Skip to main content

tv   Bloomberg Daybreak Europe  Bloomberg  October 26, 2016 1:00am-2:31am EDT

1:00 am
>> deutsche bank is considering boosting capital and investor confidence. theresa may will speak with the canadian minister. apple reports an annual sales declined. and holiday sales are barely higher than estimates. if the world's most valuable company failing to cash in on samsung's woes. after six weeks in the job, pressure mounts on monte paschi to deliver.
1:01 am
we speak with marco marelli at 7:00 u.k. time. a very warm welcome. we are live from london. i'm anna edwards. tracy: and i manus cranny. anna: we are getting excited about of these numbers out of the banking sector. 4.6 billion euros, which is ahead of the estimate at 4.5 billion euros. if we could come down to the third quarter, the net number is $1.695 billion. the net interest income is coming in at 7.8 billion euros in the third quarter. the ratio is fully loaded at 10.47%, versus 10.36% in june. so, it is moving higher. little bitatio is a
1:02 am
lower than it was in june. it was 4.29%. bad loans are moving in the right direction. we know she has been looking to take the measure of financial strength from being the second lowest among the large european banks. she wanted to take that higher. lots of detail, no doubt to come .k. economy inu brazil. these economies have been a source of stress for the business. they have already warned about slower credit demand in mature markets. santander executive vice president and cfo will be speaking to bloomberg at 8:15 u.k. time. we are getting numbers from airbus as well. the playmaker defense company is also giving us nine-month
1:03 am
numbers, confirming the outlook for a four year e-bit. they say difficulties remain in the supply chain, confirming their free cash flow outlook. in terms of the a-35, they are on track for on time delivery. people were asking if they would stick to the unit delivery forecast, whether they would stick to the cash delivery forecast. the air manufacturer is giving us these numbers. the company could announce dumb cuts. the company is responding to lower helicopter sales. topic of has been a difficulty for the business. they are also talking about the a-400, giving more details there. manus: one headline coming
1:04 am
through is on hyundai moters. the operating profit comes in $7.1 trillion, below the $1.22te of on trillion. they said they had a strike and weak sales in the emerging market. that is affecting their earnings. third-quarter sales, $22.1 trillion. that is a little bit ahead of the estimate of $21.7 trillion, but the operating profit is definitely a miss. the third-quarter operating profit was $1.07 trillion and the estimate was for $1.22 trillion. we have the santander numbers. let's go to the nordic region now. they are basically saying the net interest income comes in at $1.18 billion, just below the estimate of $1.19 billion. the loan losses are dropping,
1:05 am
$135 billion, versus an estimate of $145 billion. the loan losses is an improving story for them. when it comes to capital, this is one of the strictest regulatory environments out of there. when it comes to the tier one capital, 70.9%, beating the requirements set by the regulator of 17.3%. of course, they have shifted the dividend policy from that 75% payout target to what is called ambitious. incomedea, net interest $1.8 billion. growth has continued with markets demand. we will have a conversation with the ceo, first on daybreak at 6:30. the life's talk about markets now and let's talk about
1:06 am
the risk radar. the asian equities section is down by .3%. it seems the u.s. futures are also a little bit weaker. on the dollar index, it is up a little bit with u.s. consumer confidence at a three-month low. that does not detract from the monthly gain we have seen in the dollar, the biggest monthly gain versus peers since may. the next thing on the agenda is friday when we get non pharm payrolls. 1.3%. and daimler is down the russians, strangely enough, the russians may not necessarily be in favor of cuts. they are more in favor of caps. what pressure does that put on the saudi's to deliver below $50 per barrel. anna: oil is down for a third day. we have the pound in thei re as well, down by 0.2%.
