lower of amortized cost or fair value adjustment required at the time of settlement. |
(2) | As all of our receivables are classified as held for sale at June 30, 2017 and December 31, 2016, for the three and six months ended June 30, 2017 and for all future periods, any lower of amortized cost or fair value adjustments will relate to either changes in fair value subsequent to classification as held for sale or settlements of receivables as discussed above. |
(3) | Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to credit factors which are recorded as provision for credit losses in the consolidated statement of income (loss). |
(4) | Represents the portion of the initial lower of amortized cost or fair value adjustment attributable to non-credit factors which are recorded as a component of total other revenues in the consolidated statement income (loss) as it reflects the impact on value caused by current marketplace conditions including changes in interest rates. |
HSBC Finance Corporation |
3. | Troubled Debt Restructures and Nonperforming Receivables |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Carrying value | $ | 794 | $ | 1,691 | |||
Unpaid principal balance(1) | 973 | 2,323 |
(1) | At June 30, 2017 and December 31, 2016, the unpaid principal balance reflected above includes $160 million and $271 million, respectively, which have received a reduction in the unpaid principal balance as part of an account management action. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Average balance of TDR Loans | $ | 1,046 | $ | 5,654 | $ | 1,250 | $ | 6,589 | |||||||
Interest income recognized on TDR Loans | 13 | 93 | 33 | 250 |
Accruing Receivables | Nonaccrual Receivables(1) | Total | |||||||||
(in millions) | |||||||||||
At June 30, 2017 | $ | 1,099 | $ | 247 | $ | 1,346 | |||||
At December 31, 2016 | 5,293 | 381 | 5,674 |
(1) | Nonaccrual receivables are all receivables which are 90 or more days contractually delinquent as well as second lien receivables (regardless of delinquency status) where the first lien receivable that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged such that the contractual delinquency status has been reset to current. If a re-aged receivable subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual. Nonaccrual receivables do not include receivables totaling $183 million and $252 million at June 30, 2017 and December 31, 2016, respectively, which are less than 90 days contractually delinquent and not accruing interest. |
HSBC Finance Corporation |
Six Months Ended June 30, | 2017 | 2016 | |||||
(in millions) | |||||||
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period | $ | 14 | $ | 41 | |||
Interest income that was recorded on nonaccrual receivables during the period | 2 | 9 |
4. | Credit Loss Reserves |
Real Estate Secured | |||||||||||
First Lien | Second Lien | Total | |||||||||
(in millions) | |||||||||||
Three Months Ended June 30, 2016: | |||||||||||
Credit loss reserve rollforward: | |||||||||||
Credit loss reserve balances at beginning of period | $ | 109 | $ | 163 | $ | 272 | |||||
Provision for credit losses(1) | 9 | 3 | 12 | ||||||||
Net charge-offs: | |||||||||||
Charge-offs(1)(2) | (16 | ) | (16 | ) | (32 | ) | |||||
Recoveries | — | 2 | 2 | ||||||||
Total net charge-offs | (16 | ) | (14 | ) | (30 | ) | |||||
Credit loss reserve balance at end of period | $ | 102 | $ | 152 | $ | 254 | |||||
Six Months Ended June 30, 2016: | |||||||||||
Credit loss reserve rollforward: | |||||||||||
Credit loss reserve balance at beginning of period | $ | 137 | $ | 174 | $ | 311 | |||||
Provision for credit losses(1) | 32 | 17 | 49 | ||||||||
Net charge-offs: | |||||||||||
Charge-offs(1)(2) | (69 | ) | (42 | ) | (111 | ) | |||||
Recoveries | 2 | 3 | 5 | ||||||||
Total net charge-offs | (67 | ) | (39 | ) | (106 | ) | |||||
Credit loss reserve balance at end of period | $ | 102 | $ | 152 | $ | 254 | |||||
Reserve components: | |||||||||||
Collectively evaluated for impairment | $ | 35 | $ | 27 | $ | 62 | |||||
Individually evaluated for impairment(3) | 57 | 125 | 182 | ||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 10 | — | 10 | ||||||||
Total credit loss reserves | $ | 102 | $ | 152 | $ | 254 | |||||
Receivables held for investment: | |||||||||||
Collectively evaluated for impairment | $ | 5,735 | $ | 1,048 | $ | 6,783 | |||||
Individually evaluated for impairment(3) | 511 | 598 | 1,109 | ||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 240 | 28 | 268 | ||||||||
Total receivables held for investment | $ | 6,486 | $ | 1,674 | $ | 8,160 |
HSBC Finance Corporation |
(1) | The provision for credit losses and charge-offs for real estate secured receivables during the three and six months ended June 30, 2016 included $6 million and$19 million, respectively, related to the initial lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale. See Note 2, "Receivables Held for Sale," for additional information. |
(2) | For collateral dependent receivables that were transferred to held for sale, existing credit loss reserves at the time of transfer were recognized as a charge-off. We transferred to held for sale certain real estate secured receivables during the three and six months ended June 30, 2016 and, accordingly, we recognized the existing credit loss reserves on these receivables as additional charge-off totaling $4 million and $24 million, respectively. |
(3) | These amounts represent TDR Loans for which we evaluated reserves using a discounted cash flow methodology. Each loan was individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis was then applied to these groups of TDR Loans. The receivable balance above excluded TDR Loans held for investment that were carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $213 million at June 30, 2016. The reserve component above excluded credit loss reserves totaling $9 million at June 30, 2016 for TDR Loans held for investment that were carried at the lower of amortized cost or fair value of the collateral less cost to sell. |
5. | Fair Value Option |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Fixed rate debt accounted for under FVO reported in: | |||||||
Long-term debt | $ | 250 | $ | 1,317 | |||
Due to affiliates | 487 | 485 | |||||
Total fixed rate debt accounted for under FVO | $ | 737 | $ | 1,802 | |||
Unpaid principal balance of fixed rate debt accounted for under FVO(1) | $ | 665 | $ | 1,712 |
(1) | Balance includes a foreign currency translation adjustment relating to our foreign denominated FVO debt which decreased the debt balance by $11 million at June 30, 2017 and decreased the debt balance by $310 million at December 31, 2016. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Mark-to-market on debt designated at fair value(1): | |||||||||||||||
Interest rate component | $ | 8 | $ | 12 | $ | 26 | $ | 18 | |||||||
Credit risk component(2) | — | 8 | — | 19 | |||||||||||
Total mark-to-market on debt designated at fair value | 8 | 20 | 26 | 37 | |||||||||||
Mark-to-market on the related derivatives(1)(3) | (11 | ) | (15 | ) | (26 | ) | (24 | ) | |||||||
Net realized gains on the related derivatives(1) | 7 | 11 | 16 | 27 | |||||||||||
Gain on debt designated at fair value and related derivatives | $ | 4 | $ | 16 | $ | 16 | $ | 40 |
(1) | The derivatives associated with debt designated at fair value are economic hedges but do not qualify for hedge accounting. See Note 6, "Derivative Financial Instruments," for additional discussion of these non-qualifying hedges. |
HSBC Finance Corporation |
(2) | As discussed below and more fully in Note 13, "New Accounting Pronouncements," beginning January 1, 2017, the fair value movement on fair value option debt attributable to our credit spreads is recorded in common equity as a component of other comprehensive income (loss). For the three and six months ended June 30, 2017, the fair value movement on fair value option debt attributable to our credit spreads was a gain of less than $1 million and loss of $8 million, respectively. |
(3) | Mark-to-market on debt designated at fair value and related derivatives excludes market value changes due to fluctuations in foreign currency exchange rates. Foreign currency translation gains (losses) recorded in derivative related income (expense) associated with debt designated at fair value was a loss of $51 million and a gain of $20 million for the three months ended June 30, 2017 and 2016, respectively, and a loss of $72 million and a loss of $46 million for the six months ended June 30, 2017 and 2016, respectively. Offsetting gains (losses) recorded in derivative related income (expense) associated with the related derivatives was a gain of $51 million and a loss of $20 million for the three months ended June 30, 2017 and 2016, respectively and a gain of $72 million and a gain of $46 million for the six months ended June 30, 2017 and 2016, respectively. |
6. | Derivative Financial Instruments |
HSBC Finance Corporation |
June 30, 2017 | December 31, 2016 | ||||||||||||||
Derivative Financial Assets | Derivative Financial Liabilities | Derivative Financial Assets | Derivative Financial Liabilities | ||||||||||||
(in millions) | |||||||||||||||
Derivatives(1) | |||||||||||||||
Derivatives accounted for as cash flow hedges associated with debt: | |||||||||||||||
Currency swaps | $ | — | $ | (47 | ) | $ | — | $ | (58 | ) | |||||
Cash flow hedges | — | (47 | ) | — | (58 | ) | |||||||||
Non-qualifying hedge activities: | |||||||||||||||
Derivatives associated with debt carried at fair value: | |||||||||||||||
Cross currency interest rate swaps | 18 | (16 | ) | 15 | (286 | ) | |||||||||
Derivatives associated with debt carried at fair value | 18 | (16 | ) | 15 | (286 | ) | |||||||||
Total derivatives | 18 | (63 | ) | 15 | (344 | ) | |||||||||
Less: Gross amounts offset in the balance sheet(2) | (18 | ) | 63 | (15 | ) | 332 | |||||||||
Net amounts of derivative financial assets and liabilities presented in the balance sheet(3) | $ | — | $ | — | $ | — | $ | (12 | ) |
(1) | All of our derivatives are bilateral over-the-counter derivatives. |
(2) | Represents the netting of derivative receivable and payable balances for the same counterparty under an enforceable netting agreement. Gross amounts offset in the balance sheet includes cash collateral paid of $50 million at June 30, 2017 and $317 million at December 31, 2016. At June 30, 2017 and December 31, 2016, we did not have any financial instrument collateral received/posted. |
(3) | At June 30, 2017 and December 31, 2016, we had not received any cash not subject to an enforceable master netting agreement. |
HSBC Finance Corporation |
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) | Gain (Loss) Reclassed From AOCI into Income (Effective Portion) | Location of Gain (Loss) Recognized in Income on the Derivative(Ineffective Portion) | Gain (Loss) Recognized In Income on Derivative (Ineffective Portion) | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||
(in millions) | (in millions) | (in millions) | |||||||||||||||||||||||||
Three Months Ended June 30, | |||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | 7 | Interest expense | $ | — | $ | — | Derivative related income (expense) | $ | — | $ | — | |||||||||||||
Currency swaps | — | (1 | ) | Interest expense | — | (4 | ) | Derivative related income (expense) | 1 | 1 | |||||||||||||||||
Total | $ | — | $ | 6 | $ | — | $ | (4 | ) | $ | 1 | $ | 1 | ||||||||||||||
Six Months Ended June 30, | |||||||||||||||||||||||||||
Interest rate swaps | $ | — | $ | 18 | Interest expense | $ | — | $ | — | Derivative related income (expense) | $ | — | $ | — | |||||||||||||
Currency swaps | — | (1 | ) | Interest expense | — | (7 | ) | Derivative related income (expense) | 3 | 5 | |||||||||||||||||
Total | $ | — | $ | 17 | $ | — | $ | (7 | ) | $ | 3 | $ | 5 |
Location of Gain (Loss) Recognized in Income on Derivative | Amount of Gain (Loss) Recognized in Derivative Related Income (Expense) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in millions) | ||||||||||||||||
Cross currency interest rate contracts | Gain on debt designated at fair value and related derivatives | $ | (4 | ) | $ | (4 | ) | $ | (10 | ) | $ | 3 | ||||
Total | $ | (4 | ) | $ | (4 | ) | $ | (10 | ) | $ | 3 |
HSBC Finance Corporation |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Derivatives designated as hedging instruments: | |||||||
Currency swaps | $ | 203 | $ | 203 | |||
Non-qualifying hedges: | |||||||
Derivatives associated with debt carried at fair value: | |||||||
Cross currency interest rate swaps | 216 | 1,562 | |||||
Total | $ | 419 | $ | 1,765 |
7. | Accumulated Other Comprehensive Income (Loss) |
2017 | 2016 | ||||||
(in millions) | |||||||
Three Months Ended June 30, | |||||||
Unrealized gains (losses) on fair value option debt attributable to credit: | |||||||
Balance at beginning and end of period | $ | (24 | ) | $ | — | ||
Unrealized gains (losses) on cash flow hedging instruments: | |||||||
Balance at beginning of period | — | (7 | ) | ||||
Other comprehensive income for period: | |||||||
Net gains arising during period, net of tax of $- million and $2 million, respectively | — | 4 | |||||
Reclassification adjustment for losses realized in net income, net of tax of $- million and $1 million, respectively(1) | — | 3 | |||||
Total other comprehensive income for period | — | 7 | |||||
Balance at end of period | — | — | |||||
Pension and postretirement benefit plan liability: | |||||||
Balance at beginning of period | 23 | 28 | |||||
Other comprehensive income for period: | |||||||
Reclassification adjustment for gains realized in net income, net of tax of $(5) million and $- million, respectively(2) | (9 | ) | (2 | ) | |||
Total other comprehensive income for period | (9 | ) | (2 | ) | |||
Balance at end of period | 14 | 26 | |||||
Total accumulated other comprehensive income (loss) at end of period | $ | (10 | ) | $ | 26 | ||
HSBC Finance Corporation |
2017 | 2016 | ||||||
(in millions) | |||||||
Six Months Ended June 30, | |||||||
Unrealized gains (losses) on fair value option debt attributable to credit: | |||||||
Balance at beginning of period, as previously reported | $ | — | $ | — | |||
Cumulative effect adjustment to initially apply new accounting guidance for fair value option debt attributable to credit, net of tax of $(11) million and $- million, respectively(3) | (19 | ) | — | ||||
Balance at beginning of period, adjusted | (19 | ) | — | ||||
Other comprehensive loss for period: | |||||||
Net loss arising during period, net of tax of $(3) million and $- million, respectively | (5 | ) | — | ||||
Total other comprehensive loss for period | (5 | ) | — | ||||
Balance at end of period | (24 | ) | — | ||||
Unrealized gains (losses) on cash flow hedging instruments: | |||||||
Balance at beginning of period | — | (15 | ) | ||||
Other comprehensive income for period: | |||||||
Net gains arising during period, net of tax of $- million and $6 million, respectively | — | 11 | |||||
Reclassification adjustment for losses realized in net income, net of tax of $- million and $3 million, respectively(1) | — | 4 | |||||
Total other comprehensive income for period | — | 15 | |||||
Balance at end of period | — | — | |||||
Pension and postretirement benefit plan liability: | |||||||
Balance at beginning of period | 24 | 29 | |||||
Other comprehensive income for period: | |||||||
Reclassification adjustment for (gains) losses realized in net income, net of tax of $(6) million and $(1) million, respectively(2) | (10 | ) | (3 | ) | |||
Total other comprehensive income for period | (10 | ) | (3 | ) | |||
Balance at end of period | 14 | 26 | |||||
Total accumulated other comprehensive income (loss) at end of period | $ | (10 | ) | $ | 26 |
(1) | The amounts reclassified relate to currency swaps and are included as a component of interest expense in our consolidated statement of income (loss). |
(2) | The amounts reclassified are included as a component of salaries and employee benefits in our consolidated statement of income (loss). |
(3) | For information on the adoption of new accounting guidance related to fair value option debt attributable to our credit spreads, see Note 13, "New Accounting Pronouncements." |
8. | Pension and Other Postretirement Benefits |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Interest cost on projected benefit obligation | $ | 12 | $ | 12 | $ | 24 | $ | 24 | |||||||
Expected return on plan assets | (14 | ) | (14 | ) | (28 | ) | (28 | ) | |||||||
Amortization of net actuarial loss | 5 | 5 | 11 | 12 | |||||||||||
Administrative costs | 1 | 1 | 2 | 2 | |||||||||||
Pension expense | $ | 4 | $ | 4 | $ | 9 | $ | 10 |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Interest cost | $ | 1 | $ | 1 | $ | 2 | $ | 2 | |||||||
Amortization of reduction in liability resulting from plan amendment | (1 | ) | (1 | ) | (3 | ) | (3 | ) | |||||||
Gain from curtailment | (13 | ) | — | (13 | ) | — | |||||||||
Net periodic postretirement benefit cost | $ | (13 | ) | $ | — | $ | (14 | ) | $ | (1 | ) |
9. | Related Party Transactions |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
Assets: | |||||||
Cash | $ | 50 | $ | 128 | |||
Interest bearing deposits with banks | — | 1,500 | |||||
Securities purchased under agreements to resell(1) | 5,269 | 2,392 | |||||
Other assets | 98 | 114 | |||||
Total assets | $ | 5,417 | $ | 4,134 | |||
Liabilities: | |||||||
Due to affiliates(2) | $ | 799 | $ | 3,300 | |||
Other liabilities | 31 | 41 | |||||
Total liabilities | $ | 830 | $ | 3,341 |
(1) | Securities under an agreement to resell are purchased from HSBC Securities (USA) Inc. and generally have terms of 120 days or less. The collateral underlying the securities purchased under agreements to resell, however, is with an unaffiliated third party. Interest income recognized on these securities is reflected as interest income from HSBC affiliate in the table below. |
(2) | Due to affiliates includes amounts owed to HSBC and its subsidiaries as a result of direct debt issuances and excludes preferred stock. |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Income/(Expense): | |||||||||||||||
Interest income from HSBC affiliates | $ | 11 | $ | 2 | $ | 20 | $ | 3 | |||||||
Interest expense paid to HSBC affiliates(1) | (12 | ) | (69 | ) | (41 | ) | (144 | ) | |||||||
Net interest income (expense) | $ | (1 | ) | $ | (67 | ) | $ | (21 | ) | $ | (141 | ) | |||
Gain (loss) on FVO debt with affiliate | $ | (1 | ) | $ | 12 | $ | 2 | $ | 12 | ||||||
Servicing and other fees from (to) HSBC affiliates | — | 2 | (27 | ) | 6 | ||||||||||
Support services from HSBC affiliates | (21 | ) | (38 | ) | (44 | ) | (80 | ) | |||||||
Stock based compensation income (expense) with HSBC(2) | — | (1 | ) | (1 | ) | — |
(1) | Includes interest expense paid to HSBC affiliates for debt held by HSBC affiliates as well as net interest paid to or received from HSBC affiliates on risk management hedges related to non-affiliated debt. |
(2) | Employees may participate in one or more stock compensation plans sponsored by HSBC. These expenses are included in Salaries and employee benefits in our consolidated statement of income (loss). Certain employees are also eligible to participate in a defined benefit pension plan and other postretirement benefit plans sponsored by HSBC North America which are discussed in Note 8, "Pension and Other Postretirement Benefits." |
June 30, 2017 | December 31, 2016 | ||||||
(in millions) | |||||||
HSBC USA Inc. | $ | — | $ | 2,500 | |||
HSBC Holdings plc (includes $487 million and $485 million at June 30, 2017 and December 31, 2016 carried at fair value, respectively) | 799 | 800 | |||||
Due to affiliates | $ | 799 | $ | 3,300 |
HSBC Finance Corporation |
• | HSBC Securities (USA) Inc. ("HSI") provides transaction assistance for our receivable sales program, including receivable valuation and other transaction related activities. We pay HSI a fee for these services for each sales transaction based on the unpaid principal balance of the receivables sold. Fees paid to HSI for these services were less than $1 million during the three months ended June 30, 2017 and totaled $5 million during the six months ended June 30, 2017. Fees paid to HSI totaled $2 million during both the three and six months ended June 30, 2016. The fees paid to HSI for these services are reported as a component of Gain (loss) on sale of real estate secured receivables. |
• | Servicing activities for real estate secured receivables across North America are performed both by us and HSBC Bank USA. As a result, we receive servicing fees from HSBC Bank USA for services performed on their behalf and pay servicing fees to HSBC Bank USA for services performed on our behalf. The fees we receive from HSBC Bank USA are reported in Servicing and other fees from (to) HSBC affiliates. This includes fees received for servicing real estate secured receivables (with a carrying amount of $70 million and $559 million at June 30, 2017 and December 31, 2016, respectively) that we sold to HSBC Bank USA in 2003 and 2004. Fees we pay to HSBC Bank USA are reported in Support services from HSBC affiliates. |
