HSBC 2015 Annual Report Download - page 57

HSBC HOLDINGS PLC
55
Strategic Report Financial Review Corporate Governance Financial Statements Shareholder Information
The majority of the financial liabilities designated at fair
value are fixed-rate long-term debt issuances and are
managed in conjunction with interest rate swaps as part
of our interest rate management strategy.
Reported net income from financial instruments
designated at fair value was $1.5bn in 2015, compared
with $2.5bn in 2014. The former included favourable
movements in the fair value of our own long-term debt of
$1.0bn due to changes in credit spread, compared with
favourable movements of $417m in 2014.
Significant items and currency translation
2015 2014
$m $m
Significant items
Own credit spread 1,002 417
Currency translation 303
Year ended 31 December 1,002 720
On an adjusted basis, which excludes changes in our own
credit spread and the net adverse effect of currency
translation shown above, net income from financial
instruments at fair value decreased by $1.2bn.
Net income from financial assets held to meet liabilities
under insurance and investment contracts of $531m was
$1.8bn lower than in 2014. This was primarily driven by
weaker equity markets in Hong Kong and the UK, notably
in the second half of the year. The fair value movement in
2015 included gains in Brazil and France, partly offset by
losses in Hong Kong. These gains and losses are broadly
offset by ‘Net insurance claims and benefits paid and
movements in liabilities to policyholders’ and ‘Liabilities
to customers under investment contracts’.
Other changes in fair value reflected a net adverse
movement due to interest and exchange rate hedging
ineffectiveness.
Gains less losses from financial investments
2015
$m
2014
$m
2013
$m
Net gains/(losses) from disposal of:
–
debt securities 345 665 491
–
equity securities 1,829 1,037 1,697
–
other financial investments 56 (1)
2,179 1,708 2,187
Impairment of available-for-sale equity securities (111) (373) (175)
Year ended 31 December 2,068 1,335 2,012
In 2015, gains less losses from financial investments
increased by $733m on a reported basis compared with
2014. This was driven by the significant items and currency
translation tabulated below, notably the gain on the partial
sale of our shareholding in Industrial Bank Co. Ltd
(‘Industrial Bank’) of $1.4bn.
Significant items and currency translation
2015 2014
$m $m
Significant items
Gain on sale of shareholding in Bank of Shanghai
–
428
Gain on the partial sale of shareholding in Industrial Bank 1,372 −
Impairment of our investment in Industrial Bank
–
(271)
1,372 157
Currency translation 95
Year ended 31 December 1,372 252
On an adjusted basis, excluding all significant items and
currency translation tabulated above, gains less losses
from financial investments decreased by $387m. This was
primarily in our GB&M business, driven by lower gains on
disposals of available-for-sale debt securities, notably in
the UK and US and lower gains on equity securities in
Principal Investments in the UK.
In addition, we recorded minor losses on disposals from
our legacy credit portfolio compared with gains in 2014.
The disposal of these assets reflects our continued efforts
to manage down low-returning assets to maximise returns.