1:07 am
suggests there should be limits to easing. that seemed to move the pound yesterday. let's get to the bloomberg first word news with angie lau. anie: thanks, anna. suggests there should be limits to easing. apples shares fell after the world's most valuable company reported the first sales decline since 2001. the sales were barely higher than analyst estimates. investors had expected them to take advantage of samsung's galaxy note 7 problems. is saids shares weaker deutschk to be considering not paying bonuses in cash to boost capital and investor confidence. that is according to people familiar with the matter. executives have on formally discussed handing out shares, instead of cash rewards. agendaa might be on the when the supervisory board meets later today, although no final decision is expected. the spokesman or deutsche bank
1:08 am
declined to comment. theresa may is keen for mark carney to stay on at the bank of england. this is according to officials. they say may criticized loose monetary policy in her confirmation speech earlier this month. her office moved to reassure mark carney. the treasury has since been taking a more active role in statements on the economy. a boe spokesperson declined to comment. bad times lie ahead for bondholders. surging deficits will drive up interest rates. that is according to jeffrey ndlach. speaking at a conference
1:09 am
yesterday, he said we are in the eye of the hurricane for the next three or four years. he has recommended that and investors reduced exposure to securities. in the biggest theme park on australia's coast will remain closed until further notice. an accident on a water ride killed four people. we are basically taking a look here at arden. it is tumbling as much as 22% after two men and two women died yesterday when a raft flipped over, trapping them in machinery. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. you can find more stories on the bloomberg at top . lau.ngie this is bloomberg. anna: thank you. manus: let's get into the markets. we areiving you some of the top liens on cable -- top lines on cable and oil. is there a little bit of risk
1:10 am
off momentum this morning? >> i think you can see by all the red on my screen, there certainly is risk off. you can look at the hong kong market to see how that oil story is trying out. crude is holding at that three-week low, certainly impacting a lot of the energy players. also of course, in australia, which has closed at the lowest level in a month, down 1.5%. the cpi figure, also a focus there. it was better than expected for the third quarter, pouring cold water on the likelihood of an interest rate cut next week. the nikkei just turned positive as the yen weakened against the dollar. it was pretty flat tray for most of the session. you also want to look at the taiwan market because of course, the apple story really drove sentiment in the u.s. apple came through with its first sales declined in 15 years. a lot of the apple suppliers in
1:11 am
taiwan are under selling pressure today. they are retreating from a 16 month high it reach during yesterday's session. weakness is also coming through in korea and china on the mainland shares. looking at some of the big movers we have been watching also in relation to the u.s. story, caterpillar has lowered sales forecasted again. in tokyo, caterpillar is its main rival. , wesfarmers also under pressure, down 5.7%. sessionly a very good for asian equities today. anna: thank you very much, juliette saly. the pound recovered from its lowest levels since the flash clash earlier this month after mark carney said there were limits to the official's
1:12 am
willingness to look beyond the overshoot of the inflation targets. >> that judgment is a judgment of the optimal trader. judgment we have to make and there are limits to the mpc's willingness to look through and overshoot inflation. the u.k. voted in june to leave the european union. some employees will have to be moved out of london as a result of this vote. he spoke to bloomberg at the summit in new york. >> we love the rule of lore in england. folks like working in london. you have all the ecosystem, the infrastructure, the pipes, the plumbing, the accounting, the legal forms, everything. we are going to have to have headquarters in new york in
1:13 am
addition. we are probably going to have more capital and liquidity trap withinentities. none of this is good. we will have to move employees and their families from london. anna: let's talk about the conversation with an thimnn the. a lot to talk about on the brexit front, the u.k. front, and the pound. officials are telling bloomberg that theresa may backs mark carney and would like him to stay at the bank of england governor. doesn't matter to the pound if he stays/ -- does it matter to the pound if he stays? >> at the moment, it would probably help. anything that even gives the slightest whiff that he would leave would not help at this point. really, just because of the
1:14 am
backdrop of uncertainty. manus: the language that carney used yesterday in front of the lords, we are not in different to the levels with sterling. it sounds as if it is a more pressing and issue for them. they don't target, we know that from central bankers. but it has now turned into a real risk. >> a few weeks ago, we were welcoming the weak pound as a natural adjustment. as an offset to what was happening, in terms of trade and so on. i think the message you are conscioushether it is or subconscious, is we really don't want it to go on falling at this speed much longer, thank you very much. i am sure they will look through sterling weakness, as long at is , they willove not do anything with monetary policy as a result. this is an uncontrolled fall,
1:15 am
which is what felt like at times. anna: i spoke yesterday to john mills, a prominent campaigner for brexit. he said he wants the pound to go lower. he says manufacturing and exporting businesses get a boost. this weakness in the pound, does it stand a good chance of boosting some manufacturing and exports in the future? >> for a long time, i have been relatively skeptical. we have learned to live with a strong exchange rate. the end result of that is the currency sensitive industries are not what we have here. developing price-sensitive and you factoring that can grow on the back of this difficult action. we export what we would before, but we just get bigger margins. you can see that in share prices. but in jobs and the underlying economy. anna: we live for the strong pound, so where do you look for your benchmarks, for where the
1:16 am