• | We also provide various services to HSBC Bank USA, including processing activities and other operational and administrative support. Fees received for these services are included in Servicing and other fees from (to) HSBC affiliates. |
• | HSBC North America's technology and certain centralized support services including human resources, corporate affairs, risk management, legal, compliance, tax, finance and other shared services are centralized within HSBC Technology & Services (USA) Inc. ("HTSU"). HTSU also provides certain item processing and statement processing activities for us. The fees we pay HTSU for the centralized support services and processing activities are included in Support services from HSBC affiliates. We also receive fees from HTSU for providing certain administrative services to them as well as receiving rental revenue from HTSU for certain office space. The fees and rental revenue we receive from HTSU are included in Servicing and other fees from (to) HSBC affiliates. |
• | We use HSBC Global Services Limited, an HSBC affiliate located outside of the United States, to provide various support services to our operations including among other areas, customer service, systems, collection and accounting functions. The expenses related to these services are included in Support services from HSBC affiliates. |
• | Banking services and other miscellaneous services are provided by other subsidiaries of HSBC, including HSBC Bank USA, which are included in Support services from HSBC affiliates. |
HSBC Finance Corporation |
10. | Variable Interest Entities |
June 30, 2017 | December 31, 2016 | ||||||||||||||
Consolidated Assets | Consolidated Liabilities | Consolidated Assets | Consolidated Liabilities | ||||||||||||
(in millions) | |||||||||||||||
Real estate collateralized funding vehicles: | |||||||||||||||
Receivables held for sale | $ | 428 | $ | — | $ | 750 | $ | — | |||||||
Other liabilities | — | (6 | ) | — | (11 | ) | |||||||||
Long-term debt | — | 191 | — | 404 | |||||||||||
Total | $ | 428 | $ | 185 | $ | 750 | $ | 393 |
11. | Fair Value Measurements |
HSBC Finance Corporation |
| similarities between the asset or the liability under consideration and the asset or liability for which quotation is received; |
| collaboration of pricing by reference to other independent market data such as market transactions and relevant benchmark indices; |
| whether the security is traded in an active or inactive market; |
| consistency among different pricing sources; |
| the valuation approach and the methodologies used by the independent pricing sources in determining fair value; |
| the elapsed time between the date to which the market data relates and the measurement date; and |
| the manner in which the fair value information is sourced. |
June 30, 2017 | |||||||||||||||||||
Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
(in millions) | |||||||||||||||||||
Financial assets: | |||||||||||||||||||
Cash | $ | 50 | $ | 50 | $ | 50 | $ | — | $ | — | |||||||||
Securities purchased under agreements to resell | 5,269 | 5,269 | — | 5,269 | — | ||||||||||||||
Real estate secured receivables held for sale | 1,346 | 1,478 | — | — | 1,478 | ||||||||||||||
Due from affiliates | 98 | 98 | — | 98 | — | ||||||||||||||
Financial liabilities: | |||||||||||||||||||
Due to affiliates carried at fair value | 487 | 487 | — | 487 | — | ||||||||||||||
Due to affiliates not carried at fair value | 312 | 337 | — | 337 | — | ||||||||||||||
Long-term debt carried at fair value | 250 | 250 | — | 250 | — | ||||||||||||||
Long-term debt not carried at fair value | 2,821 | 3,166 | — | 3,166 | — |
HSBC Finance Corporation |
December 31, 2016 | |||||||||||||||||||
Carrying Value | Estimated Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
(in millions) | |||||||||||||||||||
Financial assets: | |||||||||||||||||||
Cash | $ | 128 | $ | 128 | $ | 128 | $ | — | $ | — | |||||||||
Interest bearing deposits with banks | 1,500 | 1,500 | 1,500 | — | — | ||||||||||||||
Securities purchased under agreements to resell | 2,392 | 2,392 | — | 2,392 | — | ||||||||||||||
Real estate secured receivables held for sale | 5,674 | 6,129 | — | — | 6,129 | ||||||||||||||
Due from affiliates | 114 | 114 | — | 114 | — | ||||||||||||||
Financial liabilities: | |||||||||||||||||||
Due to affiliates carried at fair value | 485 | 485 | — | 485 | — | ||||||||||||||
Due to affiliates not carried at fair value | 2,815 | 2,875 | — | 2,875 | — | ||||||||||||||
Long-term debt carried at fair value | 1,317 | 1,317 | — | 1,317 | — | ||||||||||||||
Long-term debt not carried at fair value | 3,023 | 3,359 | — | 3,359 | — | ||||||||||||||
Derivative financial liabilities | 12 | 12 | — | 12 | — |
Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Netting(1) | Total of Assets (Liabilities) Measured at Fair Value | |||||||||||||||
(in millions) | |||||||||||||||||||
June 30, 2017: | |||||||||||||||||||
Derivative financial assets: | |||||||||||||||||||
Currency swaps | $ | — | $ | 18 | $ | — | $ | — | $ | 18 | |||||||||
Derivative netting | — | — | — | (18 | ) | (18 | ) | ||||||||||||
Total derivative financial assets | — | 18 | — | (18 | ) | — | |||||||||||||
Total assets | $ | — | $ | 18 | $ | — | $ | (18 | ) | $ | — | ||||||||
Due to affiliates carried at fair value | $ | — | $ | (487 | ) | $ | — | $ | — | $ | (487 | ) | |||||||
Long-term debt carried at fair value | — | (250 | ) | — | — | (250 | ) | ||||||||||||
Derivative related liabilities: | |||||||||||||||||||
Currency swaps | — | (63 | ) | — | — | (63 | ) | ||||||||||||
Derivative netting | — | — | — | 63 | 63 | ||||||||||||||
Total derivative related liabilities | — | (63 | ) | — | 63 | — | |||||||||||||
Total liabilities | $ | — | $ | (800 | ) | $ | — | $ | 63 | $ | (737 | ) | |||||||
December 31, 2016: | |||||||||||||||||||
Derivative financial assets: | |||||||||||||||||||
Currency swaps | $ | — | $ | 15 | $ | — | $ | — | $ | 15 | |||||||||
Derivative netting | — | — | — | (15 | ) | (15 | ) | ||||||||||||
Total derivative financial assets | — | 15 | — | (15 | ) | — | |||||||||||||
Total assets | $ | — | $ | 15 | $ | — | $ | (15 | ) | $ | — | ||||||||
Due to affiliates carried at fair value | $ | — | $ | (485 | ) | $ | — | $ | — | $ | (485 | ) | |||||||
Long-term debt carried at fair value | — | (1,317 | ) | — | — | (1,317 | ) | ||||||||||||
Derivative related liabilities: | |||||||||||||||||||
Currency swaps | — | (344 | ) | — | — | (344 | ) | ||||||||||||
Derivative netting | — | — | — | 332 | 332 | ||||||||||||||
Total derivative related liabilities | — | (344 | ) | — | 332 | (12 | ) | ||||||||||||
Total liabilities | $ | — | $ | (2,146 | ) | $ | — | $ | 332 | $ | (1,814 | ) |
HSBC Finance Corporation |
(1) | Represents counterparty and swap collateral netting which allow the offsetting of amounts relating to certain contracts when certain conditions are met. |
Non-Recurring Fair Value Measurements June 30, 2017 | Total Gains (Losses) for the Three Months Ended June 30, 2017 | Total Gains (Losses) for the Six Months Ended June 30, 2017 | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Receivables held for sale | $ | — | $ | — | $ | 1,346 | $ | 1,346 | $ | 58 | $ | 171 | |||||||||||
Real estate owned(1) | — | 20 | — | 20 | (1 | ) | (3 | ) | |||||||||||||||
Total assets at fair value on a non-recurring basis | $ | — | $ | 20 | $ | 1,346 | $ | 1,366 | $ | 57 | $ | 168 |
Non-Recurring Fair Value Measurements June 30, 2016 | Total Gains (Losses) for the Three Months Ended June 30, 2016 | Total Gains (Losses) for the Six Months Ended June 30, 2016 | |||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Receivables held for sale | $ | — | $ | 707 | $ | 3,089 | $ | 3,796 | $ | (62 | ) | $ | (130 | ) | |||||||||
Receivables held for investment carried at the lower of amortized cost or fair value of the collateral less cost to sell(2) | — | 268 | — | 268 | (5 | ) | (31 | ) | |||||||||||||||
Real estate owned(1) | — | 69 | — | 69 | (5 | ) | (10 | ) | |||||||||||||||
Total assets at fair value on a non-recurring basis | $ | — | $ | 1,044 | $ | 3,089 | $ | 4,133 | $ | (72 | ) | $ | (171 | ) |
(1) | Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value of the underlying asset unadjusted for transaction costs. |
(2) | Total gains (losses) for the three and six months ended June 30, 2016 include amounts recorded on receivables that were subsequently transferred to held for sale. |
HSBC Finance Corporation |
Fair Value | Range of Inputs | ||||||||||||||||||||
Financial Instrument Type | June 30, 2017 | Dec. 31, 2016 | Valuation Technique | Significant Unobservable Inputs | June 30, 2017 | December 31, 2016 | |||||||||||||||
(in millions) | |||||||||||||||||||||
Receivables held for sale | $ | 1,346 | $ | 5,674 | Third party appraisal valuation based on | Collateral loss severity rates(1) | 0 | % | - | 100% | 0 | % | - | 100% | |||||||
estimated loss severities, including collateral values, cash flows and | Expenses incurred through collateral disposition | 5 | % | - | 10% | 5 | % | - | 10% | ||||||||||||
market discount rate | Market discount rate | 4 | % | - | 14% | 4 | % | - | 14% |
(1) | At June 30, 2017 and December 31, 2016, the weighted average collateral loss severity rate was 44 percent and 51 percent, respectively, taking into consideration both expected net cash flows as well as current collateral values. |
HSBC Finance Corporation |
HSBC Finance Corporation |
13. | New Accounting Pronouncements |
• | Financial Instruments - Classification and Measurement of Financial Liabilities Measured Under the Fair Value Option In January 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standard Update ("ASU") which, for financial liabilities measured under the fair value option, requires recognizing the change in fair value attributable to our own credit in other comprehensive income (loss). We elected to early adopt this guidance, which required a cumulative effect adjustment to the consolidated balance sheet, resulting in a reclassification from retained earnings to accumulated other comprehensive income (loss) of an after tax loss of $19 million as of January 1, 2017. The adoption of this guidance did not require financial statements for periods prior to 2017 to be restated. |
• | Compensation - Stock Compensation In March 2016, the FASB issued an ASU that requires all excess tax benefits and tax deficiencies for share-based payment awards to be recorded within income tax expense (benefit) in the consolidated statement of income (loss) rather than directly to additional paid-in capital and for excess tax benefits to be classified as an operating activity in the consolidated statement of cash flows. The adoption of the guidance related to excess tax benefits for share-based payment awards resulted in a cumulative effect adjustment of $4 million which decreased the accumulated deficit as of January 1, 2017. |
• | Financial Instruments - Classification and Measurement (Excluding Financial Liabilities Measured Under the Fair Value Option) In January 2016, the FASB issued an ASU which changes aspects of its guidance on classification and measurement of financial instruments. The ASU requires equity investments (except those accounted for under the equity method or those that result in consolidation) to be measured at fair value with changes in fair value recognized in net income. Under a practicability exception, entities may measure equity investments that do not have readily determinable fair values at cost adjusted for changes in observable prices minus impairment. Under this exception, a qualitative assessment for impairment will be required and, if impairment exists, the carrying amount of the investments must be adjusted to their fair value and an impairment loss recognized in net income. Additionally, the ASU requires new disclosure related to equity investments and modifies certain disclosure requirements related to the fair value of financial instruments. The ASU is effective for all annual and interim periods beginning January 1, 2018 and the guidance should be applied by recording a cumulative effect adjustment to the balance sheet or, as it relates to equity investments without readily determinable fair values, prospectively. We currently do not expect the adoption of this guidance will have a material impact on our financial position or results of operations. |
• | Leases In February 2016, the FASB issued an ASU which requires a lessee to recognize a lease liability and a right-of-use asset on its balance sheet for all leases, including operating leases, with a term greater than 12 months. Lease classification |
HSBC Finance Corporation |
• | Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued an ASU that clarifies how certain cash receipts and cash payments should be classified in the statement of cash flows. Under the ASU, cash proceeds from the settlement of bank-owned life insurance policies should be classified as cash inflows from investing activities. The ASU is effective for all annual and interim periods beginning January 1, 2018 and is required to be applied retrospectively to all periods presented. The new guidance will result in a change in the classification in the statement of cash flows which we do not expect to be significant and will not have any impact on our financial position and results of operations. |
• | Compensation - Retirement Benefits In March 2017, the FASB issued an ASU that requires the service cost component of net periodic pension and postretirement benefit costs to be reported in the same line item as other employee compensation costs while the other components of net periodic pension and postretirement benefit costs are required to be reported in the statement of income separately from the service cost component. The ASU is effective for all annual and interim periods beginning January 1, 2018 and is required to be applied retrospectively. We currently do not expect the adoption of this guidance will have a material impact on our financial position or results of operations. |
HSBC Finance Corporation |
Forward-Looking Statements |
• | uncertain market and economic conditions, a decline in housing prices, unemployment levels, tighter credit conditions, changes in interest rates or a prolonged period of low or negative interest rates, the availability of liquidity, unexpected geopolitical events, changes in consumer confidence and consumer spending, and consumer perception as to the continuing availability of credit and price competition in the market segments we serve; |
• | changes in laws and regulatory requirements; |
• | the ability to deliver on our regulatory priorities; |
• | extraordinary government actions as a result of market turmoil; |
• | capital and liquidity requirements under Basel III, and Comprehensive Capital Analysis and Review ("CCAR"); |
• | changes in central banks' policies with respect to the provision of liquidity support to financial markets; |
• | disruption in our operations from the external environment arising from events such as natural disasters, terrorist attacks, global pandemics, or essential utility outages; |
• | a failure in or a breach of our operation or security systems or infrastructure, or those of third party servicers or vendors, including as a result of cyberattacks; |
• | the ability to successfully manage our risks; |
• | the ability to successfully implement changes to our operational practices as needed and/or required from time to time; |
• | damage to our reputation; |
• | the ability to retain key employees; |
• | losses suffered due to the negligence or misconduct of our employees or the negligence or misconduct on the part of employees of third parties; |
• | a failure in our internal controls; |
• | our ability to meet our funding requirements; |
• | adverse changes to our or our affiliates' credit ratings; |
• | changes to our mortgage servicing and foreclosure practices; |
• | continued heightened regulatory scrutiny with respect to residential mortgage servicing practices, with particular focus on loss mitigation, foreclosure prevention and outsourcing; |
• | heightened regulatory and government enforcement scrutiny of financial institutions; |
HSBC Finance Corporation |
• | changes in bankruptcy laws to allow for principal reductions or other modifications to mortgage loan terms; |
• | our ability to wind down substantially all of our real estate secured receivable portfolio in a timely manner; |
• | adverse changes in factors which impact the fair value of receivables held for sale, such as home prices, default rates, estimated costs to obtain properties and investors' required returns; |
• | additional costs and expenses due to representations and warranties made in connection with receivable sale transactions that may require us to repurchase the loans and/or indemnify private investors for losses due to breaches of these representations and warranties; |
• | the possibility of incorrect assumptions or estimates in our financial statements, including reserves related to litigation, deferred tax assets and the fair value of certain assets and liabilities; |
• | the possibility of incorrect interpretations, application of or changes in tax laws to which we are subject; |
• | additional financial contribution requirements to the HSBC North America Holdings Inc. ("HSBC North America") pension plan; |
• | the potential impact of legal, regulatory and policy changes effecting financial institutions and the global economy as a result of the new Administration in the U.S.; and |
• | the other risk factors and uncertainties described under Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Form 10-K"). |
Executive Overview |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(dollars are in millions) | |||||||||||||||
Income (loss) from continuing operations | $ | 17 | $ | (130 | ) | $ | 435 | $ | (200 | ) | |||||
Return on average assets, annualized | .7 | % | (2.5 | )% | 7.3 | % | (1.9 | )% | |||||||
Return on average common equity, annualized | (.3 | ) | (13.5 | ) | 16.5 | (10.9 | ) | ||||||||
Net interest margin, annualized(1) | .91 | 3.17 | .75 | 3.51 | |||||||||||
Efficiency ratio(1)(2) | 76.3 | 134.0 | 15.6 | 146.5 |
(1) | See "Results of Operations" for a detailed discussion of trends in our net interest margin. |
(2) | Ratio of total costs and expenses from continuing operations to net interest income and other revenues from continuing operations. |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Income (loss) from continuing operations before income tax, as reported | $ | 19 | $ | (193 | ) | $ | 693 | $ | (319 | ) | |||||
Fair value movement on fair value option debt attributable to credit spread(1) | — | (8 | ) | — | (19 | ) | |||||||||
Impact of non-qualifying hedge portfolio | — | (2 | ) | — | 117 | ||||||||||
Interest income related to the resolution of an IRS appeal matter | (37 | ) | — | (37 | ) | — | |||||||||
File review costs associated with the receivable sales program | 8 | 16 | 16 | 38 | |||||||||||
Provision for securities litigation liability | — | 575 | — | 575 | |||||||||||
Adjusted performance from continuing operations before income tax(2) | $ | (10 | ) | $ | 388 | $ | 672 | $ | 392 |
(1) | As discussed more fully in Note 13, "New Accounting Pronouncements," in the accompanying consolidated financial statements, beginning January 1, 2017, the fair value movement on fair value option debt attributable to our credit spreads is recorded in common equity as a component of other comprehensive income. |
(2) | Represents a non-U.S. GAAP financial measure. |
HSBC Finance Corporation |
Balance Sheet Review |
Decrease from | |||||||||||||||||
March 31, 2017 | December 31, 2016 | ||||||||||||||||
June 30, 2017 | $ | % | $ | % | |||||||||||||
(dollars are in millions) | |||||||||||||||||
First lien real estate secured receivable | $ | 1,302 | $ | (558 | ) | (30.0 | )% | $ | (3,397 | ) | (72.3 | )% | |||||
Second lien real estate secured receivable | 44 | (7 | ) | (13.7 | ) | (931 | ) | (95.5 | ) | ||||||||
Total receivables held for sale | $ | 1,346 | $ | (565 | ) | (29.6 | )% | $ | (4,328 | ) | (76.3 | )% |
Results of Operations |
HSBC Finance Corporation |
2017 | %(1) | 2016 | %(1) | ||||||||||
(dollars are in millions) | |||||||||||||
Three Months Ended June 30, | |||||||||||||
Interest income | $ | 86 | 4.41 | % | $ | 286 | 6.48 | % | |||||
Interest expense | 69 | 3.50 | 146 | 3.31 | |||||||||
Net interest income | $ | 17 | .91 | % | $ | 140 | 3.17 | % | |||||
Six Months Ended June 30, | |||||||||||||
Interest income | $ | 193 | 4.27 | % | $ | 628 | 6.85 | % | |||||
Interest expense | 159 | 3.52 | 306 | 3.34 | |||||||||
Net interest income | $ | 34 | .75 | % | $ | 322 | 3.51 | % |
(1) | % Columns: comparison to average interest-earning assets. |
| Average receivable levels decreased during the three and six months ended June 30, 2017 as a result of receivable sales and continued liquidation of the receivable portfolio. |
| Interest expense decreased during the three and six months ended June 30, 2017 as a result of lower average borrowings, partially offset by the impact of higher average rates due to the maturing of certain lower rate long-term borrowings and rate increases on certain variable rate debt since June 2016. |
