tv Bloomberg Best Bloomberg July 28, 2017 8:00pm-9:00pm EDT
♪ on bloomberg best, the stories that shaped the week in business around the world. the federal reserve holds the line. we hear what that will mean for markets going forward. >> to me in means higher tenure rates for -- perhaps 2.5%. >> and earning bonanza. the busiest week of the season, we hear from tech giants also but, samsung, amazon and face. guest: we had a really strong second-quarter and it was based on increased engagement and increased ability to work with bankers. >> the best revenues for the
company in three years. >> we used to focus on cost, now we need to focus more on revenues. from ceos ofar other european banks reporting this week. also, we size up the state of the global economy. >> i think the economy is picking up but if you look around the globe it is happening elsewhere, so i do not think the bank of japan can take credit for that. >> it is effectively treading water. >> it is all straight ahead on bloomberg best. ♪ >> hello and welcome, i'm a david gura. withis bloomberg best, weekly news, analysis and interviews from around the world. let's art with the top headlines. the week regarding in -- we
start in st. petersburg russia, with the commitment to continue cutting imports in order to best exports in order to put a stop to the global -- -- >> we are pretty sure that the process may be going on at a slower pace than we earlier projected. but it is on course to read it because to accelerate of these numbers. toaugust is going demonstrate further leadership by the kingdom of saudi arabia. we have already informed our customers of a cut. our august allocate -- allocation exceeding 600 barrels -- 600,000 barrels a day. also, august will experience the maximum demand in the kingdom of arabia. we still keep hearing that it will get better but the saudi push seems to be ramped up just
a bit. >> yes, it is also the overall projection of stress that the saudi minister for the on today. they are still camped out behind me here in the hotel pointing stick with we will our lead by example model. i asked him if they would continue over complying, and he said yes will continue to do that. that is how we do business, from the very beginning. also, all who are not pulling their weight, he said -- we will go heavier in on them. it is no longer going to be tall as much as it was in the past. then we have the d stocking that the nigerian minister is talking about he says that there are going to be picking up and there was no need to refine the agreement. that said, any future adjustments -- it is fascinating to say the least. >> i did not collude with russia, nor do i know anyone else in the campaign who did so.
contacts, andper i have not relied on russian funds for my businesses. i have been fully transparent in providing all requested information. senators, or too girly democrats have said that they do want to see him in public. -- they do want to see him in public. i think clearly democrats will not be satisfied until he appears in public. i think they will have to, given the number of questions that are still swirling around about it. >> was there anything in the statement that stood out that in your sense, politicians thought was vulnerable and they wanted to understand more about? one example would be how he said that he did not rely on russian money. we are not quite sure what " rely on " means.
is it just a word he chose, so that is an example of something that democrats said they would like to learn more about. ♪ the senate being equally divided, the vice president votes in the affirmative and the motion is agreed to. >> the vice president breaking the tie, and the senate has now approved, voted yes to go ahead with motion. to begin debate on the health care bill. >> i am very happy with the results. i believe that now we will, over the next week or two, come up with a plan that will be really, really wonderful for the american people. >> the president will be doing a victory lap on this, but it might be a little bit too soon for celebration. >> the senate vote on the amendment to the health care bill am a guinea repeal bill, it seems the senate lacked the votes. this being brought by the senate
gop leader mitch mcconnell. >> this is a disappointment. i disappointment indeed. our friends over in the house, we thank them as well, and i regret that our efforts were simply not enough. >> what will be the response of the white house?>> the president is tweeting, tom, just after the vote failed -- three republicans and 48 democrats let the american people down. as i said from the beginning, watch obamacare implode and deal. watch. john mccain, was as -- a big surprise which left and audible gasp on the senate floor after he voted. ringturned after his cancer diagnosis to vote against this health care bill. ♪ >> no change in policy, concern about inflation and that hint
