Speaker 1: Good morning. It's Thursday, the thirty first of August here
Speaker 1: in London. This is the Bloomberg Daybreak You podcast.
Speaker 2: I'm Caroline Hetki and I'm Stephen Carroll. Coming up today,
Speaker 2: Swiss lander UBS post record profits as its Credit Sweeze
Speaker 2: takeover looks to be paying off, the.
Speaker 1: Chinese mega developer Country Garden posts a record loss and
Speaker 1: warms of default.
Speaker 2: Plus we take a closer look at the fallout from
Speaker 2: Europe's biggest tax scandal and why the investigation just keeps growing.
Speaker 1: Let's start with a roundup of our top stories. UBS
Speaker 1: has reported record profits in the wake of its emergency
Speaker 1: takeover of Credit sweet. The bank made again of just
Speaker 1: under twenty nine billion dollars in the second quarter. CEO
Speaker 1: Sergio A. Motti has told Bloomberg the size of the
Speaker 1: integration is unheard of.
Speaker 3: This is huge and allow us to really think about
Speaker 3: how can we now go to the next level. So
Speaker 3: now we are very focused on integration, on executing our
Speaker 3: current plans, but we can't forget that the competition on
Speaker 3: the market is evolving and we need to stay very focused.
Speaker 1: And you can get that full interview with the CEO
Speaker 1: of UBS, Serja Emoti on the Bloomberg Talks podcast all
Speaker 1: of our key conversations in one place. In terms of
Speaker 1: the numbers, after stripping out the acquisition costs and negative
Speaker 1: goodwill from the credit squeeze take of a pretext, profits
Speaker 1: for UBS were a more modest one point one billion dollars.
Speaker 2: We've also had the news about job cuts coming from UBS,
Speaker 2: saying that they're going to cut an additional two thousand
Speaker 2: Swiss jobs over the next few years, and a thousand
Speaker 2: job cuts will result from the Swiss unit integration as well.
Speaker 2: Turning to some other news, the Chinese developer Country Garden
Speaker 2: has warned that it made default on its debt and
Speaker 2: raised concerns about staying in business. The warning came as
Speaker 2: the property giant posted a record first half loss of
Speaker 2: almost seven billion dollars. Shazad Kasim, managing director of China
Speaker 2: Beige Book, says investors should brace for more negative of news.
Speaker 4: I think we get bad property news, more problems with
Speaker 4: developers at least for the next couple of years, and
Speaker 4: we really still haven't found the floor and property prices either,
Speaker 4: so I think investors should breaze for more bad news ahead.
Speaker 2: Over here, the deepening real estate slump in China mentioned
Speaker 2: there bishez Ad Cazin was among a host of negative
Speaker 2: factors that helped to push down the country's latest economic
Speaker 2: survey data. China Services PMI dipped to fifty one in August,
Speaker 2: while the reading above fifty indicated a slight expansion in
Speaker 2: the sector.
Speaker 1: A hedge fund founded by two former Citadel traders so
Speaker 1: its portfolio dropped by a court up this year. Fifth
Speaker 1: Delta was the biggest startup of its kind in twenty
Speaker 1: twenty one, but it has struggled since then to meet expectations.
Speaker 1: Data from Bloomberg shows that it's peers by an average
Speaker 1: of over six percent this year.
Speaker 2: The year long slump in the UK's private sector is
Speaker 2: set to continue for at least three months. That's according
Speaker 2: to new figures from the Confederation of British Industry. Bloomberg's
Speaker 2: Jack Ryan reports.
Speaker 5: This is the latest indicator of a gloomy outlook for
Speaker 5: the UK economy. Business is surveyed by the CBI say
Speaker 5: they're cutting back on investment as they suffer from lower demand,
Speaker 5: cost pressures and higher debt repayments. The report shows manufacturing
Speaker 5: output falling at the sharpest rate in almost three years,
Speaker 5: while services continue to slide. The findings suggest that the
Speaker 5: trend is likely to continue in the coming months, but
Speaker 5: a separate survey from Lloyd's is more optimistic, with business
Speaker 5: confidence surging to an eighteen month high. In August in London,
Speaker 5: I'm Jack Ryan Bloomberg Daybreak Europe.
Speaker 1: In the US Senate, Republican leader Mitch McConnell froze in
Speaker 1: public for the second time in as many months. The
Speaker 1: eighty one year old political veteran and struggled to answer
Speaker 1: a reporter's question about his re election plans.
Speaker 6: I'm sorry, I had heard out hearlier.
Speaker 5: That's okay.