| Overall yields on total average interest earning assets decreased during the three and six months ended June 30, 2017 driven by a significant shift in mix of total average interest earning assets to a higher percentage of short-term investments, which have significantly lower yields than our receivable portfolio, as a result of receivable sales, partially offset during the six months ended June 30, 2017 by the impact of higher receivable yields due to lower levels of nonaccrual receivables. Receivable yields were lower during the three months ended June 30, 2017 as nonaccrual receivables represented a significantly larger portion of our receivable portfolio as compared to the year-ago period as a result of receivable sales. |
HSBC Finance Corporation |
Three Months Ended June 30, 2017 | Six Months Ended June 30, 2017 | ||||||||||||
(dollars are in millions) | |||||||||||||
Net interest income/net interest margin from prior year period | $ | 140 | 3.17 | % | $ | 322 | 3.51 | % | |||||
Impact to net interest income resulting from: | |||||||||||||
Lower asset levels | (157 | ) | (316 | ) | |||||||||
Receivable yields | (3 | ) | 4 | ||||||||||
Asset mix | (86 | ) | (175 | ) | |||||||||
Interest income related to the resolution of an IRS appeals matter | 37 | 37 | |||||||||||
Investment income | 9 | 17 | |||||||||||
Cost of funds (rate and volume) | 77 | 147 | |||||||||||
Other | — | (2 | ) | ||||||||||
Net interest income/net interest margin for current year period | $ | 17 | .91 | % | $ | 34 | .75 | % |
HSBC Finance Corporation |
Increase (Decrease) | ||||||||||||||
2017 | 2016 | Amount | % | |||||||||||
(dollars are in millions) | ||||||||||||||
Three Months Ended June 30, | ||||||||||||||
Derivative related income (expense) | $ | 1 | $ | 3 | $ | (2 | ) | (66.7 | )% | |||||
Gain on debt designated at fair value and related derivatives | 4 | 16 | (12 | ) | (75.0 | ) | ||||||||
Servicing and other fees from (to) HSBC affiliates | — | 2 | (2 | ) | (100.0 | ) | ||||||||
Lower of amortized cost or fair value adjustment on receivables held for sale | 58 | (56 | ) | 114 | * | |||||||||
Gain (loss) on sale of real estate secured receivables | (2 | ) | 423 | (425 | ) | * | ||||||||
Other income | 2 | 4 | (2 | ) | (50.0 | ) | ||||||||
Total other revenues | $ | 63 | $ | 392 | $ | (329 | ) | (83.9 | )% | |||||
Six Months Ended June 30, | ||||||||||||||
Derivative related income (expense) | $ | 3 | $ | (112 | ) | $ | 115 | * | ||||||
Gain on debt designated at fair value and related derivatives | 16 | 40 | (24 | ) | (60.0 | ) | ||||||||
Servicing and other fees from (to) HSBC affiliates | (27 | ) | 6 | (33 | ) | * | ||||||||
Lower of amortized cost or fair value adjustment on receivables held for sale | 171 | (111 | ) | 282 | * | |||||||||
Gain (loss) on sale of real estate secured receivables | 615 | 423 | 192 | 45.4 | ||||||||||
Other income | 9 | 13 | (4 | ) | (30.8 | ) | ||||||||
Total other revenues | $ | 787 | $ | 259 | $ | 528 | * |
* | Not meaningful |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Net realized losses | $ | — | $ | (8 | ) | $ | — | $ | (26 | ) | |||||
Mark-to-market on derivatives in our non-qualifying hedge portfolio | — | 10 | — | (91 | ) | ||||||||||
Hedge accounting ineffectiveness | 1 | 1 | 3 | 5 | |||||||||||
Total derivative related income (expense) | $ | 1 | $ | 3 | $ | 3 | $ | (112 | ) |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Income (expense) | |||||||||||||||
Initial lower of amortized cost or fair value adjustment recorded on receivables transferred to held for sale during the period | $ | — | $ | (2 | ) | $ | — | $ | (6 | ) | |||||
Lower of amortized cost or fair value adjustment subsequent to the initial transfer to held for sale | 58 | (54 | ) | 171 | (105 | ) | |||||||||
Lower of amortized cost or fair value adjustment | $ | 58 | $ | (56 | ) | $ | 171 | $ | (111 | ) |
HSBC Finance Corporation |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Unpaid principal balance at the time of sale | $ | 621 | $ | 4,722 | $ | 4,984 | $ | 4,722 | |||||||
Aggregate cash consideration received | $ | 556 | $ | 4,667 | $ | 4,863 | $ | 4,667 | |||||||
Aggregate carrying value at the time of sale | 554 | 4,219 | 4,219 | 4,219 | |||||||||||
Transaction costs | 4 | 25 | 29 | 25 | |||||||||||
Gain (loss) on sale of real estate secured receivables | $ | (2 | ) | $ | 423 | $ | 615 | $ | 423 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Balance at beginning of period | $ | 63 | $ | 31 | $ | 53 | $ | 36 | |||||||
Increase in liability recorded through earnings(1) | 2 | 12 | 13 | 7 | |||||||||||
Realized losses | (3 | ) | — | (4 | ) | — | |||||||||
Balance at end of period | $ | 62 | $ | 43 | $ | 62 | $ | 43 |
(1) | The portion of the increase in the reserve for repurchase liabilities arising at the time of a receivable sale transaction are included as a component of gain (loss) on sale of real estate secured receivables and are not reflected in other income. |
HSBC Finance Corporation |
Increase (Decrease) | ||||||||||||||
2017 | 2016 | Amount | % | |||||||||||
(dollars are in millions) | ||||||||||||||
Three Months Ended June 30, | ||||||||||||||
Salaries and employee benefits | $ | 10 | $ | 34 | $ | (24 | ) | (70.6 | )% | |||||
Occupancy and equipment expenses, net | 5 | 4 | 1 | 25.0 | ||||||||||
Real estate owned expenses | — | 2 | (2 | ) | (100.0 | ) | ||||||||
Support services from HSBC affiliates | 21 | 38 | (17 | ) | (44.7 | ) | ||||||||
Provision for securities litigation liability | — | 575 | (575 | ) | (100.0 | ) | ||||||||
Other expenses | 25 | 60 | (35 | ) | (58.3 | ) | ||||||||
Total operating expenses | $ | 61 | $ | 713 | $ | (652 | ) | (91.4 | )% | |||||
Six Months Ended June 30, | ||||||||||||||
Salaries and employee benefits | $ | 36 | $ | 72 | $ | (36 | ) | (50.0 | )% | |||||
Occupancy and equipment expenses, net | 7 | 10 | (3 | ) | (30.0 | ) | ||||||||
Real estate owned expenses | 1 | 5 | (4 | ) | (80.0 | ) | ||||||||
Support services from HSBC affiliates | 44 | 80 | (36 | ) | (45.0 | ) | ||||||||
Provision for securities litigation liability | — | 575 | (575 | ) | (100.0 | ) | ||||||||
Other expenses | 40 | 109 | (69 | ) | (63.3 | ) | ||||||||
Total operating expenses | $ | 128 | $ | 851 | $ | (723 | ) | (85.0 | )% |
HSBC Finance Corporation |
2017 | 2016 | ||||||||||||
(dollars are in millions) | |||||||||||||
Three Months Ended June 30, | |||||||||||||
Tax expense (benefit) at the U.S. Federal statutory income tax rate | $ | 7 | 35.0 | % | $ | (68 | ) | (35.0 | )% | ||||
Increase (decrease) in rate resulting from: | |||||||||||||
State and local taxes, net of Federal benefit | 2 | * | (5 | ) | (2.6 | ) | |||||||
Adjustment with respect to tax for prior periods(1) | — | — | 4 | 2.1 | |||||||||
Uncertain tax positions | (2 | ) | * | 6 | 2.9 | ||||||||
Other non-deductible/non-taxable items | (3 | ) | * | (1 | ) | (.5 | ) | ||||||
Other | (2 | ) | * | 1 | .5 | ||||||||
Total income tax expense (benefit) | $ | 2 | 10.5 | % | $ | (63 | ) | (32.6 | )% | ||||
Six Months Ended June 30, | |||||||||||||
Tax expense (benefit) at the U.S. Federal statutory income tax rate | $ | 243 | 35.0 | % | $ | (112 | ) | (35.0 | )% | ||||
Increase (decrease) in rate resulting from: | |||||||||||||
State and local taxes, net of Federal benefit | 20 | 3.0 | (8 | ) | (2.5 | ) | |||||||
Adjustment with respect to tax for prior periods(1) | — | — | 22 | 6.9 | |||||||||
Uncertain tax positions(2) | (2 | ) | (.3 | ) | (12 | ) | (3.8 | ) | |||||
Other non-deductible/non-taxable items | (5 | ) | (.7 | ) | (3 | ) | (.9 | ) | |||||
Other | 2 | .2 | (6 | ) | (2.0 | ) | |||||||
Total income tax expense (benefit) | $ | 258 | 37.2 | % | $ | (119 | ) | (37.3 | )% |
* | Due to the small tax adjustments as well as the low level of income from continuing operations before tax, the percentages are not meaningful for the three months ended June 30, 2017. |
(1) | For the three and six months ended June 30, 2016, the amount includes a $7 million adjustment related to the Federal audit of the 2013 tax year. The amount for the six months ended June 30, 2016, was also impacted by a reversal of approximately $15 million associated with an out of period adjustment to our deferred tax asset balance. |
(2) | For the six months ended June 30, 2017 and June 30, 2016, the amount primarily relates to the conclusion of certain State audits. |
Credit Quality |
HSBC Finance Corporation |
June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||
(dollars are in millions) | |||||||||||
Dollars of contractual delinquency(1) | $ | 285 | $ | 361 | $ | 457 | |||||
Delinquency ratio | 21.18 | % | 18.89 | % | 8.05 | % |
(1) | The receivables held for sale balances reflect the lower of amortized cost or fair value for the receivable. |
June 30, 2017 | March 31, 2017 | December 31, 2016 | |||||||||
(in millions) | |||||||||||
Nonaccrual receivables held for sale(1) | $ | 247 | $ | 323 | $ | 381 | |||||
Real estate owned | 19 | 26 | 31 | ||||||||
Total nonperforming assets | $ | 266 | $ | 349 | $ | 412 |
(1) | The receivables held for sale balances reflect the lower of amortized cost or fair value for the receivable. Nonaccrual receivables reflect all receivables which are 90 or more days contractually delinquent as well as second lien receivables (regardless of delinquency status) where the first lien receivable that we own or service is 90 or more days contractually delinquent. Nonaccrual receivables do not include receivables totaling $183 million, $197 million and $252 million at June 30, 2017, March 31, 2017 and December 31, 2016, respectively, which are less than 90 days contractually delinquent and not accruing interest. In addition, nonaccrual receivables do not include receivables which have made qualifying payments and have been re-aged and the contractual delinquency status reset to current as such activity, in our judgment, evidences continued payment probability. If a re-aged receivable subsequently experiences payment default and becomes 90 or more days contractually delinquent, it will be reported as nonaccrual. |
HSBC Finance Corporation |
• | Modification – Management action that results in a change to the terms and conditions of the receivable without changing the delinquency status of the receivable. Modifications include changes to the terms of the receivable and have historically included, but were not limited to, a change in interest rate, extension of the amortization period, reduction in payment amount and partial forgiveness or deferment of principal. Beginning May 1, 2017, we revised our modification program to only include changes in interest rates. |
• | Collection Re-age – Management action that results in the resetting of the contractual delinquency status of an account to current but does not involve any changes to the original terms and conditions of the receivable. If an account which has been re-aged subsequently experiences a payment default, it will again become contractually delinquent. We use collection re-aging as an account and customer management tool in an effort to increase the cash flow from our account relationships, and accordingly, the application of this tool is subject to complexities, variations and changes from time to time. |
• | Modification Re-age – Management action that results in a change to the terms and conditions of the receivable, either temporarily or permanently, and also resets the contractual delinquency status of an account to current as discussed above. If an account which has been re-aged subsequently experiences a payment default, it will again become contractually delinquent. |
Number of Accounts | Outstanding Receivable Balance(1) | |||||
(accounts are in thousands) | (dollars are in millions) | |||||
June 30, 2017: | ||||||
Collection re-age only | 4.6 | $ | 348 | |||
Modification only | .4 | 24 | ||||
Modification re-age | 5.6 | 501 | ||||
Total receivables modified and/or re-aged(1) | 10.6 | $ | 873 | |||
March 31, 2017: | ||||||
Collection re-age only | 8.4 | $ | 539 | |||
Modification only | .7 | 33 | ||||
Modification re-age | 8.7 | 673 | ||||
Total receivables modified and/or re-aged(1) | 17.8 | $ | 1,245 | |||
December 31, 2016: | ||||||
Collection re-age only | 24.7 | $ | 991 | |||
Modification only | 2.1 | 76 | ||||
Modification re-age | 17.3 | 957 | ||||
Total receivables modified and/or re-aged(1) | 44.1 | $ | 2,024 |
(1) | The receivables balances reflect the lower of amortized cost or fair value for the receivable. |
HSBC Finance Corporation |
Number of Accounts | Outstanding Receivable Balance | ||||||||||||||||
Current or less than 30-days delinquent | 30- to 59-days delinquent | 60-days or more delinquent | Current or less than 30-days delinquent | 30- to 59-days delinquent | 60-days or more delinquent | ||||||||||||
June 30, 2017 | 67 | % | 8 | % | 25 | % | 65 | % | 8 | % | 27 | % | |||||
March 31, 2017 | 71 | 7 | 22 | 70 | 7 | 23 | |||||||||||
December 31, 2016 | 79 | 6 | 15 | 76 | 6 | 18 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in millions) | |||||||||||||||
Balance at beginning of period | $ | 1,245 | $ | 9,224 | $ | 2,024 | $ | 9,511 | |||||||
Additions due to an account management action(1) | 6 | 51 | 26 | 126 | |||||||||||
Payments(2) | (34 | ) | (222 | ) | (79 | ) | (490 | ) | |||||||
Net charge-offs(3) | — | (18 | ) | — | (62 | ) | |||||||||
Transfer to real estate owned | (2 | ) | (20 | ) | (10 | ) | (36 | ) | |||||||
Receivables held for sale that have subsequently been sold | (376 | ) | (3,738 | ) | (1,172 | ) | (3,738 | ) | |||||||
Change in lower of amortized cost or fair value on receivables held for sale | 34 | (48 | ) | 84 | (82 | ) | |||||||||
Balance at end of period | $ | 873 | $ | 5,229 | $ | 873 | $ | 5,229 |
(1) | Includes collection re-age only, modification only, and modification re-ages. |
(2) | Includes amounts received under a short sale whereby the property is sold by the borrower at a price which has been pre-negotiated with us and the borrower is released from further obligation. |
(3) | Amounts include the credit loss reserves existing at the time of transfer of receivables to held for sale during the period which are recognized as charge-off. Amounts also include the lower of amortized cost or fair value adjustment attributable to credit factors for receivables transferred to held for sale during the period. See Note 4, "Credit Loss Reserves," in the accompanying consolidated financial statements for further discussion. |
Number of Accounts Modified | Outstanding Receivable Balance at Time of Modification | |||||
(accounts are in thousands, dollars are in millions) | ||||||
Modifications(1)(2): | ||||||
Six months ended June 30, 2017 | .7 | $ | 66 | |||
Six months ended June 30, 2016 | 3.2 | 234 |
(1) | Includes all receivables modified during the six months ended June 30, 2017 and 2016 regardless of whether the receivable was also re-aged. |
(2) | If qualification criteria are met, receivable modification may occur on more than one occasion for the same account. For purposes of the table above, an account is only included in the modification totals once in an annual period and not for each separate modification in an annual period. |
HSBC Finance Corporation |
Percent of Total Real Estate Secured Receivables | |||||
June 30, 2017 | December 31, 2016 | ||||
New York | 10.2 | % | 9.0 | % | |
Florida | 7.5 | 5.9 | |||
Pennsylvania | 7.3 | 5.9 | |||
California | 6.2 | 8.7 | |||
Virginia | 6.0 | 4.4 | |||
Ohio | 5.1 | 5.3 |
Liquidity and Capital Resources |
HSBC Finance Corporation |
(in millions) | |||
2017 | $ | 177 | |
2018 | 254 | ||
2019 | 164 | ||
2020 | — | ||
2021 | 2,335 | ||
Thereafter | 141 | ||
Total | $ | 3,071 |
HSBC Finance Corporation |
Actual January 1 through June 30, 2017 | Estimated July 1 through December 31, 2017 (Minimum-Maximum) | Estimated Full Year 2017 (Minimum-Maximum) | |||||||||||||||||
(in billions) | |||||||||||||||||||
Funding needs: | |||||||||||||||||||
Unsecured debt maturities | $ | 1 | $ | — | - | $ | 1 | $ | 1 | - | $ | 2 | |||||||
Exercise call options on debt | 2 | — | - | — | 2 | - | 2 | ||||||||||||
Short-term investments | 1 | 1 | - | 2 | 2 | - | 3 | ||||||||||||
Total funding needs | $ | 4 | $ | 1 | - | $ | 3 | $ | 5 | - | $ | 7 | |||||||
Funding sources: | |||||||||||||||||||
Receivable sales | $ | 4 | $ | 1 | - | $ | 2 | $ | 5 | - | $ | 6 | |||||||
Other(1) | — | — | - | 1 | — | - | 1 | ||||||||||||
Total funding sources | $ | 4 | $ | 1 | - | $ | 3 | $ | 5 | - | $ | 7 |
(1) | Primarily reflects miscellaneous cash provided by operating activities. |
Fair Value |
| whether the pricing quotations differ substantially among independent pricing services; |
| whether the instrument is transacted in an active market with a quoted market price that is readily available; |
| the size of transactions occurring in an active market; |
| the level of bid-ask spreads; |
| a lack of pricing transparency due to, among other things, market liquidity; |
| whether only a few transactions are observed over a significant period of time; |
| whether the inputs to the valuation techniques can be derived from or corroborated with market data; and |
| whether significant adjustments are made to the observed pricing information or model output to determine the fair value. |
HSBC Finance Corporation |
Risk Management |
| Credit risk is the risk that financial loss arises from the failure of a customer or counterparty to meet its obligations under a contract; |
| Liquidity risk is the potential that an institution will be unable to meet its obligations as they become due because of inadequate cash flow or the inability to liquidate assets or obtain funding itself; |
| Market risk is the risk that movements in market factors, including interest rates and foreign currency exchange rates, will reduce our income or the value of our portfolios; |
| Interest rate risk is the potential reduction of net interest income due to mismatched pricing between assets and liabilities as well as losses in value due to rate movements; |
| Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events (including legal risk); |
| Compliance risk is the risk that we fail to observe the letter and spirit of all relevant laws, codes, rules, regulations and standards of good market practice causing us to incur fines, penalties and damage to our business and reputation (including financial crime and fraud risk); |
| Reputational risk is the risk arising from failure to meet stakeholder expectations as a result of any event, behavior, action or inaction, either by us, our employees, the HSBC Group or those with whom we are associated that may cause stakeholders to form a negative view of us. This might also result in financial or non-financial impacts, loss of confidence or other consequences; |
HSBC Finance Corporation |
| Strategic risk is the risk that the business will fail to identify, execute and react appropriately to opportunities and/or threats arising from changes in the market, some of which may emerge over a number of years such as changing economic and political circumstances, customer requirements, demographic trends, regulatory developments or competitor action; |
| Security risk is the risk to the business from terrorism, information security, incidents/disasters, cyber-attacks and groups hostile to HSBC interests; |
| Model risk is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. This occurs primarily for two reasons: 1) the model may produce inaccurate outputs when compared to the intended business use and design objective; and 2) the model could be used incorrectly; and |
| Pension risk is the risk of increased costs from the post-employment benefit plans that we have established for our employees. |
HSBC Finance Corporation |
Standard & Poor's Corporation | Moody's Investors Service | Fitch, Inc. | |||
Senior debt | A | Baa1 | A+ | ||
Senior subordinated debt | A- | Baa2 | A |
HSBC Finance Corporation |
Amount | % | |||||
(dollars are in millions) | ||||||
June 30, 2017: | ||||||
Estimated increase (decrease) in projected net interest expense: | ||||||
Resulting from a gradual 100 basis point increase in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter) | $ | (20 | ) | (20.9 | )% | |
Resulting from a gradual 100 basis point decrease in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter) | 20 | 20.9 | ||||
Resulting from an immediate 50 basis point decrease in the yield curve | 15 | 15.8 | ||||
December 31, 2016: | ||||||
Estimated increase (decrease) in projected net interest income: | ||||||
Resulting from a gradual 100 basis point increase in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter) | $ | 35 | 17.7 | % | ||
Resulting from a gradual 100 basis point decrease in the yield curve (reflects projected quarterly rate movements of 25 basis points at the beginning of each quarter) | (35 | ) | (17.7 | ) | ||
Resulting from an immediate 50 basis point decrease in the yield curve | (25 | ) | (12.7 | ) |
HSBC Finance Corporation |
HSBC Finance Corporation |
| The HSBC Group maintains several accounts in the United Kingdom for an Iranian-owned, U.K.-regulated financial institution. These accounts are generally no longer restricted under U.K. law, though HSBC maintains restrictions on the accounts as a matter of policy. Estimated gross revenue in the second quarter of 2017 on these accounts, which includes fees and/or commissions, was approximately $27,060. |