pound should be now? which history do you look towards? a lot of u.k. history has been marked by a strong currency. >> when we compare where we are effective terms, to where the pound was in 2008, or in 1992, this is a huge move and it is very weak. i think, even then, the pound is now a very weak and competitive currency. manus: what does it take to shift the momentum? mean, the red dot is the low of the pound in the financial crisis and the blue is the flash crash. what does it take to change the momentum in that chart? from everything you have written, it sounds like you and mark carney are beginning to see a floor in sterling? >> i think in terms of the value
1:17 am
of the currency, and in terms of its huge fall historically, i would say the markets are priced for the sake of making while guesses in the dark. but for an economy that will see some growth next year, but not heal,rowth, reates wates will but not negative, under a prolonged period of uncertainty. to get sterling to fall further, i think he would needed tuesday week or longer. toi think we would need it stay weaker longer. or you need a deeper sense of fear. my sense now, in terms of sterling weakness, is it is more likely we will get occasional through,concern coming where sterling falls very quickly because as it goes down, there are no buyers coming in. a day like yesterday's a
1:18 am
little bit like that. i got many phone calls yesterday, saying, "what's happening?" we did not go back to where we had started, though. anna: it bounced a bit. manus: it did not last long. >> i think that might be the nature of the next six to nine months. anna: it likes to go down the escalator and up the stairs. thank you very much, kit juckes. here are some highlights for what is ahead. manus: we will get consumer confidence out of germany. 40 minutes later, it is france's term. hour junker in the three parliamentary debate. later, we have more out of the united states and then wholesale inventory. manus: coming up, it is scanned
1:19 am
is scanned scandinavia's biggest bank. the ceo of nordea gives his first interview to date. anna: plus, mario calls for ac tion. he says reforms are needed to boost growth. manus: and the world's most valuable company records its first annual sales declined since 2001. we bring you the latest on apple. anna: and later in the show we of montethece ceo paschi. this is bloomberg. ♪
1:20 am
1:21 am
1:22 am
manus: ecb president mario draghi has repeated his message that fiscal and structural policies are needed if interest rates are to move higher. anna: draghi defended monetary
1:23 am
policy and said the fact of including slower productivity growth and aging societies were also an issue. is still withkes us. it is almost like a gauntlet, isn't it? i told you a couple weeks ago, stop blaming me for the banking woes. i am going to tell you know, get fiscal stimulus. what does this conversation do y -- thisrrency conversation do to the currency? >> not a whole lot. the spanish lack of government, out of the way. we will be talking about italian politics for several weeks to come. but the economy is trundling along. it is not getting worse at the moment. it is not doing anything very much. i think what you have is, you know, some headwinds for the
1:24 am
currency, a currency which is weakening a little bit, which mario draghi likes on the back of a u.s. dollar. it has nothing to do with the euro. the danger is forever, if they do taper their bond purchases, if they don't go on buying b onds, what then? could that send the euro much higher? anna: what happens to the euro-dollar if we see a hike in december from the fed? and what if we see an extension of quantitative easing from the ecb? >> i think in that environment, we dribble lower. anna: so, even that diversion of monetary policy is enough to give us a dribble down to the euro. >> if we get an extension to the bond purchases, that will
1:25 am
confirm what the market expects, as opposed to breaking new ground. in the u.s., it is not a question about the december hike now, it is a question of whether we get one or two. function took the work ended a little bit of manipulation on it. of december next year, what is the market pricing? by decemberbout 1% 13. the probability stands at 12%. we might trade on divergence now and we have a strong dollar divergence, a strong fed, but the reality is, the market is not pricing in that strong of a divergence. >> one side is, what would send the dollar significantly higher is pricing a significantly higher probability of the end point of rate hikes. so, getting away from the idea
1:26 am
so the market does not think there is much chance of rates above one. it is really saying, one this year and one next year. there could be a second next year, but we don't really think so. that is pretty good for emerging markets and equities, it is pretty friendly for everything. move that number of by some material amount, bad for risk and more uncertain for the global environment. taking us a little bit further away from the goldilocks number. the: how strong the th does dollar go next year, then? >> i am no different from everybody else who sat and watched the fed raise rates once last year and once this year, thinking, "wow, these people take a lot to move." on the flip side of that, which is, if the ecb were to change policy and foreign investors purchase hundreds of arm every
1:27 am
bonds every year, then they can move more. manus: up next, low hanging fruit. what is the story behind apple? this is bloomberg. ♪ [ emily kaldwin ] when you stole the throne, witch,
1:28 am
1:29 am
you took away my strongest ally -- my father. but you didn't know me. ♪ you never thought i'd fight back. you don't know me. but you will. ♪ so it begins [ male announcer ] rated "m" for "mature." anna: welcome back.
1:30 am
"u are watching daybreak: europe." we have got some numbers coming through. manus, you got these numbers from bayer. think health care and agriculture, this is what they do. 11.6 ilion dollars worth of worth of billion sales for the first quarter. there is a $66 billion bid for monsanto, the biggest takeover in the world in 2016.
1:31 am
the sales numbers are a comfortable beat. in terms of what they are saying, they say they show a strong performance and they are raising their four year adjusted earnings per share forecast. they actually raised on a net income basis of $1.19 billion. top line earnings adjusted to $2.86 billion, ahead of the estimate of $2.53 billion. so, we have a nice beat on the third quarter. the market was looking for $2.53 billion. they are saying this is a strong performance. let me open this up in terms of the acquisition of monsanto, which is ongoing. some people have been critical of it, in terms of a u.s.-german tie up, in what kind of regulation -- and what kind of regulation it might have.