Speaker 6: What are your thoughts on running for reelection.
Speaker 5: In twenty twenty six?
Speaker 6: I thought about what.
Speaker 5: Running for re election in twenty four says?
Speaker 6: Did you hear the question? Senator running for reelection in
Speaker 6: twenty twenty six? All right, I'm sorry, you are were
Speaker 6: going to need a minute.
Speaker 1: The episode raises further health concerns for Mitch McConnell, who
Speaker 1: is a major fundraiser and force in the Republican Party.
Speaker 1: His spokesman said the senator felt momentarily lightheaded and pause
Speaker 1: during his press conference and plans to consult a.
Speaker 2: Doctor, so it's this tel Bloomberg, Apple is testing the
Speaker 2: use of three D printers to produce the steel cases
Speaker 2: for some of its upcoming smart watches. The story from
Speaker 2: Bloomberg's Charlie Pallas.
Speaker 7: It would herald a major change to how the company
Speaker 7: manufactures products. The technique would do away with the need
Speaker 7: to cut large slabs of metal into the product shape.
Speaker 7: Sources say that would reduce the time it takes to
Speaker 7: build devices, while also helping the environment by using less material.
Speaker 7: The new approach has the potential to streamline Apple's supply
Speaker 7: chain and kickoff a broader shift in New York. Charlie Power, Bloomberg, Daybreak, Europe.
Speaker 1: And finally, Elon Musk's social media network X is planning
Speaker 1: to gather more data from users than ever before. The network,
Speaker 1: formerly known as Twitter, says that it will collect biometric data,
Speaker 1: which can include account holders, retina pattern and thumbprint. X
Speaker 1: also updated its privacy policy to collect information on account
Speaker 1: holders employment and education history. We often like to talk
Speaker 1: a little bit about lifestyle and what you spend your
Speaker 1: cash on. Do you buy expensive handbags, watches, coats?
Speaker 2: The most expensive thing I think I carry on with
Speaker 2: myself as my wirelast and that I've had for about
Speaker 2: ten years. It says a lot about me.
Speaker 7: Probably.
Speaker 5: Well.
Speaker 1: Apparently now some of the big luxury houses you know
Speaker 1: that have been obviously trying to grapple with fakes for
Speaker 1: so long the trade in fakes, now they're using blockchain
Speaker 1: to try to prove the origin of their most kind
Speaker 1: of coveted items. And this was discovered by one of
Speaker 1: our own reporters, Anna Irrera. She'd bought a handbag and
Speaker 1: when she pulled out on the little card inside it
Speaker 1: talked about how it was blockchain tracked.
Speaker 2: I think this is really interesting because I feel as
Speaker 2: if the promise of blockchain has been touted so much
Speaker 2: and yet we're not seeing that many real world applications
Speaker 2: of it. And this is, okay, granted, not exactly mass market,
Speaker 2: but it is an indication of how you can use
Speaker 2: something like the blockchain to validate the authenticity of something
Speaker 2: that is so rare and treasured by many. I'm sure
Speaker 2: perhaps it might be a little bit longer before we
Speaker 2: see it in greater use in other parts of the world.
Speaker 2: I mean, there's a lot of lot to talk about
Speaker 2: how regulation has made it quite difficult to the employment
Speaker 2: blockchain in the finance industry, for example, a good example
Speaker 2: of a real world application of the blockchain.
Speaker 1: Yeah, it was a Mew Mew handbag apparently film Frada
Speaker 1: and they're using Aura blockchain. So if you wanted the
Speaker 1: details on it. Anyway, there's more on that store on
Speaker 1: the bloombig tuminal.
Speaker 2: Well, let's bring you more now. Our top story in
Speaker 2: the news that UBS posting its biggest ever quarterly profit
Speaker 2: for a bank in the second quarter. The CEO of UBS,
Speaker 2: Sergy or Muti, has been speaking to Bloomberg's editor at large,
Speaker 2: Francine Lacqua, almost three months since the deal to acquire
Speaker 2: Credit Suite was unveiled. Or Mutti says that combining the
Speaker 2: firms will lead to job losses across their global workforce.