| The HSBC Group acts as the trustee and administrator for a pension scheme involving five employees of a U.S.-sanctioned Iranian bank in Hong Kong, one of whom joined the scheme during the second quarter of 2017. Under the rules of this scheme, the HSBC Group accepts contributions from the Iranian bank each month and allocates the funds into the pension accounts of the Iranian bank’s employees. The HSBC Group runs and operates this pension scheme in accordance with Hong Kong laws and regulations. Estimated gross revenue, which includes fees and/or commissions, generated by this pension scheme during the second quarter of 2017 was approximately $930. |
HSBC Finance Corporation |
3(i) | Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation's Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation's Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed November 30, 2010). | |
3(ii) | Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 20, 2017 (incorporated by reference to Exhibit 3.2 to HSBC Finance Corporation's Current Report on Form 8-K filed April 24, 2017). | |
12 | Statement of Computation of Ratio of Earnings to Fixed Charges. | |
31 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document(1) | |
101.SCH | XBRL Taxonomy Extension Schema Document(1) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document(1) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document(1) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document(1) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document(1) |
* | Schedules and exhibits are omitted pursuant to Item 601(b)(2) of Regulation S-K. HSBC Finance Corporation agrees to furnish supplementally a copy of any omitted schedules or exhibits to the Securities and Exchange Commission upon request. |
(1) | Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017, formatted in eXtensible Business Reporting Language ("XBRL") interactive data files: (i) the Consolidated Statement of Income (Loss) for the three and six months ended June 30, 2017 and 2016, (ii) the Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016, (iii) the Consolidated Balance Sheet as of June 30, 2017 and December 31, 2016, (iv) the Consolidated Statement of Changes in Equity for the six months ended June 30, 2017 and 2016, (iv) the Consolidated Statement of Cash Flows for the six months ended June 30, 2017 and 2016, and (v) the Notes to Consolidated Financial Statements. |
HSBC Finance Corporation |
Signatures |
HSBC FINANCE CORPORATION | ||
By: | /s/ MICHAEL A. REEVES | |
Michael A. Reeves | ||
Executive Vice President | ||
HSBC Finance Corporation |
3(i) | Amended and Restated Certificate of Incorporation of HSBC Finance Corporation effective as of December 15, 2004, as amended (incorporated by reference to Exhibit 3.1 of HSBC Finance Corporation's Current Report on Form 8-K filed June 22, 2005, Exhibit 3.1(b) to HSBC Finance Corporation's Current Report on Form 8-K filed December 19, 2005 and Exhibit 3.1 to HSBC Finance Corporation's Current Report on Form 8-K filed November 30, 2010). | |
3(ii) | Bylaws of HSBC Finance Corporation, as Amended and Restated effective April 20, 2017 (incorporated by reference to Exhibit 3.2 to HSBC Finance Corporation's Current Report on Form 8-K filed April 24, 2017). | |
12 | Statement of Computation of Ratio of Earnings to Fixed Charges. | |
31 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document(1) | |
101.SCH | XBRL Taxonomy Extension Schema Document(1) | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document(1) | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document(1) | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document(1) | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document(1) |
* | Schedules and exhibits are omitted pursuant to Item 601(b)(2) of Regulation S-K. HSBC Finance Corporation agrees to furnish supplementally a copy of any omitted schedules or exhibits to the Securities and Exchange Commission upon request. |
(1) | Pursuant to Rule 405 of Regulation S-T, includes the following financial information included in our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017, formatted in eXtensible Business Reporting Language ("XBRL") interactive data files: (i) the Consolidated Statement of Income (Loss) for the three and six months ended June 30, 2017 and 2016, (ii) the Consolidated Statement of Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016, (iii) the Consolidated Balance Sheet as of June 30, 2017 and December 31, 2016, (iv) the Consolidated Statement of Changes in Equity for the six months ended June 30, 2017 and 2016, (iv) the Consolidated Statement of Cash Flows for the six months ended June 30, 2017 and 2016, and (v) the Notes to Consolidated Financial Statements. |
Six Months Ended June 30, | 2017 | 2016 | |||||
(dollars are in millions) | |||||||
Income (loss) from continuing operations | $ | 435 | $ | (200 | ) | ||
Income tax expense (benefit) | 258 | (119 | ) | ||||
Income (loss) from continuing operations before income tax | 693 | (319 | ) | ||||
Fixed charges: | |||||||
Interest expense | 159 | 306 | |||||
Interest portion of rentals(1) | 2 | 2 | |||||
Total fixed charges | 161 | 308 | |||||
Total earnings (loss) from continuing operations as defined | $ | 854 | $ | (11 | ) | ||
Ratio of earnings (loss) to fixed charges | 5.30 | (.04 | ) |
(1) | Represents one-third of rentals, which approximates the portion representing interest. |
1. | I have reviewed this report on Form 10-Q of HSBC Finance Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ KATHRYN MADISON |
Kathryn Madison Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of HSBC Finance Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ MICHAEL A. REEVES |
Michael A. Reeves Executive Vice President and Chief Financial Officer |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation. |
/s/ KATHRYN MADISON |
Kathryn Madison Chief Executive Officer |
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of HSBC Finance Corporation. |
/s/ MICHAEL A. REEVES |
Michael A. Reeves Executive Vice President and Chief Financial Officer |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jul. 28, 2017 |
|
Document Documentand Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | HSBCFC | |
Entity Registrant Name | HSBC Finance Corp | |
Entity Central Index Key | 0000354964 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 68 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 15 | $ (134) | $ 437 | $ (208) |
Net change in unrealized gains (losses), net of tax, on: | ||||
Fair value option debt attributable to credit spread | 0 | 0 | (5) | 0 |
Derivatives designated as cash flow hedges | 0 | 7 | 0 | 15 |
Pension and postretirement benefit plan adjustments | (9) | (2) | (10) | (3) |
Other comprehensive income (loss), net of tax | (9) | 5 | (15) | 12 |
Total comprehensive income (loss) | $ 6 | $ (129) | $ 422 | $ (196) |
CONSOLIDATED BALANCE SHEET (UNAUDITED) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
---|---|---|---|---|---|---|
Assets | ||||||
Cash | $ 50 | $ 128 | ||||
Interest bearing deposits with banks | 0 | 1,500 | ||||
Securities purchased under agreements to resell | 5,269 | 2,392 | ||||
Receivables held for sale (including $428 million and $750 million at June 30, 2017 and December 31, 2016, respectively, collateralizing long-term debt) | [1],[2] | 1,346 | 5,674 | |||
Real estate owned | 19 | 31 | ||||
Deferred income taxes, net | 1,662 | 2,897 | ||||
Bank owned life insurance | 823 | 817 | ||||
Other assets | 1,149 | 427 | ||||
Assets of discontinued operations | 1 | 16 | ||||
Total assets | 10,319 | 13,882 | ||||
Debt: | ||||||
Due to affiliates (including $487 million and $485 million at June 30, 2017 and December 31, 2016, respectively, carried at fair value) | 799 | 3,300 | ||||
Long-term debt (including $250 million and $1.3 billion at June 30, 2017 and December 31, 2016, respectively, carried at fair value and $191 million and $404 million at June 30, 2017 and December 31, 2016, respectively, collateralized by receivables) | 3,071 | 4,340 | ||||
Total debt | 3,870 | 7,640 | ||||
Derivative related liabilities | 0 | 12 | ||||
Liability for postretirement benefits | 127 | 129 | ||||
Other liabilities | 473 | 610 | ||||
Liabilities of discontinued operations | 34 | 57 | ||||
Total liabilities | 4,504 | 8,448 | ||||
Common equity: | ||||||
Common stock ($0.01 par value, 100 shares authorized; 68 shares issued and outstanding at June 30, 2017 and December 31, 2016) | 0 | 0 | ||||
Additional paid-in capital | 23,093 | 23,138 | ||||
Accumulated deficit | (18,268) | (18,728) | ||||
Accumulated other comprehensive income (loss) | (10) | 24 | ||||
Total common equity | 4,815 | 4,434 | ||||
Total equity | 5,815 | 5,434 | ||||
Total liabilities and equity | 10,319 | 13,882 | ||||
Series C Preferred Stock [Member] | ||||||
Redeemable preferred stock: | ||||||
Series C ($0.01 par value, 1,000 shares authorized; 1,000 shares issued and outstanding at June 30, 2017 and December 31, 2016) | $ 1,000 | $ 1,000 | ||||
|
CONSOLIDATED BALANCE SHEET (UNAUDITED) (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Receivables, collateralizing long-term debt | $ 428 | $ 750 |
Due to affiliate, carried at fair value | 487 | 485 |
Long-term debt carried at fair value | 250 | 1,317 |
Long-term debt collateralized by receivables | $ 191 | $ 404 |
Common stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (shares) | 100 | 100 |
Common stock, shares issued (shares) | 68 | 68 |
Common stock, shares outstanding (shares) | 68 | 68 |
Series C Preferred Stock [Member] | ||
Redeemable preferred stock, shares authorized (shares) | 1,000 | 1,000 |
Redeemable preferred stock, par value (usd per share) | $ 0.01 | $ 0.01 |
Redeemable preferred stock, shares issued (shares) | 1,000 | 1,000 |
Redeemable preferred stock, shares outstanding (shares) | 1,000 | 1,000 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) - USD ($) $ in Millions |
Total |
Preferred stock |
Common stock |
Additional paid-in capital |
Accumulated deficit |
Accumulated other comprehensive income (loss) |
Adjustments for New Accounting Principle, Early Adoption [Member]
Accumulated deficit
|
Adjustments for New Accounting Principle, Early Adoption [Member]
Accumulated other comprehensive income (loss)
|
||
---|---|---|---|---|---|---|---|---|---|---|
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Cumulative effect adjustment to initially apply new accounting guidance | Accounting Standards Update 2016-01 [Member] | $ 0 | $ 0 | ||||||||
Cumulative effect adjustment to initially apply new accounting guidance | Accounting Standards Update 2016-09 [Member] | 0 | |||||||||
Balance at beginning of period (As Previously Reported [Member]) at Dec. 31, 2015 | $ (18,199) | $ 14 | ||||||||
Balance at beginning of period at Dec. 31, 2015 | $ 1,575 | $ 0 | $ 23,245 | (18,199) | 14 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Redemption of Series B preferred stock | (575) | |||||||||
Dividends on preferred stock | (63) | |||||||||
Employee benefit plans, including transfers and other | 1 | |||||||||
Net income (loss) | $ (208) | (208) | ||||||||
Other comprehensive income (loss) | 12 | 12 | ||||||||
Total equity at end of period at Jun. 30, 2016 | 5,802 | 1,000 | 0 | 23,183 | (18,407) | 26 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Total common shareholder's equity at end of period | 4,802 | |||||||||
Cumulative effect adjustment to initially apply new accounting guidance | [1] | (19) | ||||||||
Cumulative effect adjustment to initially apply new accounting guidance | Accounting Standards Update 2016-01 [Member] | 19 | $ (19) | ||||||||
Cumulative effect adjustment to initially apply new accounting guidance | Accounting Standards Update 2016-09 [Member] | $ 4 | |||||||||
Total common shareholder's equity at end of period | 4,434 | |||||||||
Balance at beginning of period (As Previously Reported [Member]) at Dec. 31, 2016 | (18,728) | 24 | ||||||||
Balance at beginning of period at Dec. 31, 2016 | 5,434 | 1,000 | 0 | 23,138 | (18,705) | 5 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Redemption of Series B preferred stock | 0 | |||||||||
Dividends on preferred stock | (43) | |||||||||
Employee benefit plans, including transfers and other | (2) | |||||||||
Net income (loss) | 437 | 437 | ||||||||
Other comprehensive income (loss) | (15) | (15) | ||||||||
Total equity at end of period at Jun. 30, 2017 | 5,815 | $ 1,000 | $ 0 | $ 23,093 | $ (18,268) | $ (10) | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Total common shareholder's equity at end of period | $ 4,815 | |||||||||
|
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) - USD ($) $ in Millions |
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|||||||||
Cash flows from operating activities | ||||||||||
Net income (loss) | $ 437 | $ (208) | ||||||||
Income (loss) from discontinued operations | 2 | (8) | ||||||||
Income (loss) from continuing operations | 435 | (200) | ||||||||
Adjustments to reconcile income (loss) from continuing operations to net cash used in operating activities: | ||||||||||
Provision for credit losses | 0 | 49 | [1] | |||||||
Lower of amortized cost or fair value adjustment on receivables held for sale | (171) | 111 | ||||||||
Gain on sale of real estate secured receivables | (615) | (423) | ||||||||
Provision for securities litigation liability | 0 | 575 | ||||||||
Mark-to-market on debt designated at fair value and related derivatives | 0 | (13) | ||||||||
Foreign exchange and derivative movements on long-term debt and net change in non-fair value option related derivative assets and liabilities | 42 | 114 | ||||||||
Net change in other assets | 513 | (102) | ||||||||
Net change in other liabilities | (137) | (28) | ||||||||
Other, net | 20 | 8 | ||||||||
Cash provided by operating activities – continuing operations | 87 | 91 | ||||||||
Cash used in operating activities – discontinued operations | (6) | (26) | ||||||||
Cash provided by operating activities | 81 | 65 | ||||||||
Cash flows from investing activities | ||||||||||
Net change in securities purchased under agreements to resell | (2,877) | (47) | ||||||||
Net change in interest bearing deposits with banks | 1,500 | 0 | ||||||||
Receivables: | ||||||||||
Net collections | 231 | 962 | ||||||||
Proceeds from sales of receivables | 4,863 | 4,667 | ||||||||
Proceeds from sales of real estate owned | 29 | 74 | ||||||||
Sales of properties and equipment, net | 0 | 2 | ||||||||
Cash provided by investing activities – continuing operations | 3,746 | 5,658 | ||||||||
Cash provided by investing activities – discontinued operations | 0 | 0 | ||||||||
Cash provided by investing activities | 3,746 | 5,658 | ||||||||
Debt: | ||||||||||
Net change in due to affiliates | (2,503) | (501) | ||||||||
Long-term debt retired | (1,332) | (4,439) | ||||||||
Debt prepayment fees | (28) | 0 | ||||||||
Redemption of preferred stock | 0 | (575) | ||||||||
Dividends | (43) | (63) | ||||||||
Cash used in financing activities – continuing operations | (3,906) | (5,578) | ||||||||
Cash used in financing activities – discontinued operations | 0 | 0 | ||||||||
Cash used in financing activities | (3,906) | (5,578) | ||||||||
Net change in cash | (79) | 145 | ||||||||
Cash at beginning of period | [2] | 135 | 136 | |||||||
Cash at end of period | [3] | 56 | 281 | |||||||
Supplemental Noncash Investing and Capital Activities: | ||||||||||
Fair value of properties added to real estate owned | 16 | 44 | ||||||||
Transfer of receivables to held for sale | $ 0 | $ 293 | ||||||||
|
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Parenthetical) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Statement of Cash Flows [Abstract] | ||||
Cash at beginning/end of period, discontinued operations | $ 6 | $ 7 | $ 10 | $ 12 |
Organization and Basis of Presentation |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2017 | ||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Organization and Basis of Presentation | Organization and Basis of Presentation HSBC Finance Corporation is a wholly owned subsidiary of HSBC North America Holdings Inc. ("HSBC North America"), which is an indirect, wholly-owned subsidiary of HSBC Holdings plc ("HSBC" and, together with its subsidiaries, "HSBC Group"). The accompanying unaudited interim consolidated financial statements of HSBC Finance Corporation and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods have been made. HSBC Finance Corporation and its subsidiaries may also be referred to in this Form 10-Q as "we," "us" or "our." These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 (the "2016 Form 10-K"). Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The consolidated financial statements have been prepared on the basis that we will continue as a going concern. Such assertion contemplates our receivable sales program, the significant losses recognized in recent years and the challenges we anticipate to our operating results under prevailing and forecasted economic and business conditions. HSBC continues to be fully committed and has the capacity to continue to provide the necessary capital and liquidity to fund continuing operations. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. At June 30, 2017, our consolidated balance sheet was impacted by a reclassification associated with an out of period adjustment that was recorded in the first quarter of 2017 which increased our current tax asset and reduced our deferred tax asset balance by $36 million. There was no impact to our consolidated statement of income (loss). Unless otherwise noted, information included in these notes to the consolidated financial statements relates to continuing operations for all periods presented. See Note 3, "Discontinued Operations," in our 2016 Form 10-K for further details of our discontinued operations. Interim results should not be considered indicative of results in future periods. We have one segment, Consumer, which consists of the run-off real estate secured receivable portfolio of our Consumer Lending and Mortgage Services businesses. As there are no reporting differences between our consolidated results and our segment results, we do not separately report segment results. In June 2017, we received an interest payment from the Internal Revenue Service ("IRS") of $37 million related to the resolution of an IRS appeals matter involving the netting of under-payments and over-payments for tax years 1995 through 2009. The interest payment was recorded in the second quarter of 2017 as a component of interest income. |
Receivables Held for Sale |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables Held for Sale | Receivables Held for Sale As discussed in prior filings, we established a receivable sales program in 2013 and have been engaged in an on-going evaluation of our operations as we seek to optimize our risk profile and cost structure as well as our liquidity, capital and funding requirements. As part of this on-going evaluation, in September 2016, we transferred all remaining real estate secured receivables classified as held for investment to held for sale. As a result, at June 30, 2017 and December 31, 2016, our entire receivable portfolio is classified as held for sale. Receivables held for sale, which are carried at the lower of amortized cost or fair value, are comprised of the following:
We continue to make progress in our strategy to run-off and sell our real estate secured receivable portfolio. The following table summarizes receivables sold to third party investors during the three and six months ended June 30, 2017 and 2016.
The following table summarizes the activity in receivables held for sale during the three and six months ended June 30, 2017 and 2016:
During the three and six months ended June 30, 2016, we transferred real estate secured receivables to held for sale with an unpaid principal balance (excluding accrued interest) of approximately $76 million and $358 million, respectively, at the time of transfer. The carrying value of these receivables prior to transfer after considering the fair value of the property less cost to sell was approximately $75 million and $342 million, respectively, including accrued interest. Credit loss reserves associated with these receivables totaled $4 million and $24 million, respectively, at the time of transfer to held for sale. During the three and six months ended June 30, 2016, we recorded an initial lower of amortized cost or fair value adjustment of $8 million and $25 million, respectively. Of this amount, $6 million and $19 million, respectively, were attributed to credit factors and recorded as a component of the provision for credit losses in the consolidated statement of income (loss) and $2 million and $6 million, respectively, were attributable to non-credit factors and recorded as a component of other revenues in the consolidated statement of income (loss). The following table provides a rollforward of our valuation allowance for the three and six months ended June 30, 2017 and 2016. See Note 11, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.