1:32 am
the question many are asking is, what will that do to the pharma business for bayer, in terms of their ability to invest in that? anna: certainly an area of the world where we are seeing a lot of mma at the moment. we will be joined with bayer's ceo. daybreak is on your .obile, your terminal let's take a look at some of the top stories. it is all about bonuses, or the lack thereof. in deutsche bank, it is considering not paying bonuses in cash. this is in a bid to boost capitals and investor confidence. do you get paper in the form of the non-core assets in the bank? that is like credit suisse did a couple years ago. anna: a spokesman for deutsche
1:33 am
bank declined to comment on the story. let's talk about apple, where shares fell after the world's most valuable company reported the first annual sales declined esinc 2001. forecasted sales for the last be months of 2016 were barely higher than analyst estimates. manus: finally, we focus on the pound recovery, and it recovered from its lowest level since the flash crash earlier this month. that was after mark carney said there were limits to officials' willingness to look over the overshoot. inflation is dipping a little bit lower this morning. one closing line from bayer on monsanto, the timing of trying to close the deal. they hope to close the $66 billion deal by the end of 2017. they feed 2016 up in the high
1:34 am
single-digit percentages. highey see 2016 up in the single-digit percentages. anna: mark carney spoke yesterday at the house of lords. that has moved the pound. it is coming off a little bit in this morning's trade, 1.2163. but it did pair some of those losses after mark carney said there were limits to the extent that the mpc's would look at inflation. s way for its biggest monthly gain. manus: let's focus back on the pound again, 1.2163. any rally iso hold getting difficult. we have that cftc data, in
1:35 am
terms of how the market is positioned on the pound. we had the biggest net short position in three years. they are actually cutting those positions for the first time. nymex crude is down 1.5%, and i am rounding down there. the russians want a cap, not a cut. anna: now, let's get details on the apple story. apple shares declined after they reported the first annual sales declined since 2001. manus: it declined 17% in the fiscal year. emily chang has more from san francisco. emily: the fake headline is apple is seeing its first annual 2001.decline sniceince they do expect a return to where of in the next quarter, forecasting -- they do expect a return to growth in the next
1:36 am
quarter, forecasting 7 $70 billion in sales. they are expecting a strong response to the new iphones in particular. i asked the ceo about the impact of the samsung recall of the note 7 phone. he told me it is very difficult to tell, because we are in this situation where we are supply constrained. everything we produce, we can sell right now. it is difficult to identify what different factors are driving this. even before this situation developed, we havd the highest development of androids we had ever had. 30% had a decline of year-over-year, a significant decline. maestri told me he preferred to look at emerging markets over the longer term and in the longer term, they expect to see in improving situation in china. tim cook did comment on this, saying in china specifically,
1:37 am
they are looking at anea new normal. >> we are very bullish on china. we continue to see a middle-class that is booming there. there could be a new normal in the economy, but a new normal know, a goodl, you growth rate. emily: he was also asked about india in particular and he said he believes india represents a huge opportunity, but it will be several years before that opportunity is as big as it has been in china. he also spoke about, for the very first time, a knology apple's interest -- time, a apple'sged interest in cars. >> there are many technologies that will either become available, or we will be able to revolutionize the car experience.
1:38 am
and so, it is interesting from that point of view, but nothing to announce today. emily: bloomberg has reported that apple's car plans have shifted dramatically. there has been restructuring and people have left the car division. apple seems to be working on building a car platform, as opposed to a physical car. the real focus next quarter will be on that i found. -- on that iphone. once again, the iphone seems to make up the bulk of the profit for this company. thewill be looking for impact of the samsung recall. manus: let's get straight to the founder of radio free mobile. ifgive me on this, but samsung is having a really bad why with the galaxy note 7,
1:39 am
has apple not taken the opportunity to uplift their estimates more for the holiday season? or, are they just playing keep the market calm? >> my opinion is they will must see any benefit from samsung and the reason is straightforward. with the advent of the iphone 6 two years ago, it was a very good reason to switch from android. demandthat pent-up switched over. people who wanted to leave android had two years opportunity. i think most of the people using android today do so because they prefer it. i think samsung will lose market share, but two other android devices, not necessarily to ios. anna: what do you make about the comments in the cso about being supply constrained, in terms of the rivalry? >> to me, it does not actually mean a lot because when you have
1:40 am
launched a new product, it is always good to be out of stock or supply constrained because then, everybody thinks your product is in high demand. the real question is, how much supply did they actually specify in the first place? and we don't know the answer to that. when it comes to that supply constrained and what these companies always talk about, we put that to the side until we know what the real situation is. manus: i sent you a chart earlier, it is about their share in china. it was the greate white hope in 2015. it is not exactly turning out to revenuestar maker with down 17% in the pent-up demand is gone. how unnerving is it to see that kind of a chart? thisain, my position on would be that actually, this is
1:41 am
completely normal. in fact, china will remain a very strong and very important market for apple. there is simply, that huge growth that soared over the last few quarters was driven by the fact that they came into the market officially for the first time. there was a huge amount of pent-up demand because everybody purchased the devices. now you are seeing a normalization. obviously, you can see bad growth numbers off of this pent-up demand. it will flatten and then start to grow more steadily as the chinese market evolves. anna: we started this conversation with you saying you did not think apple would make too much hay at the expense of samsung. where is samsung now, then? what do you make of their handling of the crisis around the note? >> it has left them in a very difficult position. to be fair to samsung, there was
1:42 am
amount theyous could have done about the situation. they had to replace the note 7 immediately and they had to make an assumption. unfortunately for them, that assumption was wrong. i think they will lose a good amount of market share, and it will be the market share of high end users. when it comes to new products, samsung have got all the ground to make up. it has to keep its current customers as happy as possible. whether or not it is doing that is open to question and has put the company in a bit of this array at the moment. manus: richard windsor, thank you for your input from abu dhabi. anna: nordea has reported income for the quarter of 1.8 billion euros, slightly below forecasts. great to have you on the
1:43 am
program. traffic rose 14 -- profit rose 14% out there. thank you for joining us. i want to talk about the capital you have in the business, the capital requirements. your cit ratio stands at 17.9% ahead of capital requirements. are you finished with building the capital buffer? >> i think we have come a long way and of course, the capital buffer is determined by the regulator, but i think we are coming to the end of this long cycle. manus: the long cycle of capital build up. many people look at the capital in the nordic banks and they are rather envious. you stand full and firm. you obviously reviewed where you wear with your dividend policy. what does this do, if as you say, you are beating the requirements that are there, can you raise the dividend every year?