Speaker 3: Well, of course, in our industry, is very difficult to
Speaker 3: do restructuring the deep restructurally necessary a credit suits and
Speaker 3: extract the synergies without going through people and account having
Speaker 3: say that there is a big element of the cost
Speaker 3: that is driven by real estate planning, by rationalizing legal entities,
Speaker 3: and by it platforms shutdowns on the account front. First
Speaker 3: of all, we are counting a lot on natural attrition
Speaker 3: on retirements and internal mobility and shifting all so our
Speaker 3: permanent to external account ratio. Having say that, of course
Speaker 3: we're going to have to take some paractic actions in
Speaker 3: redundancies in the years to come, mainly in Switzerland, no,
Speaker 3: I think this is something that will affect, of course,
Speaker 3: our entire workforce as much as you know. In Switzerland,
Speaker 3: we expect from a proactive standpoint of view, we will
Speaker 3: have around three thousand jobs that will be made redundant
Speaker 3: over the next years. One thousand are in relation to
Speaker 3: our decision to integrate the Swiss Bank. If we would
Speaker 3: have chosen to spin off the Swiss Bank, we would
Speaker 3: have had to reduce it by six hundreds, So the
Speaker 3: delta is four hundred people. Then we have another two
Speaker 3: thousand people that needs to be that will go through
Speaker 3: our redundancy because of the need of the restructuring. Now
Speaker 3: it's good and we are lucky that we have a
Speaker 3: very healthy labor market in Switzerland. You know, according to
Speaker 3: the the Swiss the Association of the employers in the
Speaker 3: banking industry, there are more than six thousand jobs open.
Speaker 3: Open jobs in Switzerland is not one for one the profile,
Speaker 3: but is a healthy market, and and so we are
Speaker 3: also helping our the people affected with financial retraining riskilling
Speaker 3: UH and UH and and and so we try to
Speaker 3: mitigate this issue, but of course it's the painful part
Speaker 3: of the job is to go through this exercise.
Speaker 6: Overall, thirty five thousand jobs. Too soon to say what
Speaker 6: your final headcount will look like in two years.
Speaker 3: We will. We are not talking about it counts. So
Speaker 3: other than this is a specific Swiss situation because of
Speaker 3: course the size of the country, the relevance of the
Speaker 3: both organization to the country, we want to be specific
Speaker 3: about giving clarity on this issue. But broadly speaking, you
Speaker 3: will see as the quarter goes by how the workforce
Speaker 3: is changing. What I can tell you is that since
Speaker 3: the beginning of the year at Credit Suizz we already
Speaker 3: had eight thousand reduction in workforce between internal and external.
Speaker 3: This is a consequence of the cost measures that Credit
Speaker 3: Squiz has initiated itself, recognizing the need of our restructuring,
Speaker 3: and we have been accelerating that in the second quarter.
Speaker 2: That was the CEO of UBS, Sergio or Maati, speaking
Speaker 2: to Boomberg's editor at large, Francine Laque.
Speaker 1: And Fancine joins us now to discuss the interview with
Speaker 1: the man of the moment, Matty. Good morning, Fancine, Thanks
Speaker 1: so much for taking the time to speak to us
Speaker 1: on Bloomberg Radio. Just listening to that interview, good morning,
Speaker 1: and Marti seems really quite confident about the combination. It's
Speaker 1: been well received by vesus A share price is up today.
Speaker 1: Having said that, talk of job cuts on the way.
Speaker 6: Yes, and we always knew that A good morning to
Speaker 6: both of you, that a lot of job cuts were coming.
Speaker 6: He was very careful, and I think this is out
Speaker 6: of respect to employees that must be feeling very uncertain
Speaker 6: about their future. Again, this was a shock to many
Speaker 6: that this craty sweet, huge bank got taken over. So
Speaker 6: he did talk for the first time about job cuts,
Speaker 6: but he really kept it very specific to the Swiss Bank. Again,
Speaker 6: this is a political hot potato in a country that
Speaker 6: will also go to the polls in two three months,
Speaker 6: so I think he wanted to put that to bed
Speaker 6: and make sure that everyone knew where they were standing.
Speaker 6: When you look at the profit, it's a huge number
Speaker 6: reported a twenty nine billion dollar profit, but again the
Speaker 6: boost came primarily from this accounting concept item called goodwill,
Speaker 6: So I don't know if it's a huge, wonderful profit.
Speaker 6: Certainly the share prices up five percent because this was
Speaker 6: probably a good deal, and we've been speaking to a
Speaker 6: lot of investors. They say, look, they bought pretty sweez.
Speaker 6: They're going to integrate it. As long as they execute
Speaker 6: and do the execution. Well, this is a positive because
Speaker 6: they didn't overpay for it. And at the end of
Speaker 6: the day, what we were worried about back then, remember
Speaker 6: it was only five months ago that this combination or
Speaker 6: takeover happened, was that they would find something very ugly
Speaker 6: in the Credit Slaase investment bank unit, which they haven't,
Speaker 6: and so they seem to be in a good place,
Speaker 6: making good pace. But then it's all about the execution
Speaker 6: and you could always see surprises down the line.