The following table summarizes the components of the lower of amortized cost or fair value adjustment during the three and six months ended June 30, 2017 and 2016:
During the three and six months ended June 30, 2017, we reversed $55 million and $163 million, respectively, of the lower of amortized cost or fair value adjustment recorded in prior periods related to changes in fair value which was reflected as a component of total other revenues in the consolidated statement of income (loss). This reversal of the lower of amortized cost or fair value adjustment recorded in prior periods reflects fair value changes resulting from aggregating all receivables held for sale into pools based on the marketing strategy for the remainder of 2017 as well as improvements in the fair value of these receivables during the first half of 2017. The fair value of receivables held for sale is determined based on an aggregation of receivables into pools either by similar risk characteristics or by receivable pools being marketed. During the three and six months ended June 30, 2016, we recorded an additional lower of amortized cost or fair value adjustment of $62 million and $130 million, respectively, related to changes in fair value as a result of a change in the estimated pricing on specific pools of receivables. |
Troubled Debt Restructures and Nonperforming Receivables |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Troubled Debt Restructures and Nonperforming Receivables | Troubled Debt Restructures and Nonperforming Receivables Troubled Debt Restructurings We report substantially all loans modified as a result of a financial difficulty as troubled debt restructurings ("TDR Loans"), regardless of whether the modification was permanent or temporary, including all modifications with trial periods. Additionally, we report as TDR Loans all re-ages, except first time early stage delinquency re-ages where the customer has not been granted a prior re-age or modification. TDR Loans also include loans discharged under Chapter 7 bankruptcy and not re-affirmed. TDR Loans are considered to be impaired loans regardless of their accrual status. Modifications for real estate secured receivables include changes to the terms of the loan and have historically included, but were not limited to, a change in interest rate, an extension of the amortization period, a reduction in payment amount, partial forgiveness or deferment of principal or other loan covenants. Beginning May 1, 2017, we revised our modification program to only include changes in interest rates. Interest rate reductions lower the amount of interest income we are contractually entitled to receive for a period of time in future periods. By lowering the interest rate, we believe we are able to increase the amount of cash flow that we expect to ultimately collect from the loan, given the borrower's financial condition. Re-aging is an account management action that results in the resetting of the contractual delinquency status of an account to current which generally requires the receipt of two qualifying payments. The following table presents information about our TDR Loans at June 30, 2017 and December 31, 2016. As all of our TDR Loans are classified as held for sale as of June 30, 2017 and December 31, 2016 and carried at the lower of amortized cost or fair value, there are no credit loss reserves associated with TDR Loans.
The following table provides additional information about the average balance and interest income recognized on TDR Loans.
Nonperforming Receivables The following table summarizes the status of receivables held for sale.
The following table provides additional information on nonaccrual receivables:
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Credit Loss Reserves |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Loss Reserves | Credit Loss Reserves As discussed in prior filings, subsequent to the third quarter of 2016, all of our receivables are classified as held for sale and carried at the lower of amortized cost or fair value. As a result, we did not have any credit loss reserves during the three and six months ended June 30, 2017. The table below summarizes the changes in credit loss reserves for real estate secured receivables held for investment and the related receivable balance during the three and six months ended June 30, 2016.
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Fair Value Option |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Option | Fair Value Option We have elected the fair value option ("FVO") for certain issuances of our fixed rate debt in order to align our accounting treatment with that of HSBC under International Financial Accounting Standards ("IFRSs"). Electing FVO accounting for the same issuances of fixed rate debt under U.S. GAAP and IFRSs, allows us to simplify the accounting model applied to these fixed rate debt issuances. The following table summarizes fixed rate debt issuances accounted for under FVO:
We determine the fair value of the fixed rate debt accounted for under FVO through the use of a third party pricing service. Such fair value represents the full market price (including credit and interest rate impacts) based on observable market data for the same or similar debt instruments. See Note 11, "Fair Value Measurements," for a description of the methods and significant assumptions used to estimate the fair value of our fixed rate debt accounted for under FVO. The following table summarizes the components of the gain on debt designated at fair value and related derivatives reflected in the consolidated statement of income (loss) for the three and six months ended June 30, 2017 and 2016:
Prior to January 1, 2017, changes in the fair value of fair value option debt and the value of the related derivatives, including changes in fair value related to interest rates, credit and other risks as well as any realized gains or losses on those derivatives, were reported in gain on debt designated at fair value and related derivatives in the consolidated statement of income (loss). As discussed more fully in Note 13, "New Accounting Pronouncements," beginning January 1, 2017, the fair value movement on fair value debt attributable to our credit spreads is recorded in common equity as a component of other comprehensive income. Differences arise between the movement in the fair value of the debt and the fair value of the related derivative due to the different credit characteristics and differences in the calculation of fair value for debt and derivatives. The size and direction of the accounting consequences of such changes can be volatile from period to period but do not alter the cash flows intended as part of our interest rate management strategy. On a cumulative basis, we have recorded fair value option adjustments which increased the value of our long-term debt and due to affiliates balances in total by $72 million and $90 million at June 30, 2017 and December 31, 2016, respectively. |
Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Our business activities involve analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Accordingly, we have comprehensive risk management policies to address potential financial risks, which include credit risk, liquidity risk, market risk, and operational risks. Our risk management policy is designed to identify and analyze these risks, to set appropriate limits and controls, and to monitor the risks and limits continually by means of reliable and up-to-date administrative and information systems. Our risk management policies are primarily carried out in accordance with practice and limits set by the HSBC Group Management Board. The HSBC North America Asset Liability Committee ("HSBC North America ALCO") meets regularly to review risks and approve appropriate risk management strategies within the limits established by the HSBC Group Management Board. Additionally, the Risk Committee of our Board of Directors receives regular reports on our interest rate and liquidity risk positions in relation to the established limits. In accordance with the policies and strategies established by HSBC North America ALCO, in the normal course of business, we historically entered into various transactions involving derivative financial instruments. These derivative financial instruments primarily are used as economic hedges to manage risk. Objectives for Holding Derivative Financial Instruments Market risk (which includes interest rate and foreign currency exchange risks) is the possibility that a change in underlying market rate inputs will cause a financial instrument to decrease in value or become more costly to settle. Prior to our ceasing originations in our Consumer Lending business and ceasing loan purchase activities in our Mortgage Services business, customer demand for our loan products shifted between fixed rate and floating rate products, based on market conditions and preferences. These shifts in loan products resulted in different funding strategies and produced different interest rate risk exposures. Additionally, the mix of receivables on our balance sheet and the corresponding market risk is changing as we manage the liquidation of our receivable portfolio. We maintain an overall risk management strategy that utilizes derivative financial instruments to mitigate our exposure to fluctuations caused by changes in currency exchange rates related to our debt liabilities. We manage our exposure to foreign currency exchange risk primarily through the use of cross currency interest rate swaps. Historically, we managed our exposure to interest rate risk through the use of interest rate swaps with the main objective of managing the interest rate volatility due to a mismatch in the duration of our assets and liabilities. We have entered into currency swaps to convert both principal and interest payments on debt issued in one currency to the appropriate functional currency. Interest rate swaps are contractual agreements between two counterparties for the exchange of periodic interest payments generally based on a notional principal amount and agreed-upon fixed or floating rates. The majority of our interest rate swaps were used to manage our exposure to changes in interest rates by converting floating rate debt to fixed rate or by converting fixed rate debt to floating rate. To manage our exposure to changes in interest rates, we entered into currency swaps and historically interest rate swap agreements which have been designated as cash flow hedges under derivative accounting principles, or are treated as non-qualifying hedges. We currently utilize the long-haul method to assess effectiveness of all derivatives designated as hedges. We do not manage credit risk or the changes in fair value due to the changes in credit risk by entering into derivative financial instruments such as credit derivatives or credit default swaps. Credit Risk of Derivatives By utilizing derivative financial instruments, we are exposed to counterparty credit risk. Counterparty credit risk is the risk that the counterparty to a transaction fails to perform according to the terms of the contract. We manage the counterparty credit (or repayment) risk in derivative instruments through established credit approvals, risk control limits, collateral, and ongoing monitoring procedures. We utilize HSBC affiliates as the provider of our derivatives. We have never suffered a loss due to counterparty credit failure. At June 30, 2017 and December 31, 2016, we had derivative contracts for our continuing operations with a notional amount of $419 million and $1.8 billion, respectively, which are outstanding with HSBC Bank USA, National Association (together with its subsidiaries, "HSBC Bank USA"). Derivative financial instruments are generally expressed in terms of notional principal or contract amounts which are much larger than the amounts potentially at risk for nonpayment by counterparties. Derivative agreements require that payments be made to, or received from, the counterparty when the fair value of the agreement reaches a certain level. When the fair value of our agreements with the affiliate counterparty requires the posting of collateral, it is provided in either the form of cash and recorded on the balance sheet, consistent with third party arrangements, or in the form of securities which are not recorded on our balance sheet. The fair value of our agreements with the affiliate counterparty required us to provide collateral to the affiliate of $50 million at June 30, 2017 and $317 million at December 31, 2016, all of which was provided in cash. These amounts are offset against the fair value amount recognized for derivative instruments that have been offset under the same master netting arrangement and recorded in our balance sheet as derivative financial assets or derivative related liabilities which are included as a component of other assets and other liabilities, respectively. The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.
Fair Value Hedges At June 30, 2017 and December 31, 2016, we do not have any active fair value hedges. We recorded fair value adjustments to the carrying value of our debt for terminated fair value hedges which decreased the debt balance by $14 million at June 30, 2017 and $15 million at December 31, 2016. Cash Flow Hedges Cash flow hedges include currency swaps to convert debt issued from one currency into U.S. dollar fixed rate debt and have historically also included interest rate swaps to convert our variable rate debt to fixed rate debt by fixing future interest rate resets of floating rate debt. Gains and losses on derivative instruments designated as cash flow hedges are reported in accumulated other comprehensive income (loss) and totaled losses of less than $1 million at both June 30, 2017 and December 31, 2016. We expect less than $1 million of currently unrealized net losses will be reclassified to earnings within one year. However, these reclassified unrealized losses will be offset by decreased interest expense associated with the variable cash flows of the hedged items and will result in no significant impact to our earnings. The following table provides the gain or loss recorded on our cash flow hedging relationships.
Non-Qualifying Hedging Activities As discussed in prior filings, during 2016 we terminated all of the interest rate swaps in our portfolio of non-qualifying hedges which we had previously used to minimize our exposure to changes in interest rates. Accordingly, there was no derivative related income (expense) for the three or six months ended June 30, 2017. Derivative related expense for interest rate contracts for the three and six months ended June 30, 2016 was a gain of $2 million and a loss of $117 million, respectively. We have elected the fair value option for certain issuances of our fixed rate debt and have entered into currency swaps and historically interest rate swaps related to debt carried at fair value. The currency swaps and historically the interest rate swaps associated with this debt are non-qualifying hedges but are considered economic hedges and realized gains and losses are reported as gain on debt designated at fair value and related derivatives within other revenues. The derivatives related to fair value option debt are included in the notional amount of derivative contracts table below. The following table provides the gain or loss recorded on the derivatives related to fair value option debt. See Note 5, "Fair Value Option," for further discussion.
Notional Amount of Derivative Contracts The following table provides the notional amounts of derivative contracts.
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Accumulated Other Comprehensive Income (Loss) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) ("AOCI") includes certain items that are reported directly within a separate component of equity. The following table presents changes in accumulated other comprehensive income (loss) balances.
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Benefits | Pension and Other Postretirement Benefits Defined Benefit Pension Plan The table below reflects the portion of pension expense and its related components of the HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income (loss). We have not been allocated any portion of the Plan's net pension liability.
Postretirement Plans Other Than Pensions Our employees also participate in plans which provide medical and life insurance benefits to retirees and eligible dependents. These plans cover substantially all employees who meet certain age and vested service requirements. We have instituted dollar limits on our payments under the plans to control the cost of future medical benefits. The components of our net postretirement benefit cost are as follows:
Substantially all of our postretirement benefit plans which provide medical insurance for post-65 retirees were amended in 2015 to provide a monthly payment for the retiree to purchase individual health care coverage in lieu of providing medical insurance on a self-insured basis. This amendment resulted in a reduction to our postretirement benefit obligation in 2015 of $46 million which is being amortized over the remaining service period of those affected. Due to the continued reduction in our staffing levels in the first half of 2017, a curtailment gain of $13 million (representing the acceleration of a portion of the remaining deferred gain) was recognized during the three and six months ended June 30, 2017. |
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Related Party Transactions | Related Party Transactions In the normal course of business, we conduct transactions with HSBC and its subsidiaries. HSBC policy requires that these transactions occur at prevailing market rates and terms and include funding arrangements, derivatives, servicing arrangements, information technology, centralized support services, item and statement processing services, banking and other miscellaneous services. The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:
Funding Arrangements with HSBC Affiliates: All of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans with any future funding requirements to be sourced primarily through HSBC USA Inc. ("HSBC USA") or HSBC North America. Due to affiliates consists of the following:
HSBC USA Inc. - We have a $5.0 billion, 364-day uncommitted unsecured revolving credit agreement with HSBC USA, which will expire during the fourth quarter of 2017. The credit agreement allows for borrowings with maturities of up to 5 years. In March 2017, we prepaid the entire outstanding balance on this credit agreement of $2.5 billion and incurred a loss on extinguishment of debt of $28 million which is included as a component of servicing and other fees from (to) HSBC affiliates in our consolidated statement of income (loss). HSBC Holdings plc - We have a public subordinated debt issue with a carrying amount of $3.0 billion which matures in 2021. Of this amount, HSBC Holdings plc holds $799 million at June 30, 2017 and $800 million at December 31, 2016. We have a $1.0 billion, 364-day uncommitted revolving credit facility with HSBC North America, which expires in January 2018. At June 30, 2017 and December 31, 2016, there are no outstanding balances under this credit facility. As previously discussed, we maintain an overall risk management strategy that utilizes interest rate and currency derivative financial instruments to mitigate our exposure to fluctuations caused by changes in interest rates and currency exchange rates related to third party debt liabilities. HSBC Bank USA is our counterparty in these derivative transactions. The notional amount of the derivative contracts outstanding with HSBC Bank USA totaled $419 million and $1.8 billion at June 30, 2017 and December 31, 2016, respectively. The fair value of our agreements with HSBC Bank USA required us to provide collateral to HSBC Bank USA of $50 million at June 30, 2017 and $317 million at December 31, 2016, all of which was provided in cash. See Note 6, "Derivative Financial Instruments," for additional information about our derivative portfolio. In addition to the lending arrangements discussed above, our parent company holds 1,000 shares of Series C Preferred Stock. Dividends paid on the Series C Preferred Stock totaled $21 million and $43 million during the three and six months ended June 30, 2017, respectively, compared with $21 million and $43 million during the three and six months ended June 30, 2016, respectively. During periods in which there is an accumulated deficit, dividends on the Series C preferred stock are paid from additional paid-in capital. At December 31, 2016, we had a deposit totaling $1,500 million with HSBC Bank USA at current market rates. We did not have any deposits with HSBC Bank USA at June 30, 2017. Interest income earned on deposits with HSBC Bank USA was included in interest income from HSBC affiliates in the table above and was insignificant during three and six months ended June 30, 2017 and 2016. Services Provided Between HSBC Affiliates: Under multiple service level agreements, we provide services to and receive services from various HSBC affiliates. The following summarizes these activities:
Transactions with HSBC Affiliates involving our Discontinued Operations: In December 2016, we sold our Visa Class B Shares ("Class B Shares"). The Class B Shares are currently considered restricted and are transferable under limited circumstances until certain credit card litigation is settled. Any settlement will be indemnified by Visa members, including us. Simultaneously, our affiliate, HSBC USA also sold Class B Shares to the same purchaser. Under the terms of the sale agreement, HSBC USA entered into a derivative instrument with the purchaser to retain the litigation risk associated with all of the Class B Shares sold by both us and HSBC USA until the credit card litigation is settled. Immediately following the execution of the sale agreement, we entered into a derivative instrument with HSBC USA to retain the litigation risk associated with our portion of the Class B Shares sold to the purchaser. At June 30, 2017 and December 31, 2016, the notional amount of this derivative contract totaled $61 million and $50 million, respectively. The fair value of this derivative is estimated using a discounted cash flow methodology and is dependent upon the final resolution of the credit card litigation. The fair value of the derivative related liability with HSBC USA Inc. was $6 million and $5 million at June 30, 2017 and December 31, 2016, respectively. Derivative related expense was less than $1 million during the three months ended June 30, 2017 and $1 million during the year-to-date period which was recorded as a component of income (loss) from discontinued operations. See Note 3, "Discontinued Operations," in our 2016 Form 10-K for additional information about the sale of the Visa Class B Shares and this derivative instrument. |
Variable Interest Entities |
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Disclosure Variable Interest Entities Summary Of Assets And Liabilities Of Consolidated Secured Financing V I Es [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entities | Variable Interest Entities We consolidate variable interest entities ("VIE") in which we hold a controlling financial interest as evidenced by the power to direct the activities of a VIE that most significantly impact its economic performance and the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE and therefore are deemed to be the primary beneficiary. See Note 17, "Variable Interest Entities," in our 2016 Form 10-K for additional information regarding VIEs. Consolidated VIEs Historically, we have organized special purpose entities primarily to meet our funding needs through collateralized funding transactions. As part of these transactions, we transferred certain receivables to these trusts which in turn issued debt instruments collateralized by the transferred receivables. The entities used in these transactions are VIEs. As we are the servicer of the assets of these trusts and have retained the benefits and risks, we determined that we are the primary beneficiary of these trusts. Accordingly, we consolidate these entities and report the debt securities issued by them as secured financings in long-term debt. As a result, all receivables transferred in these secured financings remained and continue to remain on our balance sheet and the debt securities issued by them have remained and continue to be included in long-term debt. As all of our ongoing funding requirements have been integrated into the overall HSBC North America funding plans, we no longer use collateralized funding transactions to meet our funding needs. The assets and liabilities of the consolidated secured financing VIEs consisted of the following at June 30, 2017 and December 31, 2016:
The assets of the consolidated VIEs serve as collateral for the obligations of the VIEs. The holders of the debt securities issued by these vehicles have no recourse to our general assets. Unconsolidated VIEs We do not have any unconsolidated VIEs. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements Accounting principles related to fair value measurements provide a framework for measuring fair value and focus on an exit price that would be received to sell an asset or paid to transfer a liability in the principal market (or in the absence of the principal market, the most advantageous market) accessible in an orderly transaction between willing market participants (the "Fair Value Framework"). Where required by the applicable accounting standards, assets and liabilities are measured at fair value using the "highest and best use" valuation premise. Fair value measurement guidance clarifies that financial instruments do not have alternative use and, as such, the fair value of financial instruments should be determined using an "in-exchange" valuation premise. Fair Value Adjustments The best evidence of fair value is quoted market price in an actively traded market, where available. In the event listed price or market quotes are not available, valuation techniques that incorporate relevant transaction data and market parameters reflecting the attributes of the asset or liability under consideration are applied. Where applicable, fair value adjustments are made to ensure the financial instruments are appropriately recorded at fair value. The fair value adjustments reflect the risks associated with the products, contractual terms of the transactions, and the liquidity of the markets in which the transactions occur. Credit Risk Adjustment The credit risk adjustment is an adjustment to a group of financial assets or financial liabilities to reflect the credit quality of the parties to the transaction in arriving at fair value. A credit valuation adjustment to a financial asset is required to reflect the default risk of the counterparty. Where applicable, we take into consideration the credit risk mitigating arrangements including collateral agreements and master netting arrangements in estimating the credit risk adjustments. Valuation Control Framework A control framework has been established which is designed to ensure that fair values are validated by a function independent of the risk-taker. To that end, the ultimate responsibility for the measurement of fair values rests with the HSBC U.S. Valuation Committee. The HSBC U.S. Valuation Committee establishes policies and procedures to ensure appropriate valuations. Fair values for long-term debt for which we have elected fair value option are measured by a third party valuation source (pricing service) by reference to external quotations on the identical or similar instruments. Once fair values have been obtained from the third party valuation source, an independent price validation process is performed and reviewed by the HSBC U.S. Valuation Committee. For price validation purposes, we obtain quotations from at least one other independent pricing source for each financial instrument, where possible. We consider the following factors in determining fair values:
Greater weight is given to quotations of instruments with recent market transactions, pricing quotes from dealers who stand ready to transact, quotations provided by market-makers who originally underwrote such instruments, and market consensus pricing based on inputs from a large number of participants. Any significant discrepancies among the external quotations are reviewed by management and adjustments to fair values are recorded where appropriate. Fair values for derivatives are determined by management using valuation techniques, valuation models and inputs that are developed, reviewed, validated and approved by the Markets Independent Model Review Team of an HSBC affiliate. The models used apply appropriate control processes and procedures to ensure that the derived inputs are used to value only those instruments that share similar risk to the relevant benchmark indexes and therefore demonstrate a similar response to market factors. We have various controls over our valuation process and procedures for receivables held for sale. As these fair values are generally determined using value estimates from third party and affiliate valuation specialists, the controls may include analytical reviews of quarterly value trends, corroboration of inputs by observable market data, direct discussion with potential investors and results of actual sales of such receivable, all of which are submitted to the HSBC U.S. Valuation Committee for review. Fair Value of Financial Instruments The fair value estimates, methods and assumptions set forth below for our financial instruments, including those financial instruments carried at cost, are made solely to comply with disclosures required by generally accepted accounting principles in the United States and should be read in conjunction with the financial statements and notes included in this Form 10-Q. The following table summarizes the carrying value and estimated fair value of our financial instruments at June 30, 2017 and December 31, 2016.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis The following table presents information about our assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a recurring basis during the three and six months ended June 30, 2017 and 2016. Information on Level 3 Assets and Liabilities There were no assets or liabilities recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2017 and 2016. Transfers between leveling categories are assessed, determined and recognized at the end of each reporting period. Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis at June 30, 2017 and 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of June 30, 2017 or 2016 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2016 Form 10-K as well as the summary of our valuation techniques below for discussion of our policy in measuring fair value.