1:44 am
>> oh, capital policy, our dividend policy, as we have stated, it is our ambition to have a progressive dividend policy. that remains clearly the goal, given the increase requirement. we cannot make the final determination until the fourth quarter. low growthank in the environment, that is somethg we should strive for. anna: i wanted to ask you, casper, about the swedish banking association. they have warned that banking operations will be moved from sweden if the government introduces a financial activity tax, that is planned? what you think this will do to the sector? >> no doubt, any tax will have an impact on the cost base. it will have an increase on how
1:45 am
you run your business. i am concerned. i think one needs to look at the totality that any increase will have on the actions we take. i will look at this with concern, but of course, as a nordic bank, we have flexibility to adjust. manus: flexibility is the name of the game. when it comes to your chairman, we understand he has been in discussions about a merger. they could move the hq from sweden. is that the only conversation that nordea is having at the moment? is it the most robust conversation? >> i would not like to update more on that. i think we have said everything we have said and can say. myself, i actually am focusing very much on transforming the bank. we are making major investments in our digital platform. have defined where
1:46 am
our focus is. anna: but these talks about bringing your bank together with another bank could see the bank leaving sweden. is that something you would be open to? is that something the bank actively exploring because of the tax and capital requirements? >> that is not something i would comment on here further. manus: casper, you said you're actively engaged in the restructuring of the bank and the digitization. we have had these conversations with your competitors. fundamental changes need to be made in terms of staffing and branches. we are hearing this from other institutions. what are the repercussions of that for you, in terms of job losses, etc.? >> i think we have come a long way already in adjusting our
1:47 am
branch structure to the new world. we are down from where we were historically. from here on, it is how we balance the digital frame with personal service. i don't think the personal service will go away. if anything, it is about combining digital and personal so customers get the best possible customer experience, and service level. i think we have come a long way and i don't see -- of course, i see this trend continuing, but i am quite comfortable with where we are today. from here on, i think it will be an adjustment that comes quite naturally. anna: how is the sector handling the low interest rate environment, and the negative interest rate environment? is it something that influences your business? do you spend time complaining about it, or do you just get on with the job? >> i think we need to get on with the job. we hit negative rates for the first time in the first quarter
1:48 am
of 2015. we have now operated in this negative rate environment for almost two years. i actually see the trough behind me. i would predict that our fourth quarter interest margin would improve and actually be, in terms of absolute level, flat to last year's. i see a turn here. it is all about getting on with business. manus: casper, the element in every banker's room is brexit. i want to get your take, in terms of your concern about a hard brexit, the momentum gathering in terms of the rhetoric here. >> brexit for us, from a nord ea perspective, i think it is unfortunate. that is my personal view. it will not have a direct impact on our activities. i think the brexit impact is
1:49 am
actually indirect through the u.k. economy and european economy. i think there are two losers here, both the u.k. and europe. that creates uncertainty. theuncertainty will be impact on our activity. d, butas so far, been mute we will continue to monitor that direct impact. sper, thank you for your thoughts this morning. casper von koskull, the ceo of nordea bank. manus: from underweight to overweight, our guest says it is time to build tactical equities. anna: the last data from europe's biggest economy and third-quarter results from lloyds banking group. manus: and turning around the world's oldest bank after banca monte dei paschi announces plans to slash cost. we speak exclusively with the
1:50 am
company's ceo, marco marelli. this is bloomberg. ♪
1:51 am
1:52 am
1:53 am
anna: this is bloomberg daybreak: europe. from underweight to overweight, it is time for a tactical position in equities? chris, great to see you this wednesday morning. so, explain this move to overweight in equities and tactically, you say, this is. so, you don't love this move. you are doing this short-term? >> i think so. i think this bigger picture has been going on since march of 20 09. fundamentals have not been terribly good, but we have gotten so much help from central banks on the sidelines and it has changed the course of the months.en to weigheight they are letting the economy run hot. i think the market has become a
1:54 am
stale bet. the bearishness is common and widespread. if you look at cash flows, they are super high. the only guys who are buying this are companies. there is nowhere to sell. so, fundamental stabilization and cash on the sidelines, central banks helping, you have to be there for the last, final flurry. manus: we put together a bank of america and merrill lynch chart. you have alows, stale market. what is that level of repressed volatility saying to you? >> on the one hand, it makes me worried because it speaks a little bit to complacency. on the other hand, we have got that because of what central banks are up to. there is so much liquidity in the world and it is suppressing
1:55 am
volatility. at some stage, i think a little backf volatility will come and it will be a challenge for markets, but that is telling of what central bankers are up to, lots of qe and assets. anna: sticking with central banks, you don't see them as active and raining back on ning back-- and reig on stimulus. looming?e inflation how do you view that kind of asset class? >> well, the pressures are building a little bit. but what is interesting is central banks have made it clear they want inflation to be above target. they are quite relaxed about it being higher than otherwise would be expected. the inflation haws in the world have really taken a backseat. anna: it is a good idea then, if you fear inflation?
