Business Segments

3 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Business Segments

Business Segments

We have four distinct business segments that we utilize for management reporting and analysis purposes, which are aligned with HSBC's global businesses and business strategy: Retail Banking and Wealth Management ("RBWM"), Commercial Banking ("CMB"), Global Banking and Markets ("GB&M") and Private Banking ("PB"). There have been no changes in the basis of our segmentation or measurement of segment profit as compared with the presentation in our 2014 Form 10-K.

Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply International Financial Reporting Standards ("IFRS") and, as a result, our segment results are prepared and presented using financial information prepared on the basis of HSBC Group's accounting and reporting policies ("Group Reporting Basis") (a non-U.S. GAAP financial measure) as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees, are primarily made on this basis. However, we continue to monitor capital adequacy, establish dividend policy and report to regulatory agencies on a U.S. GAAP basis.

We are currently in the process of re-evaluating the financial information used to manage our businesses, including the scope and content of the U.S. GAAP financial data being reported to our Management and our Board. To the extent we make changes to this reporting in 2015, we will evaluate any impact such changes may have on our segment reporting.

A summary of differences between U.S. GAAP and Group Reporting Basis as they impact our results are presented in Note 23, "Business Segments," in our 2014 Form 10-K. There have been no significant changes since December 31, 2014 in the differences between U.S. GAAP and Group Reporting Basis.

The following table summarizes the results for each segment on a Group Reporting Basis, as well as provides a reconciliation of total results under the Group Reporting Basis to U.S. GAAP consolidated totals:

	Group Reporting Basis Consolidated Amounts
	RBWM			CMB		GB&M		PB			Other			Adjustments/ Reconciling Items			Total		Group Reporting Basis Adjustments(3)			Group Reporting Basis Reclassi- fications(4)			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2015
Net interest income(1)	$	197		$	201	$	118	$	49		$	(6	)	$	(5	)	$	554	$	(14	)	$	66		$	606
Other operating income	87			77		266		24			82			5			541		(10		)	(67		)	464
Total operating income	284			278		384		73			76			—			1,095		(24		)	(1		)	1,070
Loan impairment charges	22			10		8		—			—			—			40		14			(1		)	53
	262			268		376		73			76			—			1,055		(38		)	—			1,017
Operating expenses(2)	281			169		259		58			27			—			794		(17		)	—			777
Profit (loss) before income tax expense	$	(19	)	$	99	$	117	$	15		$	49		$	—		$	261	$	(21	)	$	—		$	240
Balances at end of period:
Total assets	$	19,856		$	30,788	$	198,942	$	8,121		$	804		$	—		$	258,511	$	(56,958	)	$	41		$	201,594
Total loans, net	16,902			29,649		23,341		6,424			—			—			76,316		891			3,548			80,755
Goodwill	581			358		—		325			—			—			1,264		348			—			1,612
Total deposits	29,240			22,209		38,891		10,973			—			—			101,313		(5,975		)	23,756			119,094
Three Months Ended March 31, 2014
Net interest income(1)	$	198		$	187	$	97	$	49		$	(13	)	$	(5	)	$	513	$	(15	)	$	21		$	519
Other operating income	113			68		294		25			25			5			530		(4		)	(26		)	500
Total operating income	311			255		391		74			12			—			1,043		(19		)	(5		)	1,019
Loan impairment charges	2			7		15		(5		)	—			—			19		4			(7		)	16
	309			248		376		79			12			—			1,024		(23		)	2			1,003
Operating expenses(2)	279			158		239		55			25			—			756		(8		)	2			750
Profit (loss) before income tax expense	$	30		$	90	$	137	$	24		$	(13	)	$	—		$	268	$	(15	)	$	—		$	253
Balances at end of period:
Total assets	$	19,143		$	25,594	$	181,545	$	8,231		$	723		$	—		$	235,236	$	(47,888	)	$	(174	)	$	187,174
Total loans, net	16,177			24,509		17,485		6,022			—			—			64,193		1,411			2,719			68,323
Goodwill	581			358		—		325			—			—			1,264		348			—			1,612
Total deposits	30,206			21,254		30,126		12,529			—			—			94,115		(3,247		)	14,663			105,531

⁽¹⁾  Net interest income of each segment represents the difference between actual interest earned on assets and interest paid on liabilities of the segment adjusted for a funding charge or credit. Segments are charged a cost to fund assets (e.g. customer loans) and receive a funding credit for funds provided (e.g. customer deposits) based on equivalent market rates. The objective of these charges/credits is to transfer interest rate risk from the segments to one centralized unit in Balance Sheet Management and more appropriately reflect the profitability of segments.

⁽²⁾  Expenses for the segments include fully apportioned corporate overhead expenses.

⁽³⁾  Represents adjustments associated with differences between the Group Reporting Basis and the U.S. GAAP basis of accounting.

⁽⁴⁾  Represents differences in financial statement presentation between Group Reporting Basis and U.S. GAAP.