Significant Transfers Between Level 1 and Level 2 There were no transfers between Level 1 and Level 2 for assets and liabilities recorded at fair value on a non-recurring basis during the three and six months ended June 30, 2017 and 2016. Significant Transfers Between Level 2 and Level 3 We transferred real estate secured receivables held for sale from Level 3 to Level 2 prior to the sale of these receivables totaling $554 million and $4,219 million during the three and six months ended June 30, 2017, respectively, compared with $3,627 million and $4,926 million during the three and six months ended June 30, 2016, respectively. Receivables held for sale are reclassified from Level 3 to Level 2 upon acceptance of a final offer from a third party to purchase a distinct pool of receivables for a specified purchase price on a specific date. The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy at June 30, 2017 and December 31, 2016:
Valuation Techniques The following summarizes the valuation methodologies used for assets and liabilities recorded at fair value on both a recurring and non-recurring basis and for estimating fair value for financial instruments not recorded at fair value but for which fair value disclosures are required. Cash: Carrying amount approximates fair value due to the liquid nature of cash. Interest bearing deposits with banks and securities purchased under agreements to resell: The fair value of interest bearing deposits with banks and securities purchased under agreements to resell approximates carrying amount due to the short-term maturity of the agreements. Receivables held for sale: The estimated fair value of our receivables held for sale is determined by developing an approximate range of value from a mix of various sources appropriate for the respective pools of assets aggregated either by similar risk characteristics or by pools of receivables being marketed. These sources include recently observed over-the-counter transactions where available and fair value estimates obtained from an HSBC affiliate and a third party valuation specialist for distinct pools of receivables. These fair value estimates are based on discounted cash flow models using assumptions we believe are consistent with those that would be used by market participants in valuing such receivables and trading inputs from other market participants which includes observed primary and secondary trades. In certain cases, the estimated fair value for a pool of receivables being marketed may be based on bids received from third parties interested in purchasing the pool of receivables. Valuation inputs include estimates of future interest rates, prepayment speeds, default and loss curves, estimated collateral values (including expenses to be incurred to maintain the collateral) and market discount rates reflecting management's estimate of the rate of return that would be required by investors in the current market given the specific characteristics and inherent credit risk. Some of these inputs are influenced by collateral value changes and unemployment rates. We perform analytical reviews of fair value changes on a quarterly basis and periodically validate our valuation methodologies and assumptions based on the results of actual sales of such receivables. We also may hold discussions on value directly with potential investors. Since some receivables pools may have features which are unique, the fair value measurement processes use significant unobservable inputs which are specific to the performance characteristics of the various receivable portfolios. Real estate owned: Fair value is determined based on third party valuations obtained at the time we take title to the property and, if less than the carrying amount of the receivable, the carrying amount of the receivable is adjusted to the fair value less estimated cost to sell. The carrying amount of the property is further reduced, if necessary, at least every 45 days to reflect observable local market data, including local area sales data. Due from affiliates: Carrying amount approximates fair value because the interest rates on these receivables adjust with changing market interest rates. Long-term debt and Due to affiliates: Fair value is primarily determined by a third party valuation source. The pricing services source fair value from quoted market prices and, if not available, expected cash flows are discounted using the appropriate interest rate for the applicable duration of the instrument adjusted for our own credit risk (spread). The credit spreads applied to these instruments are derived from the spreads recognized in the secondary market for similar debt as of the measurement date. Where available, relevant trade data is also considered as part of our validation process. Derivative financial assets and liabilities: Derivative values are defined as the amount we would receive or pay to extinguish the contract using a market participant at the reporting date. The values are determined by management using a pricing system maintained by HSBC Bank USA. In determining these values, HSBC Bank USA uses quoted market prices, when available. For non-exchange traded contracts, such as interest rate swaps, fair value is determined using discounted cash flow modeling techniques. Valuation models calculate the present value of expected future cash flows based on models that utilize independently-sourced market parameters, including interest rate yield curves, option volatilities, and currency rates. Valuations may be adjusted in order to ensure that those values represent appropriate estimates of fair value. These adjustments are generally required to reflect factors such as market liquidity and counterparty credit risk that can affect prices in arms-length transactions with unrelated third parties. Finally, other transaction specific factors such as the variety of valuation models available, the range of unobservable model inputs and other model assumptions can affect estimates of fair value. Imprecision in estimating these factors can impact the amount of revenue or loss recorded for a particular position. Counterparty credit risk is considered in determining the fair value of a financial asset. The Fair Value Framework specifies that the fair value of a liability should reflect the entity's non-performance risk and accordingly, the effect of our own credit risk (spread) has been factored into the determination of the fair value of our financial liabilities, including derivative instruments. In estimating the credit risk adjustment to the derivative assets and liabilities, we take into account the impact of netting and/or collateral arrangements that are designed to mitigate counterparty credit risk. |
Litigation and Regulatory Matters |
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Litigation and Regulatory Matters | Litigation and Regulatory Matters The following supplements, and should be read together with, the disclosure in Note 20, "Litigation and Regulatory Matters," in our 2016 Form 10-K and in Note 12, "Litigation and Regulatory Matters," in our Form 10-Q for the three months ended March 31, 2017 (the "2017 First Quarter Form 10-Q"). Only matters with significant updates and new matters since our disclosure in our 2016 Form 10-K and 2017 First Quarter Form 10-Q are reported herein. In addition to the matters described below and in our 2016 Form 10-K and 2017 First Quarter Form 10-Q, in the ordinary course of business, we are routinely named as defendants in, or as parties to, various legal actions and proceedings relating to activities of our current and/or former operations. These legal actions and proceedings may include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief. In the ordinary course of business, we also are subject to governmental and regulatory examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of which may result in adverse judgments, settlements, fines, penalties, injunctions or other relief. In connection with formal and informal inquiries by these regulators, we receive numerous requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects of our regulated activities. Due to the inherent unpredictability of legal matters, including litigation, governmental and regulatory matters, particularly where the damages sought are substantial or indeterminate or when the proceedings or investigations are in the early stages, we cannot determine with any degree of certainty the timing or ultimate resolution of such matters or the eventual loss, fines, penalties or business impact, if any, that may result. We establish reserves for litigation, governmental and regulatory matters when those matters present loss contingencies that are both probable and can be reasonably estimated. Once established, reserves are adjusted from time to time, as appropriate, in light of additional information. The actual costs of resolving litigation and regulatory matters, however, may be substantially higher than the amounts reserved for those matters. For the legal matters disclosed below, including litigation, governmental and regulatory matters, as well as for the legal matters discussed in Note 20, "Litigation and Regulatory Matters," in our 2016 Form 10-K and in Note 12, "Litigation and Regulatory Matters," in the 2017 First Quarter Form 10-Q as to which a loss in excess of accrued liability is reasonably possible in future periods and for which there is sufficient currently available information on the basis of which we believe we can make a reliable estimate, we believe a reasonable estimate could be as much as $400 million for HSBC Finance Corporation. The legal matters underlying this estimate of possible loss will change from time to time and actual results may differ significantly from this current estimate. Given the substantial or indeterminate amounts sought in certain of these matters, and the inherent unpredictability of such matters, an adverse outcome in certain of these matters could have a material adverse effect on our consolidated financial statements in any particular quarterly or annual period. Litigation - Continuing Operations Mortgage Securitization Activity DeKalb County, et al. v. HSBC North America Holdings Inc., et al. In May 2017, the U.S. Supreme Court issued its decision in the City of Miami case, affirming the Eleventh Circuit’s finding that a municipal plaintiff can be within the zone of interest conceivably protected by the Fair Housing Act. The court did not determine whether the injuries alleged by the city met the proximate cause test, but provided guidance for the lower courts in employing that test in further proceedings. This matter remains stayed pending direction from the Eleventh Circuit in the City of Miami matter. County of Cook. v. HSBC North America Holdings Inc., et al. In May 2017, the U.S. Supreme Court issued its decision in the City of Miami case, affirming the Eleventh Circuit’s finding that a municipal plaintiff can be within the zone of interest conceivably protected by the Fair Housing Act. The court did not determine whether the injuries alleged by the city met the proximate cause test, but provided guidance for the lower courts in employing that test in further proceedings. Subsequent to the decision, the stay was lifted and a scheduling order entered. An amended complaint was filed in July 2017. As noted previously, discussions are ongoing with the U.S. Department of Justice regarding liability under the Financial Industry Reform, Recovery, and Enforcement Act in connection with certain residential mortgage-backed securities securitizations from 2005 to 2007. Litigation - Discontinued Operations Salveson v. JPMorgan Chase et al. In April 2017, the U.S. Supreme Court denied plaintiff’s petition for a writ of certiorari and the matter is now concluded. |
New Accounting Pronouncements |
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New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ||||||||||||||||||||||||||||
New Accounting Pronouncements | New Accounting Pronouncements The following new accounting pronouncements were adopted effective January 1, 2017:
The following are accounting pronouncements which will be adopted in future periods:
There have been no additional accounting pronouncements issued that are expected to have or could have a material impact on our financial position or results of operations. |
Receivables Held for Sale (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Real Estate Secured Receivables Held for Sale | Receivables held for sale, which are carried at the lower of amortized cost or fair value, are comprised of the following:
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Schedule of Receivables Sold to Third-party Investors | The following table summarizes receivables sold to third party investors during the three and six months ended June 30, 2017 and 2016.
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Summary of Activity in Receivables Held for Sale | The following table summarizes the activity in receivables held for sale during the three and six months ended June 30, 2017 and 2016:
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Allowance for Credit Losses on Financing Receivables | The following table provides a rollforward of our valuation allowance for the three and six months ended June 30, 2017 and 2016. See Note 11, "Fair Value Measurements," for a discussion of the factors impacting the fair value of these receivables.
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Summary of Components of Cumulative Lower of Amortized Cost or Fair Value Adjustment | The following table summarizes the components of the lower of amortized cost or fair value adjustment during the three and six months ended June 30, 2017 and 2016:
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Troubled Debt Restructures and Nonperforming Receivables (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TDR Loans | The following table presents information about our TDR Loans at June 30, 2017 and December 31, 2016. As all of our TDR Loans are classified as held for sale as of June 30, 2017 and December 31, 2016 and carried at the lower of amortized cost or fair value, there are no credit loss reserves associated with TDR Loans.
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Additional Information Relating To Trouble Debt Restructuring Loans | The following table provides additional information about the average balance and interest income recognized on TDR Loans.
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Nonperforming Consumer Receivable Portfolio | The following table summarizes the status of receivables held for sale.
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Additional Information on Nonaccrual Receivables | The following table provides additional information on nonaccrual receivables:
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Credit Loss Reserves (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarizes Changes in Credit Loss Reserves by Product/Class and Related Receivable Balance by Product | The table below summarizes the changes in credit loss reserves for real estate secured receivables held for investment and the related receivable balance during the three and six months ended June 30, 2016.
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Fair Value Option (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Liabilities Measured on Recurring Basis | The following table summarizes fixed rate debt issuances accounted for under FVO:
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Components of Gain (Loss) on Debt Designated at Fair Value and Related Derivatives | The following table summarizes the components of the gain on debt designated at fair value and related derivatives reflected in the consolidated statement of income (loss) for the three and six months ended June 30, 2017 and 2016:
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Derivative Financial Instruments (Tables) |
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments | The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet.
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Gain or Loss Recorded on Our Cash Flow Hedging Relationships | The following table provides the gain or loss recorded on our cash flow hedging relationships.
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Gain or Loss Recorded on Derivatives Related to Fair Value Option Debt Primarily Due to Changes in Interest Rates | The following table provides the gain or loss recorded on the derivatives related to fair value option debt. See Note 5, "Fair Value Option," for further discussion.
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Notional Values of Derivative Contracts | The following table provides the notional amounts of derivative contracts.
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Accumulated Other Comprehensive Income (Loss) (Tables) |
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Jun. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Accumulated Other Comprehensive Loss | The following table presents changes in accumulated other comprehensive income (loss) balances.
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Pension and Other Postretirement Benefits (Tables) |
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension Plan, Defined Benefit [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Pension Expense for Defined Benefit Pension Plan | The table below reflects the portion of pension expense and its related components of the HSBC North America Pension Plan which has been allocated to us and is recorded in our consolidated statement of income (loss). We have not been allocated any portion of the Plan's net pension liability.
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Other Postretirement Benefit Plan, Defined Benefit [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Pension Expense for Defined Benefit Pension Plan | The components of our net postretirement benefit cost are as follows:
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Related Party Transactions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | Due to affiliates consists of the following:
The following tables and discussions below present the more significant related party balances and the income (expense) generated by related party transactions for continuing operations:
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Variable Interest Entities (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Variable Interest Entities Summary Of Assets And Liabilities Of Consolidated Secured Financing V I Es [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Assets and Liabilities of Consolidated Secured Financing VIEs | The assets and liabilities of the consolidated secured financing VIEs consisted of the following at June 30, 2017 and December 31, 2016:
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying and Estimated Fair Value | The following table summarizes the carrying value and estimated fair value of our financial instruments at June 30, 2017 and December 31, 2016.
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Assets and Liabilities Recorded at Fair Value on a Recurring Basis | The following table presents information about our assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.
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Assets and Liabilities Recorded at Fair Value on a Non-recurring Basis | The following table presents information about our assets and liabilities measured at fair value on a non-recurring basis at June 30, 2017 and 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Certain of the fair values in the table below were not obtained as of June 30, 2017 or 2016 but during the periods then ended. See Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," in our 2016 Form 10-K as well as the summary of our valuation techniques below for discussion of our policy in measuring fair value.