about the bell. the committee expects to begin implementing its balance sheet normalization program>> relatively soon. >>the fed is keeping to this narrative of transitory factors holding down inflation must so they can get on with the balance sheet normalization. then the focus shifts to december, on whether or not inflation has preceded enough to give them another hike. fed will stop raising short-term interest rates, and start disinvesting in 10 year treasuries by reducing the balance sheet over time. that means, to me, slightly higher 10 year rates. ♪ he is having one of the best earnings days, that he is experienced in over 20 years. james edward jones, arriving today in london. at the same time, the world's biggest or were reported
results. 's minutes later, came nestle results, then dannon, diageo, british american tobacco, all of them before 7:50 a.m.. jones is still with us. you're not even done, are you? we have l'oreal in a few minutes. and 6 million euros is market cap reporting today. all of thesejoy incomes reporting on at the same day, you just have to focus on what is important. is problem today, is that it not impossible to work out what is important. for examplemissed was the sales in the u.s., and i had to be visited at 11:00 this morning. so, it has been hectic. ♪ all of theatching economic numbers that have come out -- inflation not really
budging, still essentially flat there in japan. we did see retail sales miss on the other end. households ending on the other end had a tiny dip there. >> at least these numbers do not really change our view that despite the labor market tightening, and upward wage pressures, the pickup in inflation will be limited in the near term. >> i think the economy is picking up but if you look at around the globe -- it is happening elsewhere, so i do not think the bank of japan can take too much credit for it. weak, and in fact if you look at the service inflation, which is probably the best gauge of domestic rices is in japan, it actually turned negative last month for the first time since the bank launched quantitative easing. a big sign that the policy is not gaining much traction. 6.6% --umber is amiss,
2.6%. 2.6% -- 2.7%.as >> the headline number comes best comes down from estimations. inflation is just nowhere to be seen. >> it pains a picture of an economy overall which is effectively treading water. maybe inflation will be helped courtesy of capitol hill later on this year, but it is too early to see. weekend, thehis markets reaction to it. we saw the downgrading of the inflation outlook and the warning --k it as a treasuries rose, dollar gained. ♪ >> tech earnings on cap. we digest the results of
alphabet, facebook, samsung and amazon. also, betting the wrong way on u.s. inflation ending quarterly revenues south korea and we will hear from the leader of germany's largest investment bank. >> we said that if revenues do not meet our expectations -- the micro investment environment and europe is still very positive. >> next, you're watching bloomberg. ♪
♪ this is bloomberg best, i am david gura. let's continue with our week's top stories. tech earnings, starting with alphabet. >> alphabet shares dipping in after-hours trading. google's parent company releasing quarter earnings which sent shares soaring then turned south. revenues came in at $26 billion, up 21%.
but, aggregate costs dropped 23% from a year ago. these numbers include the effect of that $2.7 billion fine from the eu. i talked to one of its representatives who said that it is too early for our analysis of the decision and it is illegal mark -- matter. have not decided yet if they will appeal. shares were up and then down, cory. is this about traffic acquisition costs -- >> than anything else? i think so. i have warned of a big change in their business -- they will be more mobile and this time we saw it. >> we talked about the adpocalypse this year when they were really criticized for their content. pulled -- advertisers their campaigns but now it seems
like all of those advertisers have returned. i asked the representatives about this and one of them said -- they have returned and we continue to take very seriously the issue and we are doing all that we can to protect the ecosystem. >> a lot of them have made a lot of noise about this, but they the traffic, that google is giving them overall. in terms of clicks from their ads. google ads is like nothing else in the history of advertising because you can actually see the results of an ad as it runs. ♪ facebook turned out faster than expected, quarterly sales growth fueled by continued strength in mobile video advertising. overocial network now has 2 billion active monthly users driving revenue at a faster pace than other text giants. it is also investing in original content and the first shows are expected to come online in august. i've look with facebook ceo