1:56 am
>> is not something we spend a lot of time thinking about. i think it is quite expensive. i would want to think harder on that. but in terms of central bank to inflation, i think it will be slow. the other thing about equity markets, why did the fed not raise rates earlier this year? two reasons, really. china and equity market volatility. they are only going to raise rates if the markets are up early. tips are forrase, winners. chris watling, ceo and chief market strategist of longview economics. are: up next, we speaking live to the ceo of banca monte dei paschi, marco marelli, on his plans to turn around the world's oldest bank. yesterday, the shares were on a roller coaster ride.
1:57 am
relatively low valuations these days. how will they persuade key investors to get on board? this is bloomberg. ♪ [ emily kaldwin ] when you stole the throne, witch,
1:58 am
1:59 am
you took away my strongest ally -- my father. but you didn't know me. ♪ you never thought i'd fight back. you don't know me. but you will. ♪ so it begins [ male announcer ] rated "m" for "mature."
2:00 am
be considering not paying bonuses in cash in a boost to boost capital and investor confidence. want they is said to canadian to stay at the bank as governor. that is as he boost the pound with his comments. and apple reports its first annual sales decline in 15 years. sales barelyoliday higher than estimates. is the company in failing to cash in on samsung's woes? we speak to him exclusively
2:01 am
on "daybreak." welcome to bloomberg daybreak. our flagship morning show from the city of london. breaking from lloyds bank for the third quarter. the third quarter underline pretax profits. that is a touch should i of the was coming-- that through. ofmisses the average estimates compiled by bloomberg news. the pension fund swung to a 740 million deficit in the third quarter. the strategy pretax profit comes .n at 811 million pounds
2:02 am
they're taking a one billion ppi. charge on missold this is something that has blinded many a u.k. bank in recent years but lloyds has been badly hit. there is a focus on whether a new charge could be taken. they pushed back the consumer deadline for complaints by one year. that was extended over the time that banks have to provide for the possibility of these payouts to consumers who were missold insurance. the they will be focusing on the cet 1. higher that at the end of
2:03 am
the second quarter when he was 13%. many people watching what this does to dividends. has pledged to return next this cash above the 13% level. that is what the bank said in its half-year earnings that it would generate about 160 basis points of cet 1. lots of thoughts from lloyds but the line on ppi perhaps one of the big ones. consumer confidence dipped, estimated at 10. wonderful line on yesterday's bloombergom our intelligence. the economy is booming seems to be the sentiment in germany. another consumer confidence index coming in, germany goes to the polls next year. you have a host of issues
2:04 am
playing into the german story. we have a bit of breaking news on heineken. getting beerdated volumes rising 2%, the estimate was 1.4%. volume number looks to be ahead of estimas. some gardens around the business as well, talking about expectations remaining unchanged. continued adverse conditions -- conditions, this has been a headache for heineken. giving us nine-month profit takers as well. manus: you have london down by -1%. the dominant stories, equity futures indicating a little bit lower in london and paris. reporting --
2:05 am
bayer reporting. crude is definitely on the downside. the russians, are they -- do to take athe stomach cut? oil is below 50 bucks a barrel. cftc at the you have seen the leveraged market step back, leveraged funds are pulling back from the biggest net short positions in three years. markets are beginning to scale back at their net short positions on cable. anna: we have a look at the bonds boards, we will put that on the screen for you and show you where we are on the 10 year sure to in germany it is .03. and signaling it is starting talks to draw investors to its 5 billion euro capital. mays: i concerns they struggle to secure its survival through private funds. we are joined for an exclusive
2:06 am
.onversation with the ceo thank you for joining us this morning. yesterday you delivered your plan and some people in reaction to that my you're targeting 1.1 billion euros by 2019. it is a tall order, is that given the backdrop in italy and some people are saying you delivered nothing more than a notice of interest. guess: good morning. the business plan projections and everything we presented yesterday was the first step putting theg on bank back onto a stability trajectory and look forward and see that -- sick the interest from outside investors. this is something we could have done and could have started only on the basis of the new business plan. interest is already there. we now need to move to stage two and see where we are heading.