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Fair Value Inputs, Assets, Quantitative Information | The following table presents quantitative information about non-recurring fair value measurements of assets and liabilities classified as Level 3 in the fair value hierarchy at June 30, 2017 and December 31, 2016:
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Organization and Basis of Presentation (Details) $ in Millions |
1 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
segment
|
|
Income Taxes [Line Items] | ||
Number of reportable segments | segment | 1 | |
Interest payment received from the IRS | $ 37 | |
Out of Period Adjustment [Member] | ||
Income Taxes [Line Items] | ||
Current tax asset, out of period adjustment | 36 | $ 36 |
Deferred tax asset, out of period adjustment | $ (36) | $ (36) |
Receivables Held for Sale - Real Estate Secured Receivables (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
---|---|---|---|---|---|---|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Receivables held for sale | [1],[2] | $ 1,346 | $ 5,674 | |||
Loans pledged as collateral | 428 | 750 | ||||
Mortgage loans in process of foreclosure | 172 | 235 | ||||
First lien [Member] | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Receivables held for sale | 1,302 | 4,699 | ||||
Second lien [Member] | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Receivables held for sale | $ 44 | $ 975 | ||||
|
Receivables Held for Sale - Receivables Sold to Third Party Investors (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Aggregate cash consideration received | $ 4,863 | $ 4,667 | ||
Gain (loss) on sale of real estate secured receivables | $ (2) | $ 423 | 615 | 423 |
Real Estate Secured Receivables Held for Sale [Member] | ||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||
Unpaid principal balance at the time of sale | 621 | 4,722 | 4,984 | 4,722 |
Aggregate cash consideration received | 556 | 4,667 | 4,863 | 4,667 |
Aggregate carrying value at the time of sale | 554 | 4,219 | 4,219 | 4,219 |
Transaction costs | 4 | 25 | 29 | 25 |
Gain (loss) on sale of real estate secured receivables | $ (2) | $ 423 | $ 615 | $ 423 |
Receivables Held for Sale - Summary of Activity in Receivables Held for Sale (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||||||
Receivables Held for Sale, Activity [Roll Forward] | |||||||||||||||
Real estate secured receivables held for sale at beginning of period | [1],[2] | $ 5,674 | |||||||||||||
Real estate secured receivables held for sale at end of period | [1],[2] | $ 1,346 | 1,346 | ||||||||||||
Receivables Held for Sale, Initial Lower of Amortized Cost or Fair Value Adjustment | $ (8) | $ (25) | |||||||||||||
Mortgage Loans on Real Estate [Member] | |||||||||||||||
Receivables Held for Sale, Activity [Roll Forward] | |||||||||||||||
Real estate secured receivables held for sale at beginning of period | 1,911 | 8,185 | 5,674 | 8,265 | |||||||||||
Transfer of real estate secured receivables into held for sale at the lower of amortized cost or fair value | [3],[4] | 0 | 63 | 0 | 293 | ||||||||||
Real estate secured receivable sales | (554) | (4,219) | (4,219) | (4,219) | |||||||||||
Lower of amortized cost or fair value adjustment on real estate secured receivables held for sale subsequent to initial transfer to held for sale | 58 | (54) | 171 | (105) | |||||||||||
Carrying value of real estate secured receivables held for sale transferred to real estate owned (REO) | (6) | (20) | (17) | (34) | |||||||||||
Carrying value of real estate secured receivables held for sale settled through short sale | (7) | (10) | (15) | (18) | |||||||||||
Change in real estate secured receivable balance, including collections | (56) | (149) | (248) | (386) | |||||||||||
Real estate secured receivables held for sale at end of period | [5] | $ 1,346 | $ 3,796 | $ 1,346 | $ 3,796 | ||||||||||
|
Receivables Held for Sale - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Aggregate unpaid balance | $ 76,000,000 | $ 358,000,000 | |||||||||||||||
Aggregate carrying value | 75,000,000 | 342,000,000 | |||||||||||||||
Credit loss reserve | [1],[2] | 32,000,000 | 111,000,000 | ||||||||||||||
Initial lower of amortized cost or fair value adjustment | 8,000,000 | 25,000,000 | |||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | $ (58,000,000) | 62,000,000 | $ (171,000,000) | 130,000,000 | |||||||||||||
Provision for Credit Losses [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Initial lower of amortized cost or fair value adjustment | [3] | 6,000,000 | 19,000,000 | ||||||||||||||
Other Revenue [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Initial lower of amortized cost or fair value adjustment | [4] | 2,000,000 | 6,000,000 | ||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | (58,000,000) | [5] | 56,000,000 | (171,000,000) | [5] | 111,000,000 | |||||||||||
Subsequent to initial transfer to held for sale | 54,000,000 | 105,000,000 | |||||||||||||||
Fair Value [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | (55,000,000) | 70,000,000 | (163,000,000) | 155,000,000 | |||||||||||||
Fair Value [Member] | Provision for Credit Losses [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Initial lower of amortized cost or fair value adjustment | [3] | 6,000,000 | 19,000,000 | ||||||||||||||
Fair Value [Member] | Other Revenue [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Initial lower of amortized cost or fair value adjustment | [4] | 2,000,000 | 6,000,000 | ||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | $ (55,000,000) | [5] | 64,000,000 | $ (163,000,000) | [5] | 136,000,000 | |||||||||||
Subsequent to initial transfer to held for sale | 62,000,000 | 130,000,000 | |||||||||||||||
Real Estate Secured Receivable Portfolio [Member] | |||||||||||||||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | |||||||||||||||||
Credit loss reserve | $ 4,000,000 | $ 24,000,000 | |||||||||||||||
|
Receivables Held For Sale - Allowance for Credit Losses Rollforward (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Allowance for Loan and Lease Losses [Roll Forward] | ||||
Balance at beginning of period | $ 61 | $ 86 | $ 174 | $ 13 |
Initial valuation allowance for real estate secured receivables transferred to held for sale during the period | 0 | 2 | 0 | 6 |
Increase (decrease) in valuation allowance resulting from changes in fair value | (55) | 62 | (163) | 130 |
Change in valuation allowance for collections, charged-off, transferred to REO or short sale | (3) | 0 | (8) | 1 |
Balance at end of period | $ 3 | $ 150 | $ 3 | $ 150 |
Receivables Held for Sale - Summary of Components of Cumulative Lower of Amortized Cost or Fair Value Adjustment (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | $ 8,000,000 | $ 25,000,000 | |||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | $ (58,000,000) | 62,000,000 | $ (171,000,000) | 130,000,000 | |||||||||||
Fair Value [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | (55,000,000) | 70,000,000 | (163,000,000) | 155,000,000 | |||||||||||
Settlement [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | [1] | (3,000,000) | (8,000,000) | (8,000,000) | (25,000,000) | ||||||||||
Other Revenue [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [2] | 2,000,000 | 6,000,000 | ||||||||||||
Subsequent to initial transfer to held for sale | 54,000,000 | 105,000,000 | |||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | (58,000,000) | [3] | 56,000,000 | (171,000,000) | [3] | 111,000,000 | |||||||||
Other Revenue [Member] | Fair Value [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [2] | 2,000,000 | 6,000,000 | ||||||||||||
Subsequent to initial transfer to held for sale | 62,000,000 | 130,000,000 | |||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | (55,000,000) | [3] | 64,000,000 | (163,000,000) | [3] | 136,000,000 | |||||||||
Other Revenue [Member] | Settlement [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [1],[2] | 0 | 0 | ||||||||||||
Subsequent to initial transfer to held for sale | [1] | (8,000,000) | (25,000,000) | ||||||||||||
Lower of amortized cost or fair value adjustment on loans held for sale | [1] | $ (3,000,000) | [3] | (8,000,000) | $ (8,000,000) | [3] | (25,000,000) | ||||||||
Provision for Credit Losses [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [4] | 6,000,000 | 19,000,000 | ||||||||||||
Provision for Credit Losses [Member] | Fair Value [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [4] | 6,000,000 | 19,000,000 | ||||||||||||
Provision for Credit Losses [Member] | Settlement [Member] | |||||||||||||||
Lower of amortized cost or fair value adjustment recorded as a component of: | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | [1],[4] | $ 0 | $ 0 | ||||||||||||
|
Troubled Debt Restructures and Nonperforming Receivables - TDR Loans (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
||
---|---|---|---|---|
Financing Receivable, Modifications [Line Items] | ||||
Unpaid principal balance subject to reduction | $ 160 | $ 271 | ||
Receivables Held For Sale [Member] | Real estate secured [Member] | ||||
Financing Receivable, Modifications [Line Items] | ||||
Carrying value | 794 | 1,691 | ||
Unpaid balance | [1] | $ 973 | $ 2,323 | |
|
Troubled Debt Restructures and Nonperforming Receivables - Additional Information Related to TDR Loans (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Receivables [Abstract] | ||||
Average balance of TDR Loans | $ 1,046 | $ 5,654 | $ 1,250 | $ 6,589 |
Interest income recognized on TDR Loans | $ 13 | $ 93 | $ 33 | $ 250 |
Troubled Debt Restructures and Nonperforming Receivables - Nonperforming Portfolio (Details) - USD ($) $ in Millions |
6 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||
Receivables | $ 1,346 | $ 5,674 | ||
Delinquency threshold for loss reserves | 90 days | |||
Nonaccrual loans carried at lower of amortized cost of fair value less cost to sell but less than 90 days delinquent | $ 183 | 252 | ||
Accruing Receivables [Member] | ||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||
Receivables | 1,099 | 5,293 | ||
Nonaccrual Receivables [Member] | ||||
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||||
Receivables | [1] | $ 247 | $ 381 | |
|
Troubled Debt Restructures and Nonperforming Receivables - Additional Information on Nonaccrual Receivables (Details) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Financing Receivable, Recorded Investment, Past Due [Line Items] | ||
Interest income that would have been recorded if the nonaccrual receivable had been current in accordance with contractual terms during the period | $ 14 | $ 41 |
Interest income that was recorded on nonaccrual receivables during the period | $ 2 | $ 9 |
Credit Loss Reserves - Summarizes Changes in Credit Loss Reserves by Product/Class and Related Receivable Balance by Product (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2016 |
||||||||||||
Allowance for Loan and Lease Losses [Roll Forward] | ||||||||||||||||
Credit loss reserves at beginning of period | $ 272 | $ 311 | ||||||||||||||
Provision for credit losses | $ 0 | 12 | [1] | $ 0 | 49 | [1] | ||||||||||
Charge-offs | [1],[2] | (32) | (111) | |||||||||||||
Recoveries | 2 | 5 | ||||||||||||||
Total net charge-offs | (30) | (106) | ||||||||||||||
Credit loss reserves at end of period | 254 | 254 | ||||||||||||||
Reserve components: | ||||||||||||||||
Collectively evaluated for impairment | $ 62 | |||||||||||||||
Individually evaluated for impairment | [3] | 182 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 10 | |||||||||||||||
Total credit loss reserves | 272 | 311 | 254 | |||||||||||||
Receivables held for investment: | ||||||||||||||||
Collectively evaluated for impairment | 6,783 | |||||||||||||||
Individually evaluated for impairment | [3] | 1,109 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 268 | |||||||||||||||
Total receivables held for investment | 8,160 | |||||||||||||||
Initial lower of amortized cost or fair value adjustment | 8 | 25 | ||||||||||||||
Excludes Credit loss reserves for TDR Loans that are carried at the lower of amortized cost or fair value | 9 | |||||||||||||||
Real Estate Secured Receivable Portfolio [Member] | ||||||||||||||||
Allowance for Loan and Lease Losses [Roll Forward] | ||||||||||||||||
Charge-offs | (4) | (24) | ||||||||||||||
First lien [Member] | ||||||||||||||||
Allowance for Loan and Lease Losses [Roll Forward] | ||||||||||||||||
Credit loss reserves at beginning of period | 109 | 137 | ||||||||||||||
Provision for credit losses | [1] | 9 | 32 | |||||||||||||
Charge-offs | [1],[2] | (16) | (69) | |||||||||||||
Recoveries | 0 | 2 | ||||||||||||||
Total net charge-offs | (16) | (67) | ||||||||||||||
Credit loss reserves at end of period | 102 | 102 | ||||||||||||||
Reserve components: | ||||||||||||||||
Collectively evaluated for impairment | 35 | |||||||||||||||
Individually evaluated for impairment | [3] | 57 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 10 | |||||||||||||||
Total credit loss reserves | 109 | 137 | 102 | |||||||||||||
Receivables held for investment: | ||||||||||||||||
Collectively evaluated for impairment | 5,735 | |||||||||||||||
Individually evaluated for impairment | [3] | 511 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 240 | |||||||||||||||
Total receivables held for investment | 6,486 | |||||||||||||||
Second lien [Member] | ||||||||||||||||
Allowance for Loan and Lease Losses [Roll Forward] | ||||||||||||||||
Credit loss reserves at beginning of period | 163 | 174 | ||||||||||||||
Provision for credit losses | [1] | 3 | 17 | |||||||||||||
Charge-offs | [1],[2] | (16) | (42) | |||||||||||||
Recoveries | 2 | 3 | ||||||||||||||
Total net charge-offs | (14) | (39) | ||||||||||||||
Credit loss reserves at end of period | 152 | 152 | ||||||||||||||
Reserve components: | ||||||||||||||||
Collectively evaluated for impairment | 27 | |||||||||||||||
Individually evaluated for impairment | [3] | 125 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 0 | |||||||||||||||
Total credit loss reserves | 163 | 174 | 152 | |||||||||||||
Receivables held for investment: | ||||||||||||||||
Collectively evaluated for impairment | 1,048 | |||||||||||||||
Individually evaluated for impairment | [3] | 598 | ||||||||||||||
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell | 28 | |||||||||||||||
Total receivables held for investment | 1,674 | |||||||||||||||
Provision for Loan and Lease Losses [Member] | ||||||||||||||||
Receivables held for investment: | ||||||||||||||||
Initial lower of amortized cost or fair value adjustment | [4] | $ 6 | $ 19 | |||||||||||||
TDR [Member] | ||||||||||||||||
Receivables held for investment: | ||||||||||||||||
Excludes TDR loans that are carried at the lower of amortized cost or fair value | $ 213 | |||||||||||||||
|
Fair Value Option - Fair Value Option on Liabilities (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
||
---|---|---|---|---|
Fair Value Disclosures [Abstract] | ||||
Long-term debt | $ 250 | $ 1,317 | ||
Due to affiliates | 487 | 485 | ||
Total fixed rate debt accounted for under FVO | 737 | 1,802 | ||
Unpaid principal balance of fixed rate debt accounted for under FVO | [1] | 665 | 1,712 | |
Change in debt balance from foreign currency translation adjustment | $ (11) | $ (310) | ||
|
Fair Value Option - Components of Gain (Loss) on Debt Designated at Fair Value and Related Derivatives (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
||||||||
Mark-to-market on debt designated at fair value : | |||||||||||
Interest rate component | [1] | $ 8 | $ 12 | $ 26 | $ 18 | ||||||
Credit risk component(2) | [1],[2] | 0 | 8 | 0 | 19 | ||||||
Total mark-to-market on debt designated at fair value | [1] | 8 | 20 | 26 | 37 | ||||||
Mark-to-market on the related derivatives | [1],[3] | (11) | (15) | (26) | (24) | ||||||
Net realized gains on the related derivatives | [1] | 7 | 11 | 16 | 27 | ||||||
Gain on debt designated at fair value and related derivatives | 4 | 16 | 16 | 40 | |||||||
Fair value option debt attributable to credit spread, before tax (less than $1 million for the 3 months ended June 30, 2017) | 1 | (8) | |||||||||
Foreign currency translation gains (losses) recorded in derivatives | (51) | 20 | (72) | (46) | |||||||
Offsetting gains (losses) recorded in derivative related income (expense) | $ 51 | $ (20) | $ 72 | $ 46 | |||||||
|
Fair Value Option - Additional Information (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Cumulative increased value of debt through fair value option adjustments | $ 72 | $ 90 |
Derivative Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|
Derivative [Line Items] | |||||
Notional values of derivative contracts | $ 419 | $ 419 | $ 1,765 | ||
Decrease in debt carrying value due to fair value hedge | 14 | 14 | 15 | ||
Losses on current derivative instruments designated as cash flow hedges are reported in OCI net of tax (less than $1 million at June 30, 2017 and December 31, 2016) | 1 | 1 | 1 | ||
Unrealized net losses on cash flow hedges (less than $1 million) | 1 | ||||
HSBC Bank USA [Member] | |||||
Derivative [Line Items] | |||||
Notional values of derivative contracts | 419 | 419 | 1,800 | ||
Fair value of collateral agreements with affiliate counterparties | 50 | 50 | $ 317 | ||
Derivative related income (expense) [Member] | Interest Rate Contracts [Member] | |||||
Derivative [Line Items] | |||||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | $ 0 | $ 2 | $ 0 | $ (117) |
Derivative Financial Instruments - Schedule of Derivative Instruments (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||||||
---|---|---|---|---|---|---|---|---|---|
Derivative Asset [Abstract] | |||||||||
Derivatives accounted for as cash flow hedges associated with debt: | [1] | $ 0 | $ 0 | ||||||
Total Derivative Financial Assets | [1] | 18 | 15 | ||||||
Less: Gross amounts offset in the balance sheet | [1],[2] | (18) | (15) | ||||||
Net amounts of derivative financial assets and liabilities presented in the balance sheet | [1],[3] | 0 | 0 | ||||||
Derivative Liability [Abstract] | |||||||||
Derivatives accounted for as cash flow hedges associated with debt: | [1] | (47) | (58) | ||||||
Total Derivative Financial Liabilities | [1] | (63) | (344) | ||||||
Less: Gross amounts offset in the balance sheet | [1],[2] | 63 | 332 | ||||||
Net amounts of derivative financial assets and liabilities presented in the balance sheet | [1],[3] | 0 | (12) | ||||||
Debt [Member] | |||||||||
Derivative Asset [Abstract] | |||||||||
Non-qualifying hedge activities: | [1] | 18 | 15 | ||||||
Derivative Liability [Abstract] | |||||||||
Non-qualifying hedge activities: | [1] | (16) | (286) | ||||||
Currency swaps [Member] | |||||||||
Derivative Asset [Abstract] | |||||||||
Derivatives accounted for as cash flow hedges associated with debt: | [1] | 0 | 0 | ||||||
Derivative Liability [Abstract] | |||||||||
Derivatives accounted for as cash flow hedges associated with debt: | [1] | (47) | (58) | ||||||
Cross currency interest rate swaps [Member] | Debt [Member] | |||||||||
Derivative Asset [Abstract] | |||||||||
Non-qualifying hedge activities: | [1] | 18 | 15 | ||||||
Derivative Liability [Abstract] | |||||||||
Non-qualifying hedge activities: | [1] | $ (16) | $ (286) | ||||||
|
Derivative Financial Instruments - Gain or Loss Recorded on Our Cash Flow Hedging Relationships (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) | $ 0 | $ 6 | $ 0 | $ 17 |
Interest rate swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), Interest Rate Swaps | 0 | 7 | 0 | 18 |
Currency swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized in AOCI on Derivative (Effective Portion), Currency Swaps | 0 | (1) | 0 | (1) |
Interest Expense [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Reclassed From AOCI into Income (Effective Portion) | 0 | (4) | 0 | (7) |
Interest Expense [Member] | Interest rate swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Reclassed from AOCI into Income (Effective Portion), Interest Rate Swaps | 0 | 0 | 0 | 0 |
Interest Expense [Member] | Currency swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Reclassed from AOCI into Income (Effective Portion), Currency swaps | 0 | (4) | 0 | (7) |
Derivative related income (loss) [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized In Income on Derivative (Ineffective Portion) | 1 | 1 | 3 | 5 |
Derivative related income (loss) [Member] | Interest rate swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized in Income on Derivative (Ineffective Portion), Interest Rate Swaps | 0 | 0 | 0 | 0 |
Derivative related income (loss) [Member] | Currency swaps [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Gain (Loss) Recognized in Income on Derivative (Ineffective Portion, Currency swaps) | $ 1 | $ 1 | $ 3 | $ 5 |
Derivative Financial Instruments - Gain or Loss Recorded on Our Non-Qualifying Hedges (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Interest Rate Contracts [Member] | Derivative related income (expense) [Member] | ||||
Derivatives, Fair Value [Line Items] | ||||
Amount of Gain (Loss) Recognized in Derivative Related Income (Expense) | $ 0 | $ 2 | $ 0 | $ (117) |
Derivative Financial Instruments - Gain or Loss Recorded on Derivatives Related to Fair Value Option Debt Primarily Due to Changes in Interest Rates (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Total amount of Gain (loss) recognized in derivative related income (expense) | $ (4) | $ (4) | $ (10) | $ 3 |
Gain (loss) on debt designated at fair value and related derivatives [Member] | Cross currency interest rate contracts [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Currency contracts, Gain on debt designated at fair value and related derivatives, Amount of Gain (Loss) Recognized in Derivative Related Income (Expense) | $ (4) | $ (4) | $ (10) | $ 3 |
Derivative Financial Instruments - Notional Values of Derivative Contracts (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivatives, Fair Value [Line Items] | ||
Total | $ 419 | $ 1,765 |
Currency swaps [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Total | 216 | 1,562 |
Derivatives designated as hedging instruments [Member] | Currency swaps [Member] | ||
Derivatives, Fair Value [Line Items] | ||
Total | $ 203 | $ 203 |
Accumulated Other Comprehensive Income (Loss) - Summary of Changes in Accumulated Other Comprehensive Loss (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
||||||||
Unrealized Gains (Losses) on Fair Value Option Debt Attributable to Credit [Abstract] | ||||||||||||
Balance at beginning of period | $ (24,000,000) | $ 0 | $ (19,000,000) | $ 0 | ||||||||
Cumulative effect adjustment to initially apply new accounting guidance for fair value option debt attributable to credit, net of tax | [1] | $ (19,000,000) | ||||||||||
Net (loss) arising during period, net of tax | (5,000,000) | 0 | ||||||||||
Total other comprehensive loss for period | (5,000,000) | 0 | ||||||||||
Balance at end of period | (24,000,000) | 0 | (24,000,000) | 0 | ||||||||
Cumulative effect adjustment to initially apply new accounting guidance for fair value option debt attributable to credit, tax | (11,000,000) | 0 | ||||||||||
Net (loss) arising during period, tax | 0 | 0 | (3,000,000) | 0 | ||||||||
Unrealized gains (losses) on cash flow hedging instruments: | ||||||||||||
Balance at beginning of period | 0 | (7,000,000) | 0 | (15,000,000) | ||||||||
Net gains arising during period, net of tax | 0 | 4,000,000 | 0 | 11,000,000 | ||||||||
Reclassification adjustment for losses realized in net income, net of tax | [2] | 0 | 3,000,000 | 0 | 4,000,000 | |||||||
Total other comprehensive income for period | 0 | 7,000,000 | 0 | 15,000,000 | ||||||||
Balance at end of period | 0 | 0 | 0 | 0 | ||||||||
Net gains arising during period, taxes | 0 | 2,000,000 | 0 | 6,000,000 | ||||||||
Reclassification adjustment for losses realized in net income, taxes | 0 | (1,000,000) | 0 | 3,000,000 | ||||||||