sheryl sandberg who explained the strategy. >> we are seeing a lot of content doing and engagement shifting to mobile and our goal is to be a platform for content providers to find their audience and monetize it. we are doing some early investing in kickstarting the ecosystem to promote video viewing on facebook. we have a lot of video views on facebook, but not really of that kind which is why we are making an investment. we hope to have content providers creating the content and finding their audience on facebook. to benkly, for facebook producing original content is a major shift, away from the approach they have always that they wanted to take, which was to be a neutral platform for content created by others. typically, when they have defeated from that in the past, they have given up, so i will not be surprised if it doesn't work. to be honest. this?t do you think of >> you have anyone from hulu,
hbo, netflix, amazon, all of them buying such content. i think facebook wants to see what will work, and it is a company that has as a part of its culture, experimentation and trying new ideas. see if they actually try to roll this out in any kind of scale. ♪ on high, not surprising given that their profits have beat estimates. net income surging $19 billion last quarter. the company is such a big part of the south korean economy. fort was a strong quarter samsung, estimates were quite high, about $9.6 billion. about 10% ahead of estimates. so, a strong performance and part of it was driven by the business, atphone comeback from the note 7 troubles that they had last year, and also the chips
business has been very strong for them. it is benefiting from being not only in the smartphone business itself but also making a lot of the components and selling them to their rivals including apple otheraming and competitors. crazyare used to these beats, is that why you don't sound very impressed? it remains a tough market to read if you look at the overall smartphone market, it is till very flat. it is difficult to differentiate that smart phone from hardware. so, when there is a product rush to creates a revenue search, so we still need to remand a portion of the some sunken- how differentiate their product from just being about hardware. >> amazon dipping you to disappointment with its financial guidance, especially its projection of a potential
loss in the coming quarter. the company's second-quarter -- $.40 per40% share, missed estimates. amazon is struggling to set up -- trying to set up competition with walmart and also bet. expectations, a bit unusual for this company, they tend to fluctuate wildly. exactly, what we've seen with the stock -- whenever there is a dip in the earnings every quarter, the stock holes up -- pulls back and investors pile in. the long-term bullish story for amazon is growth in online retail sales and obviously amazon is the dominant player there. is it different from these other things, where there could be multiple players? >> it has spent billions of dollars in their content, only bested by netflix.
we have never seen a company show up with this art of artillery -- this sort of artillery. whole foods, they're about to become the fastest-growing off-line retailer and in the largest market. consumerly the largest market in the world. i'm sure a lot of people here shop at whole foods, and they would shop there more if it was less expensive, guess what, it is about to get less expensive. brings its over rational excellence, it will happen. >> it looks like revenue growth though, has been slowing down. 47% in thewn from preceding quarter. this is a deceleration of amazon 's profitable unit? >> yes, this is a business iswing very quickly, but it a competitive business. microsoft is in the marketplace,
with a very compelling product. facebook and others, google in the cloud business, so it is a competitive business, subject to severe price cutting across the board. what is happening in the cloud base are all of the companies are going for a share right now and we've seen that in the pricing. i think long-term they are trying to get as much real estate as they can in the cloud business because this, again is another long-term success tory. ♪ -- success story. ♪
you probably saw that the headcount has started to come down. that is a mixture of the work that we did to restructure in germany, which is now almost complete. also we have been internalizing some of our technology in particular. the headcount has come down which will come through as reduce costs in the future and we continue to modernize the bank. we distinguish between running and investing, and we want to keep up the investment because he wants to move on from the modernization program. a bit of a mixed picture, but we have been focused -- focused on costs, and now we are can be more focused on revenues. you brought it down to some extent, in the last few years -- have you started to turn that around because surely if you want to get -- the best talent, you have to pay for it. >> we recognize that we were a bit of an under pair for a few years -- under payer and we wonder rectify that.
