Business Segments

We have five distinct business segments that we utilize for management reporting and analysis purposes, which are aligned with HSBC's global business strategy: Retail Banking and Wealth Management ("RBWM"), Commercial Banking ("CMB"), Global Banking and Markets ("GB&M"), Private Banking ("PB") and a Corporate Center ("CC"). There have been no changes in the basis of our segmentation as compared with the presentation in our 2018 Form 10-K.

Net interest income of each segment represents the difference between actual interest earned on assets and interest incurred on liabilities of the segment, adjusted for a funding charge or credit that includes both interest rate and liquidity components. Segments are charged a cost to fund assets (e.g. customer loans) and receive a funding credit for funds provided (e.g. customer deposits) based on equivalent market rates that incorporate both repricing (interest rate risk) and tenor (liquidity) characteristics. The objective of these charges/credits is to transfer interest rate risk from the segments to one centralized unit in Balance Sheet Management, recognize term funding costs/benefits and more appropriately reflect the profitability of the segments.

Certain other revenue and operating expense amounts are also apportioned among the business segments based upon the benefits derived from this activity or the relationship of this activity to other segment activity. These inter-segment transactions have not been eliminated, and we generally account for them as if they were with third parties.

Our segment results are presented in accordance with HSBC Group accounting and reporting policies, which apply IFRSs as issued by the IASB and endorsed by the EU, and, as a result, our segment results are prepared and presented using financial information prepared on the Group Reporting Basis as operating results are monitored and reviewed, trends are evaluated and decisions about allocating resources, such as employees, are primarily made on this basis. We continue, however, to monitor capital adequacy and report to regulatory agencies on a U.S. GAAP basis.

There have been no changes in the measurement of segment profit as compared with the presentation in our 2018 Form 10-K.

A summary of significant differences between U.S. GAAP and the Group Reporting Basis as they impact our results are summarized in Note 23, "Business Segments," in our 2018 Form 10-K. Other than the change discussed below, there have been no other significant changes since December 31, 2018 in the differences between U.S. GAAP and the Group Reporting Basis impacting our results.

Property - The sale and leaseback of our 452 Fifth Avenue property, including the 1 W. 39th Street building, in 2010 resulted in the recognition of a gain under the Group Reporting Basis, while under U.S. GAAP, such gain was historically deferred and was being recognized over the lease term. In January 2019, we adopted new accounting guidance under U.S. GAAP which resulted in a cumulative effect adjustment to recognize the previously deferred gain in retained earnings as of January 1, 2019.

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			CC			Total			Group Reporting Basis Adjustments⁽¹⁾			Group Reporting Basis Reclassi- fications⁽²⁾			U.S. GAAP Consolidated Totals
	(in millions)
Three Months Ended March 31, 2019
Net interest income	$	221		$	201		$	151		$	37		$	14		$	624		$	6		$	(68	)	$	562
Other operating income	65			58			175			16			24			338			(17		)	69			390
Total operating income	286			259			326			53			38			962			(11		)	1			952
Expected credit losses / provision for credit losses	21			6			(17		)	(1		)	1			10			41			7			58
	265			253			343			54			37			952			(52		)	(6		)	894
Operating expenses	311			138			206			53			40			748			8			(6		)	750
Profit (loss) before income tax expense	$	(46	)	$	115		$	137		$	1		$	(3	)	$	204		$	(60	)	$	—		$	144
Balances at end of period:
Total assets	$	18,733		$	25,612		$	78,899		$	6,686		$	79,715		$	209,645		$	(28,724	)	$	—		$	180,921
Total loans, net	16,885			24,447			20,068			5,584			2,230			69,214			(1,797		)	3,034			70,451
Goodwill	581			358			—			321			—			1,260			347			—			1,607
Total deposits	33,459			22,323			28,274			7,540			6,629			98,225			(2,827		)	18,241			113,639

Three Months Ended March 31, 2018
Net interest income	$	216		$	186		$	149		$	47		$	15		$	613		$	8		$	(69	)	$	552
Other operating income	93			55			197			20			83			448			(11		)	76			513
Total operating income	309			241			346			67			98			1,061			(3		)	7			1,065
Expected credit losses / provision for credit losses	3			(10		)	(14		)	(3		)	3			(21		)	(51		)	1			(71		)
	306			251			360			70			95			1,082			48			6			1,136
Operating expenses	325			151			216			61			532			1,285			(9		)	6			1,282
Profit (loss) before income tax expense	$	(19	)	$	100		$	144		$	9		$	(437	)	$	(203	)	$	57		$	—		$	(146	)
Balances at end of period:
Total assets	$	18,533		$	24,421		$	85,481		$	7,356		$	77,074		$	212,865		$	(30,830	)	$	—		$	182,035
Total loans, net	16,665			23,402			18,100			6,132			1,791			66,090			(683		)	1,332			66,739
Goodwill	581			358			—			321			—			1,260			347			—			1,607
Total deposits	34,822			23,573			33,778			7,970			3,635			103,778			(2,803		)	16,978			117,953


⁽¹⁾	Represents adjustments associated with differences between U.S. GAAP and the Group Reporting Basis.


⁽²⁾	Represents differences in financial statement presentation between U.S. GAAP and the Group Reporting Basis.