Pension and postretirement benefit plan liability: | ||||||||||||
Balance at beginning of period | 23,000,000 | 28,000,000 | 24,000,000 | 29,000,000 | ||||||||
Reclassification adjustment for (gains) losses realized in net income, net of tax | [3] | (9,000,000) | (2,000,000) | (10,000,000) | (3,000,000) | |||||||
Total other comprehensive income for period | (9,000,000) | (2,000,000) | (10,000,000) | (3,000,000) | ||||||||
Balance at end of period | 14,000,000 | 26,000,000 | 14,000,000 | 26,000,000 | ||||||||
Reclassification adjustment for losses realized in net income, tax | (5,000,000) | 0 | (6,000,000) | (1,000,000) | ||||||||
Total accumulated other comprehensive income (loss) at end of period | $ (10,000,000) | $ 26,000,000 | (10,000,000) | 26,000,000 | $ 24,000,000 | |||||||
As Previously Reported [Member] | ||||||||||||
Unrealized Gains (Losses) on Fair Value Option Debt Attributable to Credit [Abstract] | ||||||||||||
Balance at beginning of period | $ 0 | $ 0 | ||||||||||
|
Pension and Other Postretirement Benefits - Components of Pension Expense for Defined Benefit Pension Plan (Detail) - Pension Plan, Defined Benefit [Member] - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Defined Benefit Plan Disclosure [Line Items] | ||||
Interest cost on projected benefit obligation | $ 12 | $ 12 | $ 24 | $ 24 |
Expected return on assets | (14) | (14) | (28) | (28) |
Amortization of net actuarial loss | 5 | 5 | 11 | 12 |
Administrative costs | 1 | 1 | 2 | 2 |
Net periodic postretirement benefit cost | $ 4 | $ 4 | $ 9 | $ 10 |
Pension and Other Postretirement Benefits-Post Retirement Benefit Cost (Details) - Other Postretirement Benefit Plan, Defined Benefit [Member] - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2015 |
|
Defined Benefit Plan Disclosure [Line Items] | |||||
Interest Cost | $ 1 | $ 1 | $ 2 | $ 2 | |
Amortization of reduction in liability resulting from plan amendment | (1) | (1) | (3) | (3) | |
Gain from curtailment | (13) | 0 | (13) | 0 | $ (46) |
Net periodic postretirement benefit cost | $ (13) | $ 0 | $ (14) | $ (1) |
Related Party Transactions - Related Party Balances and Income and (Expense) Generated by Related Party Transactions (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
||||||||||
Assets: | ||||||||||||||
Cash | $ 50 | $ 50 | $ 128 | |||||||||||
Interest bearing deposits with banks | 0 | 0 | 1,500 | |||||||||||
Securities purchased under agreements to resell | 5,269 | 5,269 | 2,392 | |||||||||||
Other assets | 1,149 | 1,149 | 427 | |||||||||||
Total assets | 10,319 | 10,319 | 13,882 | |||||||||||
Liabilities | ||||||||||||||
Due to affiliates | 799 | 799 | 3,300 | |||||||||||
Other liabilities | 473 | 473 | 610 | |||||||||||
Total liabilities | 4,504 | $ 4,504 | 8,448 | |||||||||||
General term of securities purchased under an agreement to resell | 120 days | |||||||||||||
Income/(Expense): | ||||||||||||||
Servicing and other fees from (to) HSBC affiliates | 0 | $ 2 | $ (27) | $ 6 | ||||||||||
Support services from HSBC affiliates | (21) | (38) | (44) | (80) | ||||||||||
HSBC affiliates [Member] | ||||||||||||||
Assets: | ||||||||||||||
Cash | 50 | 50 | 128 | |||||||||||
Interest bearing deposits with banks | 0 | 0 | 1,500 | |||||||||||
Securities purchased under agreements to resell | [1] | 5,269 | 5,269 | 2,392 | ||||||||||
Other assets | 98 | 98 | 114 | |||||||||||
Total assets | 5,417 | 5,417 | 4,134 | |||||||||||
Liabilities | ||||||||||||||
Due to affiliates | [2] | 799 | 799 | 3,300 | ||||||||||
Other liabilities | 31 | 31 | 41 | |||||||||||
Total liabilities | 830 | 830 | $ 3,341 | |||||||||||
Income/(Expense): | ||||||||||||||
Interest income from HSBC affiliates | 11 | 2 | 20 | 3 | ||||||||||
Interest expense paid to HSBC affiliates | [3] | (12) | (69) | (41) | (144) | |||||||||
Net interest income (expense) | (1) | (67) | (21) | (141) | ||||||||||
Servicing and other fees from (to) HSBC affiliates | 0 | 2 | (27) | 6 | ||||||||||
Support services from HSBC affiliates | (21) | (38) | (44) | (80) | ||||||||||
Stock based compensation income (expense) with HSBC | [4] | 0 | (1) | (1) | 0 | |||||||||
Borrowings [Member] | HSBC affiliates [Member] | ||||||||||||||
Income/(Expense): | ||||||||||||||
Gain (loss) on FVO debt with affiliate | $ (1) | $ 12 | $ 2 | $ 12 | ||||||||||
|
Related Party Transactions - Schedule of due to Affiliated entities (Details) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Related Party Transaction [Line Items] | ||
Due to affiliates | $ 799 | $ 3,300 |
Due to affiliate, carried at fair value | 487 | 485 |
HSBC USA, Inc. [Member] | ||
Related Party Transaction [Line Items] | ||
Due to affiliates | 0 | 2,500 |
HSBC Holdings plc [Member] | ||
Related Party Transaction [Line Items] | ||
Due to affiliates | $ 799 | $ 800 |
Related Party Transactions - Additional Information (Detail) - USD ($) |
3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
|||
Related Party Transaction [Line Items] | |||||||
Long-term debt | $ 3,071,000,000 | $ 3,071,000,000 | $ 4,340,000,000 | ||||
Due to affiliates | 799,000,000 | 799,000,000 | 3,300,000,000 | ||||
Notional values of derivative contracts | 419,000,000 | 419,000,000 | 1,765,000,000 | ||||
Interest bearing deposits with banks | 0 | 0 | 1,500,000,000 | ||||
Derivative related liabilities | 0 | 0 | 12,000,000 | ||||
Derivative related expense (less than $1 million for the 3 months ended June 30, 2017) | 1,000,000 | $ 3,000,000 | 3,000,000 | $ (112,000,000) | |||
HSBC USA, Inc. [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Due to affiliates | 0 | 0 | 2,500,000,000 | ||||
HSBC USA, Inc. [Member] | Revolving Credit Facility [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Borrowing capacity of credit facility | 5,000,000,000 | $ 5,000,000,000 | |||||
Debt instrument, term | 364 days | ||||||
Maximum maturity period for borrowings | 5 years | ||||||
Repayments of Lines of Credit | $ 2,500,000,000 | ||||||
Loss on extinguishment of debt | 28,000,000 | ||||||
HSBC Holdings plc [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Due to affiliates | 799,000,000 | 799,000,000 | 800,000,000 | ||||
HSBC North America [Member] | Revolving Credit Facility [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Borrowing capacity of credit facility | 1,000,000,000 | $ 1,000,000,000 | 1,000,000,000 | ||||
Debt instrument, term | 364 days | ||||||
Amount of credit facility outstanding | 0 | $ 0 | 0 | ||||
HSBC Bank USA [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Notional values of derivative contracts | 419,000,000 | 419,000,000 | 1,800,000,000 | ||||
Fair value of our agreements with affiliate counterparties required the affiliate to provide collateral | 50,000,000 | 50,000,000 | 317,000,000 | ||||
Receivables services to affiliates | 70,000,000 | 70,000,000 | 559,000,000 | ||||
HSBC affiliates [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Due to affiliates | [1] | 799,000,000 | 799,000,000 | 3,300,000,000 | |||
Interest bearing deposits with banks | 0 | 0 | 1,500,000,000 | ||||
HSBC Securities (USA) Inc. [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Receivable transaction assistance fees (less than $1 million for the 3 months ended June 30, 2017) | 1,000,000 | 2,000,000 | 5,000,000 | 2,000,000 | |||
Discontinued Operations [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Derivative related expense (less than $1 million for the 3 months ended June 30, 2017) | 1,000,000 | $ 1,000,000 | |||||
Series C Preferred Stock [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Number of shares of stock issued (shares) | 1,000 | ||||||
Dividend paid on preferred stock | 21,000,000 | $ 21,000,000 | $ 43,000,000 | $ 43,000,000 | |||
Subordinated Debt [Member] | Public Subordinated Debt Issue Maturing 2021 [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Long-term debt | 3,000,000,000 | 3,000,000,000 | |||||
Discontinued Operations [Member] | Visa Class B Shares [Member] | HSBC USA, Inc. [Member] | |||||||
Related Party Transaction [Line Items] | |||||||
Notional values of derivative contracts | 61,000,000 | 61,000,000 | 50,000,000 | ||||
Derivative related liabilities | $ 6,000,000 | $ 6,000,000 | $ 5,000,000 | ||||
|
Variable Interest Entities - Summary of Assets and Liabilities of Consolidated Secured Financing VIEs (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
||||
---|---|---|---|---|---|---|
Variable Interest Entity [Line Items] | ||||||
Receivables held for sale | [1],[2] | $ 1,346 | $ 5,674 | |||
Long-term debt | 3,071 | 4,340 | ||||
Variable Interest Entity [Member] | ||||||
Variable Interest Entity [Line Items] | ||||||
Receivables held for sale | 428 | 750 | ||||
Total, Consolidated Assets | 428 | 750 | ||||
Other liabilities | (6) | (11) | ||||
Long-term debt | 191 | 404 | ||||
Total, Consolidated Liabilities | $ 185 | $ 393 | ||||
|
Fair Value Measurements - Carrying and Estimated Fair Value (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Financial assets: | ||
Cash | $ 50 | $ 128 |
Interest bearing deposits with banks | 0 | 1,500 |
Securities purchased under agreements to resell | 5,269 | 2,392 |
Financial liabilities: | ||
Long-term debt | 3,071 | 4,340 |
Derivative financial liabilities | 0 | 12 |
Level 1 [Member] | ||
Financial assets: | ||
Cash | 50 | 128 |
Interest bearing deposits with banks | 1,500 | |
Securities purchased under agreements to resell | 0 | 0 |
Real estate secured receivables held for sale | 0 | 0 |
Due from affiliates | 0 | 0 |
Financial liabilities: | ||
Due to affiliates carried at fair value | 0 | 0 |
Due to affiliates not carried at fair value | 0 | 0 |
Derivative financial liabilities | 0 | |
Level 2 [Member] | ||
Financial assets: | ||
Cash | 0 | 0 |
Interest bearing deposits with banks | 0 | |
Securities purchased under agreements to resell | 5,269 | 2,392 |
Real estate secured receivables held for sale | 0 | 0 |
Due from affiliates | 98 | 114 |
Financial liabilities: | ||
Due to affiliates carried at fair value | 487 | 485 |
Due to affiliates not carried at fair value | 337 | 2,875 |
Derivative financial liabilities | 12 | |
Level 3 [Member] | ||
Financial assets: | ||
Cash | 0 | 0 |
Interest bearing deposits with banks | 0 | |
Securities purchased under agreements to resell | 0 | 0 |
Real estate secured receivables held for sale | 1,478 | 6,129 |
Due from affiliates | 0 | 0 |
Financial liabilities: | ||
Due to affiliates carried at fair value | 0 | 0 |
Due to affiliates not carried at fair value | 0 | 0 |
Derivative financial liabilities | 0 | |
Carrying Value [Member] | ||
Financial assets: | ||
Cash | 50 | 128 |
Interest bearing deposits with banks | 1,500 | |
Securities purchased under agreements to resell | 5,269 | 2,392 |
Real estate secured receivables held for sale | 1,346 | 5,674 |
Due from affiliates | 98 | 114 |
Financial liabilities: | ||
Due to affiliates carried at fair value | 487 | 485 |
Due to affiliates not carried at fair value | 312 | 2,815 |
Derivative financial liabilities | 12 | |
Estimated Fair Value [Member] | ||
Financial assets: | ||
Cash | 50 | 128 |
Interest bearing deposits with banks | 1,500 | |
Securities purchased under agreements to resell | 5,269 | 2,392 |
Real estate secured receivables held for sale | 1,478 | 6,129 |
Due from affiliates | 98 | 114 |
Financial liabilities: | ||
Due to affiliates carried at fair value | 487 | 485 |
Due to affiliates not carried at fair value | 337 | 2,875 |
Derivative financial liabilities | 12 | |
Long-term Debt Carried at Fair Value [Member] | Level 1 [Member] | ||
Financial liabilities: | ||
Long-term debt | 0 | 0 |
Long-term Debt Carried at Fair Value [Member] | Level 2 [Member] | ||
Financial liabilities: | ||
Long-term debt | 250 | 1,317 |
Long-term Debt Carried at Fair Value [Member] | Level 3 [Member] | ||
Financial liabilities: | ||
Long-term debt | 0 | 0 |
Long-term Debt Carried at Fair Value [Member] | Carrying Value [Member] | ||
Financial liabilities: | ||
Long-term debt | 250 | 1,317 |
Long-term Debt Carried at Fair Value [Member] | Estimated Fair Value [Member] | ||
Financial liabilities: | ||
Long-term debt | 250 | 1,317 |
Long Term Debt Not Carried at Fair Value [Member] | Level 1 [Member] | ||
Financial liabilities: | ||
Long-term debt | 0 | 0 |
Long Term Debt Not Carried at Fair Value [Member] | Level 2 [Member] | ||
Financial liabilities: | ||
Long-term debt | 3,166 | 3,359 |
Long Term Debt Not Carried at Fair Value [Member] | Level 3 [Member] | ||
Financial liabilities: | ||
Long-term debt | 0 | 0 |
Long Term Debt Not Carried at Fair Value [Member] | Carrying Value [Member] | ||
Financial liabilities: | ||
Long-term debt | 2,821 | 3,023 |
Long Term Debt Not Carried at Fair Value [Member] | Estimated Fair Value [Member] | ||
Financial liabilities: | ||
Long-term debt | $ 3,166 | $ 3,359 |
Fair Value Measurements - Fair Value of Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($) $ in Millions |
Jun. 30, 2017 |
Dec. 31, 2016 |
|||
---|---|---|---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative related liabilities | $ 0 | $ (12) | |||
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Due to affiliates carried at fair value | 0 | 0 | |||
Derivative related liabilities | 0 | ||||
Significant Other Observable Inputs (Level 2) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Due to affiliates carried at fair value | (487) | (485) | |||
Derivative related liabilities | (12) | ||||
Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Due to affiliates carried at fair value | 0 | 0 | |||
Derivative related liabilities | 0 | ||||
Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Netting | [1] | (18) | (15) | ||
Netting | [1] | 63 | 332 | ||
Recurring [Member] | Derivative netting [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Netting | [1] | (18) | (15) | ||
Netting | [1] | 63 | 332 | ||
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Total assets | 0 | 0 | |||
Due to affiliates carried at fair value | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 | |||
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Currency swaps [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Derivative netting [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 18 | 15 | |||
Total assets | 18 | 15 | |||
Due to affiliates carried at fair value | (487) | (485) | |||
Derivative related liabilities before netting | (63) | (344) | |||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | (800) | (2,146) | |||
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Currency swaps [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 18 | 15 | |||
Derivative related liabilities before netting | (63) | (344) | |||
Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | Derivative netting [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Total assets | 0 | 0 | |||
Due to affiliates carried at fair value | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 | |||
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Currency swaps [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | Derivative netting [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets before netting | 0 | 0 | |||
Derivative related liabilities before netting | 0 | 0 | |||
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Long term debt carried at fair value | 0 | 0 | |||
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Significant Other Observable Inputs (Level 2) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Long term debt carried at fair value | (250) | (1,317) | |||
Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Long term debt carried at fair value | 0 | 0 | |||
Estimated Fair Value [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Due to affiliates carried at fair value | (487) | (485) | |||
Derivative related liabilities | (12) | ||||
Estimated Fair Value [Member] | Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets | 0 | 0 | |||
Total assets | 0 | 0 | |||
Due to affiliates carried at fair value | (487) | (485) | |||
Derivative related liabilities | 0 | (12) | |||
Financial and Nonfinancial Liabilities, Fair Value Disclosure | (737) | (1,814) | |||
Estimated Fair Value [Member] | Recurring [Member] | Currency swaps [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets | 18 | 15 | |||
Derivative related liabilities | (63) | (344) | |||
Estimated Fair Value [Member] | Recurring [Member] | Derivative netting [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Derivative financial assets | (18) | (15) | |||
Derivative related liabilities | 63 | 332 | |||
Estimated Fair Value [Member] | Long-term Debt Carried at Fair Value [Member] | Recurring [Member] | |||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||
Long term debt carried at fair value | $ (250) | $ (1,317) | |||
|
Fair Value Measurements - Assets and Liabilities Recorded at Fair Value on Non-recurring Basis (Detail) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Dec. 31, 2016 |
||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total Gains (Losses) | $ 57 | $ (72) | $ 168 | $ (171) | ||||||
Real estate secured receivables held for sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total Gains (Losses) | 58 | (62) | 171 | (130) | ||||||
Receivables Held-for-Investment [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total Gains (Losses) | [1] | (5) | (31) | |||||||
Real Estate Owned [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total Gains (Losses) | [2] | (1) | (5) | (3) | (10) | |||||
Level 1 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 0 | 0 | $ 0 | |||||||
Level 2 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 0 | 0 | 0 | |||||||
Level 3 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 1,478 | 1,478 | 6,129 | |||||||
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total assets at fair value on a non-recurring basis | 0 | 0 | 0 | 0 | ||||||
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Real estate secured receivables held for sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 0 | 0 | 0 | 0 | ||||||
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Receivables Held-for-Investment [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Receivables held for investment | [1] | 0 | 0 | |||||||
Non-Recurring Fair Value Measurements [Member] | Level 1 [Member] | Real Estate Owned [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Real estate owned | [2] | 0 | 0 | 0 | 0 | |||||
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total assets at fair value on a non-recurring basis | 20 | 1,044 | 20 | 1,044 | ||||||
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Real estate secured receivables held for sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 0 | 707 | 0 | 707 | ||||||
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Receivables Held-for-Investment [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Receivables held for investment | [1] | 268 | 268 | |||||||
Non-Recurring Fair Value Measurements [Member] | Level 2 [Member] | Real Estate Owned [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Real estate owned | [2] | 20 | 69 | 20 | 69 | |||||
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total assets at fair value on a non-recurring basis | 1,346 | 3,089 | 1,346 | 3,089 | ||||||
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Real estate secured receivables held for sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 1,346 | 3,089 | 1,346 | 3,089 | 5,674 | |||||
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Receivables Held-for-Investment [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Receivables held for investment | [1] | 0 | 0 | |||||||
Non-Recurring Fair Value Measurements [Member] | Level 3 [Member] | Real Estate Owned [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Real estate owned | [2] | 0 | 0 | 0 | 0 | |||||
Total [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 1,478 | 1,478 | $ 6,129 | |||||||
Total [Member] | Non-Recurring Fair Value Measurements [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total assets at fair value on a non-recurring basis | 1,366 | 4,133 | 1,366 | 4,133 | ||||||
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Real estate secured receivables held for sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Total receivables held for sale | 1,346 | 3,796 | 1,346 | 3,796 | ||||||
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Receivables Held-for-Investment [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Receivables held for investment | [1] | 268 | 268 | |||||||
Total [Member] | Non-Recurring Fair Value Measurements [Member] | Real Estate Owned [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Real estate owned | [2] | 20 | 69 | 20 | 69 | |||||
Real Estate Secured Receivables Held for Sale [Member] | ||||||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||||||||
Assets transferred from Level 3 to Level 2 | $ 554 | $ 3,627 | $ 4,219 | $ 4,926 | ||||||
|
Fair Value Measurements - Quantitative Information for Non-Recurring Fair Value Measurements (Detail) - Level 3 [Member] - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
Jun. 30, 2016 |
||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Receivables held for sale carried at the lower of amortized cost or fair value | $ 1,478 | $ 6,129 | ||||
Real estate secured receivables held for sale [Member] | Third Party Appraisal Valuation [Member] | Minimum [Member] | ||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Collateral loss severity rates | [1] | 0.00% | 0.00% | |||
Expenses incurred through collateral disposition | 5.00% | 5.00% | ||||
Market discount rate | 4.00% | 4.00% | ||||
Real estate secured receivables held for sale [Member] | Third Party Appraisal Valuation [Member] | Maximum [Member] | ||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Collateral loss severity rates | [1] | 100.00% | 100.00% | |||
Expenses incurred through collateral disposition | 10.00% | 10.00% | ||||
Market discount rate | 14.00% | 14.00% | ||||
Real estate secured receivables held for sale [Member] | Non-Recurring Fair Value Measurements [Member] | ||||||
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items] | ||||||
Receivables held for sale carried at the lower of amortized cost or fair value | $ 1,346 | $ 5,674 | $ 3,089 | |||
|
Fair Value Measurements - Additional Information (Detail) |
6 Months Ended | |
---|---|---|
Jun. 30, 2017 |
Dec. 31, 2016 |
|
Fair Value Disclosures [Abstract] | ||
Weighted average collateral loss severity rate (percent) | 44.00% | 51.00% |
Minimum period to update carrying values for real estate owned properties | 45 days |
Litigation and Regulatory Matters - Additional Information (Detail) |
Jun. 30, 2017
USD ($)
|
---|---|
Loss Contingency [Abstract] | |
Estimate of possible loss | $ 400,000,000 |
New Accounting Pronouncements (Details) - USD ($) $ in Millions |
Dec. 31, 2016 |
Dec. 31, 2015 |
||
---|---|---|---|---|
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Cumulative effect of new accounting principle | [1] | $ (19) | ||
Accounting Standards Update 2016-01 [Member] | Adjustments for New Accounting Principle, Early Adoption [Member] | Accumulated other comprehensive income (loss) | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Cumulative effect of new accounting principle | (19) | $ 0 | ||
Accounting Standards Update 2016-01 [Member] | Adjustments for New Accounting Principle, Early Adoption [Member] | Accumulated deficit | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Cumulative effect of new accounting principle | 19 | 0 | ||
Accounting Standards Update 2016-09 [Member] | Adjustments for New Accounting Principle, Early Adoption [Member] | Accumulated deficit | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Cumulative effect of new accounting principle | $ 4 | $ 0 | ||
|
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