have you noticed that you underperform your peers in the u.s. question mark>> i would argue against that, especially in fixed income. in -- wees, we have lost a bit of market share and we are down quite a bit. we think there are some underlying factors and we do need to invest in electronic trading, and in cash trading and derivatives, i think we are ok. potential to make revenues and finance to read those balances are back, and once activity levels pick up should see an improvement in revenues. share do youarket expect it takes, even if the whole pie is shrinking, you still want a bigger piece, don't you? byword here is always long-term sustainable profitability. obviously, revenues are important, but we need to make
sure we are relevant to our clients by investing in systems and in people. we have been working on our advisory side and also in equity sales, trying to build up the numbers. that also works under the new rules coming next year. >> where will you build up the numbers, because of brexit, obviously, everyone is going to be wondering where you will be focused. >> london will obviously be an important venue for us, but we will also try to focus on little bit more on countries in europe, in particular germany. we will try to straighten the roots of a bank here. >> will he be moving from london to frankfurt? >> whether we have an adjustment to where our people are, depends really on what exit looks like and what the rules are. what we said is from the perspective of contingency planning, we need to ensure that --ld we can do in germany pretty much everything that we can do in london today. we know that that means --
adding at least, some operations people here in germany. i am not sure about moving. but certainly from the perspective of making sure that the competences are the same, we do need to build here in germany. there is a positive impact here. we do not know what the impact will be in london. >> what will your business -- what would you guess your business will look like in london, post-brexit? >> i guess that we will gravitate towards doing more business in london, because going outside the eu adds a modicum of risk, it probably will gravitate to europe. we have to respond to the way that clients react. >> let's talk about your revenue outlook. you said that revenue, i believe operational revenue at least, will be smaller this year than last year. and you quantify that? a little bit more precisely? >> the first half will be a
little bit indicative of the new footprint of the bank. revenues do not meet our expectations, and there is good and bad, but i think the microeconomic environment in europe is very positive. if you look, there are a lot of predictions for growth at the end of the year, up to 3%. that is a way of taking down the u.s.. though, we should be very positioned. we are positively exposed and if interest rates go up will make a lot more money with out -- without any additional costs. our american peers have reported already that there is a lot of positives tailwind to that. with the timing of those improvements, it is difficult to gauge. deutsche bank was not the only european bank in the spotlight this week, coming up, we hear from other executives
♪ this is bloomberg best, i am david gura. the global growth story is part business and part government. geopolitical presence, trade and central-bank policy have been factors in local growth. we start in united kingdom, our ceo inr spoke to this washington where he began preliminary trade talks in the u.s.. ♪ >> we not willing to lower standards, what you're looking for our areas where we can get a greater overlap. so, in areas perhaps like areastion mechanisms, or
where we might have a closer view to the u.s. or areas where we might have a closer view to the eu. ultimately, we are setting united kingdom standards. we are neither owing to be members of the eu or members of the you ask. -- the u.s. central bank. ♪ what happened to inflation, and what is that going to do in reacting to the apparent lack of inflation right now? >> for a while, i thought the simple explanation was dominance. we now know as many of us suspected that there was more slack in the economy the unemployment numbers had suggested. under those circumstances it is not surprising that inflation remains soft. now, though, after a long. of on -- of employment growth substantially above the levels needed to deal with new entrants , one begins to wonder whether there are other factors that of the network, like the end of the
commodity super cycle. perhaps, labor is finally getting a higher per person of the returns to industry. and that is being eating by companies rather than resulting in price increases. those types of explanations, i think, need to be considered. >> what are the risks of going too slow, and getting asset inflation bubbles, as opposed>> to really slowing down the economy? one of the most important factors of the last several years, for people thinking about monetary policy, has been the fact that with interest rates close to zero,e should we get a shock to the economy, there is not much room to reduce rates. when you consider the fact that in a normal recession, hedge response would be 700 basis points of easing, there is not room to do that. therefore, there has been a sense of risks in we are being asked major -- as medical to the
downside. of risks to the other side runaway inflation seem pretty modest at this juncture. >> how important was the the -- then your relations decline in your relations with the eu? euour relations with the the last 18 months, i believe there were a lot of misunderstandings. i know it is very difficult to explain in a couple of seconds, but everyone agrees that the system -- the judiciary system needs reform. too manye no -- not changes after 1989 when we started the transformation. now, the reforms have to be by the judges, by the president, by prior months, and opposition parties. you will see what the next propositions will be on the table. >> are you ready to take actions
in case the markets, and kiss sentiments turn against poland? >> markets and investors are for me, critically important. i can assure you that we will do everything to make sure that certains are happy, , legalur democracy situation, and so on. >> multinationals play a major role in global growth. this week we talk with top executives about their plans. >> when we invest on the customer's agenda, they respond well. it doesn't mean they want to pay --e, they truly appreciate if they go to the supermarket the usually have to pay more. sureald's, we want to make -- we are democratic and affordable for everyone.
