Strategic Initiatives

9 Months Ended

Sep. 30, 2022

Restructuring and Related Activities [Abstract]

As discussed in our 2021 Form 10-K, we previously announced a strategic plan to restructure our operations ("Restructuring Plan") in alignment with HSBC’s global strategy, to refocus our wholesale operations to better serve our international corporate clients and restructure our retail operations to better meet the needs of globally mobile and affluent clients. Our Restructuring Plan also includes streamlining our functional and operations support model by removing duplication and reducing the size of our balance sheet to better align with the scope and scale of the U.S. opportunity. As discussed further in Note 3, "Branch Assets and Liabilities Held for Sale," during the second quarter of 2021, we made the decision to exit our mass market retail banking business, including the sale or closure of certain branches, and transferred certain assets and liabilities to held for sale. We expect to incur pre-tax charges in connection with this Restructuring Plan over the three-year period of 2020-2022 of approximately $800-$840 million ($600-$630 million after-tax). The following table presents a summary of the total pre-tax charges we currently expect to incur by reportable segment:


	Expected Charges in Connection with Restructuring Plan
	Minimum		Maximum
	(in millions)
Wealth and Personal Banking	$	148	$	154
Commercial Banking	16		18

Markets and Securities Services	80		82
Global Banking and Markets Other	14		16
Corporate Center(1)	542		570
Total	$	800	$	840

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

During the first nine months of 2022, we continued to progress our Restructuring Plan, including simplification of our support service functions and investing in systems infrastructure and new technologies. In February 2022, we also completed the sale of the branch disposal group associated with the exit of our mass market retail banking business. During the three and nine months ended September 30, 2022, we recorded pre-tax charges in connection with our Restructuring Plan totaling $41 million and $113 million, respectively, compared with pre-tax charges totaling $47 million and $183 million during the three and nine months ended September 30, 2021, respectively. To date, we have recorded a total of $682 million of pre-tax charges in connection with our Restructuring Plan. We currently expect our multi-year strategic plan to re-profile our business will be substantially completed by the end of 2022.

The following table summarizes the changes in the liability associated with our Restructuring Plan during the three and nine months ended September 30, 2022 and 2021:


	Severance and Other Employee Costs(1)		Lease Termination and Associated Costs(2)		Other(3)		Total
	(in millions)
Three Months Ended September 30, 2022
Restructuring liability at beginning of period	$	2	$	34	$	—	$	36
Restructuring costs accrued during the period	4		3		5		12
Restructuring costs paid during the period	(2)		(11)		(5)		(18)
Restructuring liability at end of period	$	4	$	26	$	—	$	30

Three Months Ended September 30, 2021
Restructuring liability at beginning of period	$	6	$	46	$	—	$	52
Restructuring costs accrued during the period	3		2		3		8
Restructuring costs paid during the period	(2)		(2)		(3)		(7)
Restructuring liability at end of period	$	7	$	46	$	—	$	53


	Severance and Other Employee Costs(1)		Lease Termination and Associated Costs(2)		Other(3)		Total
	(in millions)
Nine Months Ended September 30, 2022
Restructuring liability at beginning of period	$	10	$	46	$	—	$	56
Restructuring costs accrued during the period	8		3		23		34
Restructuring costs paid during the period	(14)		(23)		(23)		(60)
Restructuring liability at end of period	$	4	$	26	$	—	$	30

Nine Months Ended September 30, 2021
Restructuring liability at beginning of period	$	10	$	23	$	—	$	33
Restructuring costs accrued during the period	8		32		9		49
Restructuring costs paid during the period	(11)		(9)		(9)		(29)
Restructuring liability at end of period	$	7	$	46	$	—	$	53

(1)Severance and other employee costs are included in salaries and employee benefits in the consolidated statement of income. The majority of these costs were reported in the Wealth and Personal Banking business segment. Not included in these costs are allocated severance costs from HSBC Technology & Services ("HTSU") discussed further below.

(2)Primarily includes real estate taxes, service charges and decommissioning costs. Lease termination and associated costs are included in occupancy expense, net in the consolidated statement of income and were reported in the Wealth and Personal Banking and the Corporate Center business segments.

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

In addition to the restructuring costs reflected in the rollforward table above, during the three and nine months ended September 30, 2022, we recorded impairment charges of $4 million and $1 million, respectively, to write-down the lease right-of-use ("ROU") assets and leasehold improvement assets associated with certain office space that we determined we would exit.

During the second quarter of 2021, as part of our decision to exit our mass market retail banking business, we determined that we would exit approximately 30 branches. As a result, we recorded impairment charges during the second quarter of 2021 to write-off the assets associated with these branches, including $29 million of lease ROU assets, $18 million of leasehold improvement assets and $3 million of equipment assets. During the three and nine months ended September 30, 2021, we also recorded impairment charges of $4 million and $9 million to write-down the lease ROU assets and leasehold improvement assets primarily associated with certain office space that we determined we would exit. Lease impairment charges are reflected in occupancy expense, net in the consolidated statement of income and were reported in the Wealth and Personal Banking and the Corporate Center business segments.

During the three and nine months ended September 30, 2021, we recorded $22 million and $32 million, respectively, of trading losses associated with the exit of certain derivative contracts as part of our Restructuring Plan. These losses are included in trading revenue (expense) in the consolidated statement of income and were reported in the Markets and Securities Services and the Corporate Center business segments.

Our Restructuring Plan also resulted in costs being allocated to us from HTSU, primarily support service project costs and severance costs, which are reflected in support services from HSBC affiliates in the consolidated statement of income. During the three and nine months ended September 30, 2022, we recorded $25 million and $78 million, respectively, of allocated costs from HTSU related to restructuring activities compared with $13 million and $43 million of allocated costs during the three and nine months ended September 30, 2021, respectively. These costs were reported in the Corporate Center business segment.

HSBC Group Restructuring Separate from the charges related to our Restructuring Plan as detailed above, during the three and nine months ended September 30, 2022, we also recorded $36 million and $78 million, respectively, of allocated costs from other HSBC affiliates related to the HSBC Group's restructuring activities, primarily support service project costs and severance costs, compared with $14 million and $32 million of allocated costs during the three and nine months ended September 30, 2021, respectively. These costs are reflected in support services from HSBC affiliates in the consolidated statement of income and were reported in the Corporate Center business segment.