2:07 am
anna: let's explore that interest of little bit more. our investors approaching you or are you calling them to get them interested? guest: investors have been very proactive in approaching the bank or investment banks working for us. at this stage, we could engage in talks for obvious reasons. manus: lots of press reports that you are speaking with qatar. give us the complexion of are you approaching sovereign wealth funds, if so are you in the gulf or are you focused on asia or america? yes: at this stage we want to entertain talks with a multitude of different investors. and then we will define which is the best routes we want to pursue and see what is the most appropriate potential.
2:08 am
you have a number in your head for the amount of the capital raising that you want to come from these cornerstone investors or are you open to all things? guest: we are open to old things. this is going to be a mixture of interest from core investors, from institutional investors, we need to find out what is eventually the conversion rate of one conversion, we are to launch in the next few weeks. difficult to gauge as we speak of what is going to be -- manus: what would you hope for? the amount of debt that you swap equals the amount that you have got to raise. what is your best ambition on this because the three legs of the stool are tied together, aren't they? guest: they are. my ambition is the ceo of the bank is to look for long-term stability. we need to make sure that the
2:09 am
--k eventually manus: how much of that would you like to see convert from debt? guest: difficult to make predictions. we actually received huge interest from bondholders to entertain talks vis-a-vis the potential conversion. at this stage, difficult to come up with a firm number, but this is, at the end of the day, we want to make sure the bank raises the 5 billion, the 5 billion are actually the base upon which we projected the plan . this is what we want. what difficult to say comes from debt and what from equity. some investors have expressed nervousness at the plan hinges on being able to find them, being able to get enough money from those anchor investors.
2:10 am
would you say that the success or failure of the plan relies on a big anchor investor from somewhere? yes: not necessarily. success relies on the fact that the overall transaction structure is such that we need to raise 5 billion, ok? this is what we are in it for. manus: the other discussion that anna and i have had, your bank is front and center on the news here. people that are coming on board either as new cornerstone investors or your current investors, have the had conversations with you saying i am in, i am with you but i want you to do a merger, i want you to be active in the market. if i commit to you, i want you to do these. is that part of the conversation? guest: not as far as i am concerned. they have not entertain this. out one, we need to find whether there are investors willing to be a permanent
2:11 am
shareholder of the bank going forward in the new setup. renesola future is the only plan, there is no plan b. guest: there is no plan b at the moment. this is what we're focusing on as we speak. given the backdrop in the italian economy this is a lot to achieve. how would you convince those naysayers? market assumptions on the plan are very conservative. our interest-rate assumption behind the plan are very conservative. projection we're making on the is line are something which pretty feasible. this will be an execution plan. so the top management of the knew we need them to focus on execution. manus: this is a delicate one. you were the cfo at a time when
2:12 am
it was really a tough time in this bank. i am going back to 2010. many people, some truckers would say here is the former cfo coming back six years later to exceed the power to run the bank. what would you say to the people who are detractors or question that move? guest: i was the cfo, i was actually the one who raised concerns on a formal basis on a number of things the bank was doing at the moment. i was one to ae ones who opposed it number of transactions that the senior management of the bank had decided to do at that juncture. and then i quit. i think this is pretty much self expository of my behavior at the time. anna: think you. -- thank you. for this exclusive interview here on bloomberg. ♪
2:13 am
2:14 am
2:15 am
2:16 am
manus: let's get the visit -- business flash. is consideringk not paying bonuses in cash in a bid to boost capital and investor confidence according to people familiar with the matter. they say they have and formally discussed heading out shares in the non-core unit instead of cash rewards or replacing money with stock. the idea may be on the agenda when the supervisory board meets later today although no final decision is expected. a spokesman to client to comment. postedbanking group has a 15% decline in third-quarter profit. to 811profit failed million pounds as they took a one billion pound charge to compensate customers who were wrongly sold loan insurance. and profit was little changed in the third quarter facing estimates as fees increased.