why is it so challenging to make the transition to fresh beef? >> >> you can start from the supply side, if you think about the way -- not just that you meat, you have to transported, and store them. so you need more freezer space. then you get to the restaurant, and the handling of the food needs to be done if italy, and cooking temperatures on the grill are different. ultimately, we recognize that and we had customer saying that customers saying that it is juicier, and flavorful. it was very encouraging and we went ahead. our job is to solve operational challenges and deliver what the customer is asking for. chipotle found out what it is like to get the supply chain wrong. >> are you mindful of their experience when working on something as challenging as fresh beef? been mindful have since 1955, every day. that not take for granted
over 60 million customers a day visit a mcdonald's all over the world. that is our utmost importance. >> there is risk on the horizon that everybody is horizon, and that is nonperforming debt. your bank is not in that category. but it is a risk to read maybe you can tell us, what kind of risk it is and whether>> it is a hurdle or obstacle? the governments have put in good tosures which will lead in tw a resolution. they have brought in the insolvency act, asked regulators to be more active, approached the banks with tighter standards, and the big borrowers that created a problem, have been singled out. the banks are required to swap them out in the next six months or refer them to the bankruptcy
court. so, i do believe that over the next 12 to 18 months, this problem should not be that much of an issue. >> what about growth? >> we are again, fortunately positioned. where we stand today, we probably have the best brand in the system. like the old-fashioned banking, i give you money, you give me my money back. or we have a problem. [laughter] so, we do not have any asset issues. we are in a country that is growing at 7.5% and could be going to a percent once capital comes in. we have also, during this time, with the use of technology, taken our products to rural india, where 60% of the population lives. previously it did not make sense from the cost of revenue basis, but now, our ability to deal with them on mobile, take photocopies and send messages, our ability to provide them back
up, train our people electronically, we have gone there and that accounts for 20% of the business. leader,lmost the market almost the only major financial institution on the asset side of the business. so the country will grow, and we will grow in combination of increased market share and profits. i don't think growth is an issue♪ . ♪ dealu did the blockbuster -- $50 billion deal. , a,question in my mind is would you ever reach out for a deal of that size again? >> not this year, i would say. but, joking aside, it was a great deal for us to do. first of all, much of the results that you are seeing today, of course, are on the back of that deal. it has brought us high quality assets in brazil, australia, with a lot of growth.
also places like kazakhstan and other areas to read it has afforded us to upgrade our portfolio, but in a lot of growth opportunities that we are still harvesting. we are still growing our cash flow on the back of that deal as well. overall it has worked out very well. we think by the end of the year will be done with the energies, $4.5 billion that we promised in capital markets mixed year, we will get that eye gear early. >-- a year early. what i do something like that again? yes, absolutely. ♪ the results that we announced in the second quarter are good because all of the 38 -- engine nukes are -- the three engines are banking and others that are doing very well. looking forward, we believe the momentum is till there. driven, of it is market so it is difficult to forecast
exactly what the future will look like. what i can say that the momentum created since the end of last year has continued into the second quarter. >> you have done really well and completed your acquisition of workplace in november. have you fully digested barclays at this point? is fully integrated into the bank of singapore platform. we have been able to cross sell that capabilities that barclays had into our original franchise. so, penetration ratio has really increased. >> are there plans to further expand the wealth management business, the number of billionaires, one billionaire in asia is minted every three days. so there is great potential. are you looking to hire more, acquire more, what is the strategy? >> organic growth, as well as rm'sgh the addition of which will recruit from the market. with respect to whether there
♪ you're watching bloomberg best, i am david gura. in a dissenter deutsche bank, credit suisse, and barclays also request -- reported order results this week. we spoke to all of them. let's art with the ceo of credit suisse. ♪ i think our strategy is working to read as you say, it is 18 months out of 36, and i believe that we are delivering. jump in growth and we have generated almost 23 billion of m&a's in the first half. the best performance since 2011. very very good.