Speaker 2: Yeah, and on that point, Francine, what is the biggest
Speaker 2: complexity facing UBS now as they try to continue that integration.
Speaker 6: I mean, they're huge complexity. First of all, the global
Speaker 6: wealth management new money is sixteen point two billion dollars.
Speaker 6: That's great. Can they continue We also spoke with Surgiromodi
Speaker 6: about how much time does he spend on focusing on
Speaker 6: the integration, But also the future of the bank. Remember
Speaker 6: he's basically building a plane, which is this megabank, whilst
Speaker 6: at the same time trying to keep UBS on the road,
Speaker 6: trying to keep clients happy. So this is complex. He
Speaker 6: did say twice in our interview that look, this is
Speaker 6: a competitive market landscape, but it's really not the concern
Speaker 6: about risky businesses. It's more about the complexity of it.
Speaker 6: So they just had to make it right in terms
Speaker 6: of what they sell off, how they do that they
Speaker 6: go to the market in the right way, so it's
Speaker 6: not like they're less of some kind of bombshell that
Speaker 6: they don't know what to do with. I think the
Speaker 6: complexity is making sure that they get everything right that
Speaker 6: it fits without culture clashes or people wanting to leave.
Speaker 1: Yeah, and I mean obviously Sergia and MOSTI having been
Speaker 1: the CEO formally, is also extremely knowledgeable about the UBS business.
Speaker 1: So how do you think success is going to be
Speaker 1: measured going forwards?
Speaker 6: Well, this is probably the billion dollar question. A lot
Speaker 6: of it will be on execution, when what he's trying
Speaker 6: to do is saying, look, this is what we've done
Speaker 6: at UBS that worked, so we're going to replicate that
Speaker 6: for credit suitese to we also at the same time
Speaker 6: integrating it. We've covered many many banking and then a
Speaker 6: huge deals and at the end of the day, culture,
Speaker 6: if you don't change the culture of the company that
Speaker 6: you've bought, or if there's a massive shift in that,
Speaker 6: that's when it becomes really difficult. And remody so far
Speaker 6: has said that they've seen some formidable momentum when it
Speaker 6: comes to winning back client money. Does that continue? Also,
Speaker 6: you know how big are the losses that UBS expects
Speaker 6: from the one down of some of the non strategic assets.
Speaker 6: For the moment, everything could you know, seems okay, but
Speaker 6: it could turn and how fast can it make this
Speaker 6: energy from integrating credit suite. So I think timeline is important.
Speaker 6: I think how he measured success is where he'll probably
Speaker 6: be in January and February. At the moment. Central bank
Speaker 6: action also makes it easier for banks to make money.
Speaker 6: But if there's a fun and downturn, if there's a recession,
Speaker 6: we don't one hundred percent know what this large uber bank,
Speaker 6: how they'll deal with those kinds of tests stresses.
Speaker 2: It was big news fan scene when Sergio Ramarti came
Speaker 2: back to lead this bank through this takeover. What was
Speaker 2: your gauge of how he is feeling his mood now
Speaker 2: this far in.
Speaker 6: Well, he was very respected chief executive. Is there's one
Speaker 6: person that has both the confidence of politicians because Swiss,
Speaker 6: but also understands ubs deeply. It was probably him. I
Speaker 6: think he likes the challenge. We've spoken a couple of times,
Speaker 6: you know, since this happened, and then again today. He's
Speaker 6: one that doesn't shy away from something difficult. He did
Speaker 6: highlight many times a strong brand of the client relationship
Speaker 6: that he's had. It was also the first time that
Speaker 6: he was a bit punchy, and I thought that was
Speaker 6: interesting just in his state of mind and saying, look,
Speaker 6: you know the question that they have now because the
Speaker 6: share prices up five percent because they have this twenty
Speaker 6: nine billion dollar negative goodwill is well, was it a
Speaker 6: fair deal for the eighty one? Is that last everything?
Speaker 6: Should they have had actually a better deal, because if
Speaker 6: you're a landholder at the time and you were in
Speaker 6: eighty one, you were completely wiped out. And that he
Speaker 6: really pushed back against and saying, look, this was not
Speaker 6: only a liquidity problem. You know, pretty sweet had concerned
Speaker 6: on how it was managed and I thought that was
Speaker 6: nite bunche. It was the first time I.
Speaker 7: Heard him say it.
Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the
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