2:17 am
for the three months in september, income rose to 1.7 billion euros. apple's shares fell in extended trading after the world's most viable company reported its first annual sales declined since 2001. it forecast sales for the last three months at twice 16 that were barely higher than analysts estimates. investors had expected the iphone maker to take advantage of samsung's galaxy note 7 problems and issue a more robust holiday sales forecast. that is your bloomberg business last. -- flash. anna: still with us, our exclusive interview with marco morelli. ambitionsabout the behind your new business plan a little bit and he said it is up to management to deliver. on the backdrop of the attendant -- italian economy, we're looking at record low interest rates for the banking sector is
2:18 am
did -- is to deliver. can you be so confident you can deliver 1.1 billion euros in 2019? guest: our business plan is based on three key pillars. one is restoring the commercial position on the banks throughout italian territory. the second one is dealing with in at in a different way, more systematic way, well organized way. in terms of new flows and the stock and then the third pillar and i really want to stress that is to make sure all the people do understand that this is a situation we need to take care of in a appropriate manner. manus: you have 20 billion euros worth of bad debt, part of that will be taken by [indiscernible]
2:19 am
the fund. are some of your existing customers talking about taking that portion and split that 28 billion up for me. guest: the structure is such that there is a part of the [indiscernible] related to the securities issue which is assigned to exist in the capitalof increase. there is 1.6 billion notes which would be assigned to existing shareholders. 9.1 net of the securitization. 28 billion is the gross and out -- amount. they're going to take a chunk of the overall amount. manus: compensation is getting harder in your marketplace. how do you build the business
2:20 am
where if we sit down and we say where do the fees come in from? guest: fees will come from a more proactive way of doing business on asset management and the insurance business, everything which is related to the core client race -- base. again, the target we are putting our plan, if you gauge and way that with other competitors are somewhat conservative in my opinion. we do believe this is a feasible you-- a feasible plan for anna: that is the seaside. you have announced branch closures, 500 branches to close out of 1900. is that a worst-case scenario, is that a definite plan, could there be even more branch closures? guest: we do one as i mentioned
2:21 am
earlier to go for something which is feasible. we do believe that 500 branches out of 1900 is something we can get to throughout the three-year business plan. and then when you talk about branches closure, you need to .hink about people it is not simply a logistical issue. you need to make sure that -- you had targeted 10%, the probability target from 2018. you are a very brave ceo. there's not many european banking ceos that are giving us profitability targets and are sticking to them. very assured you can hit that 10%, you haven't used that word conservative in the language we're hearing. >> this is all things being equal and achievable targets. the bank is going to be the
2:22 am
cleanest one in the market for nonperforming loans. we will get rid of existing by far.d more coverage the aim is to get to 42% p.verage on the uto focusing onwe're credit quality. a new approach to credit quality. this is the reason why we do believe we can get to targets we indicated in the plan. anna: the timing of everything that is happening, it happens in its own bubble but also in relation to what is happening in italian politics. we have the egm taking place and everyone who watches european politics, december 4 when we have the referendum. is it very important that everything is decided before
2:23 am
december the fourth, is there a link between your plans and italian policy? guest: coming back to what we discussed earlier, some of the potential investors who approached us told us we are so, we to the referendum are interested in principally respective of the outcome of the referendum which is a good sign. so, yes. there is this very day is going to be something which we attract a lot of attention in terms of the final outcome. but again, i need to project the bank forward to the extent that this is a feasible transaction, we need to try to grow. anna: do you want political continuity? guest: what we need is stability while means. this is what the markets would like to see. manus: the italian market itself, the bank has a tectonic
2:24 am
shift. there has been cap calls from your own bank. what happens next in a tie and banking, is there more consolidation, do you envisage broader and european consolidation, the italian market first and then your perspective. guest: there is good guys going consolidationca in italian markets. as far as european consolidation on the retail commercial banking environment, i think this is going to be more difficult. can --here do you see opportunities to consolidate, what are the types of businesses that should long together? guest: i think within the financial services is going to be more on the asset management side. but again, on the third commercial core business, it is going to be the headline. from: one of the headlines
2:25 am
mario draghi, a countryman of yours, stop complaining to me about negative interest rates. what would you say to him if you of coffee with him in terms that argument? guest: my advice to him would be its make sure that everything, each of us is doing in his own home -- this is not good for the banking business or together. on the other hand, you need to look after the macro environment. and therefore, some of the decision which had been taken i think goes toward this direction. anna: do anticipate further easing, is there -- is that something your factoring in? guest: we are factoring in conservative macro interest environments which is negative interest rates throughout the three year plan. manus: you would like to go on a whirlwind tour convincing
2:26 am
investors to be with you on this journey. i noticed there was a line yesterday that he did not embed any dividend payout for the time being. there is no way you will have conversation with cornerstone investors and this is not going to come up. in your timeline, what is potentially achievable, if it all goes according to plan and you pick up the fee, when is that dividend there? >> it is too early to come up with a firm indication to be honest. number one is to put the bank on track unpredictability. then we can start -- manus: a tentative one. guest: let's focus on the three-year plan. we need to deliver in then we will take care of dividends. anna: very nice to see you in the studio. thanks for visiting us. and bringing us your thoughts on the status of your roadshow. thank you very much to the ceo.
2:27 am
that is marco marelli. --us: that is it for what for "daybreak." markets are set for later open. -- a lighter open.
2:28 am
2:29 am
2:30 am
guy: welcome. we have your first trade of the day right here. i am alongside caroline hyde was over in berlin. what are we watching this wednesday morning? bonus mashing -- bonus bashing. the lender considers its office a offers to boost. catching falling pound, sterling bounces after visiting flash crash was. mark carney says there is a limito


info Stream Only

Uploaded by TV Archive on