, growth is back and profitable. profit is up 21% and we said that we would resolve the tactical issue and our rates are now at 13 percent. in 2016,ut 1.9 billion 600 million in the first half to read we have a target of 18.5 for this year, and we said that we would reduce can -- reduce risk, it is now 47% down. the s are you is half the size it was 18 months ago. we have been growing, cutting costs, reducing risk. >> revenue is beating expectations. will that change? >> it is right on expectations, up 9% over the prior year. it is good to grow 9% every year.
it is a very good performance. faster, forw even the first time. statistics,at the we grew 5% while other companies in the market grew through .5%. >> your bank is one of the few units with high risk returns on capital, -- >> we have always said we could grow pti profit. it is up over the past two years. i think we can actually grow, and the swiss universal bank is a very good leader, and we are a universal bank. we can play on any level. ♪ board, look across the very strong momentum to read the had growth and no international
business of 6.6% on a very high base. this is in fact because we have been producing our plant advisor accounts, and demonstrating that we can grow with a quality and we're not focusing on quantity. perform in different market solutions -- conditions. >> you mentioned the institutional client activity slowing down and the pre-tax profit of the investment bank being down 6% in the past quarter. this is not anything surprising, concerning what we've seen out of the u.s. banks. wendy you think that could take up again? -- when do you think that good take--tick up again? despite the market conditions, we returned 18% on allocated capital. so, of course with volatility low, alling so
institutional clients have been on the sidelines. until you see a little bit of a cap there in volatility there it indifficult to see a change the behavior of our clients. we are also entering -- in the middle of the summer, a time which is from a seasonal standpoint not the best time to read but i am confident that most important for us is to show that under any market conditions, we are able to perform, not only to shareholders, but to clients. -- this was case, the case. >> if you look at domestic markets, commercial activity has been doing well in a low interest rate environment. international financial services has been firing on all cylinders. it has been doing very well and will continue to do very well
and grab market share. equities were down a little bit, -- -- it shows we are well capitalized. diversified, corporate banking, security services, all of these activities. revenues are at best are up 5%. costs are down, so basically, yes it is a good result which has allowed us to continue to capture market share. >> the fixed income was difficult. we have seen some activities from clients there. >> it is true, if you look at our cid, which is related to our awkward institutional clients, it goes up with demand. sometimes there is higher demand than others, and if you compare to last year where there was higher demand, and the. of brexit discussions, you can see a linear with the demand.
>> revenues are slightly down, 1%, when you expected to turn around. a real turnaround, and do you expect this turnaround to be quicker, given a new government? >> i think, if you look at our friends activities -- our activities in france, you see a difference when it comes to our commercial activities. in france, we are up 8%, we are there to serve our clients. we are in a low interest rate environment. france, when comes to we are of course, very supportive for a continuation of bestitive is this out like outlook that has been going on for the past couple of quarters. ♪ >> in terms of the fx trading business, how happy are you with how that is performing question mark what action do you want to take their? >> with the investment bank overall we are quite pleased. the equity underwriting, we had
a great quarter, the first half of this year was one of the best results that the bank has ever had in that part of our business. trading is been quite well. rates in currency, we are still not very happy, we were down in the second quarter. we have made some recent will get hires and we that corrected. but overall, and i think the investment bank had a pretty good quarter. >> are you still happy with the extent to which you back to the investment banking business in barclays question mark do you think he of taken enough action to turn its performance around? >> we still have room for improvement. we are clearly very pleased with the strategy that was set out in terms of the transatlantic consumer corporate and investment banks. ad the investment bank we had strong position in you new york. we were the number one investment bank and the u.k.
with a market share of over 10% in the second quarter. the strategy of being a transatlantic bank and we will continue to invest in the investment bank. >> we continue to see the consumer credit story in a united kingdom, lenders are dicing with a complacency. has that forced you to change or policies when it comes to credit cards? >> we are definitely focused on that. we have been in discussions with the bank of england, and what we seen is a pretty sharp increase in consumer spending since the brexit vote. that has been matched by an increase in consumer credit per capita 80. it is at a level, roughly equal to where it was in 2008. that being said, unemployment stays very low, and we're watching it. we are adjusting our underwriting standards and we
want to remain a bank with one of the highest quality consumer credit loan portfolios. and weare focused on it are also focused on unemployment , which continues to be quite low. but i think everyone should be mindful of the levels of consumer credit, both in the u k and actually in the u.s. as well. ♪
♪ this is grr, where we are in the first half of the year. at 23%.forming health care at 17 and energy. down double digits as well. look at the sales surprise, companies that reported their earnings -- if you explore bloomberg's wonderful function. hereve a look at opec, -- on my bloomberg. a quick snapshot of where we are. >> bloomberg app has 35,000 sanctions and we love showing you our favorites. here's another function evil thequic go. ic --