WEBVTT - UPDATE: UBS CEO Talks Record Profits, Job Cuts & Apple Tries 3D Printing

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<v Speaker 1>Good morning. It's Thursday, the thirty first of August here

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<v Speaker 1>in London. This is the Bloomberg Daybreak You podcast.

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<v Speaker 2>I'm Caroline Hetki and I'm Stephen Carroll. Coming up today,

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<v Speaker 2>Swiss lander UBS post record profits as its Credit Sweeze

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<v Speaker 2>takeover looks to be paying off, the.

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<v Speaker 1>Chinese mega developer Country Garden posts a record loss and

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<v Speaker 1>warms of default.

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<v Speaker 2>Plus we take a closer look at the fallout from

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<v Speaker 2>Europe's biggest tax scandal and why the investigation just keeps growing.

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<v Speaker 1>Let's start with a roundup of our top stories. UBS

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<v Speaker 1>has reported record profits in the wake of its emergency

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<v Speaker 1>takeover of Credit sweet. The bank made again of just

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<v Speaker 1>under twenty nine billion dollars in the second quarter. CEO

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<v Speaker 1>Sergio A. Motti has told Bloomberg the size of the

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<v Speaker 1>integration is unheard of.

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<v Speaker 3>This is huge and allow us to really think about

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<v Speaker 3>how can we now go to the next level. So

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<v Speaker 3>now we are very focused on integration, on executing our

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<v Speaker 3>current plans, but we can't forget that the competition on

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<v Speaker 3>the market is evolving and we need to stay very focused.

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<v Speaker 1>And you can get that full interview with the CEO

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<v Speaker 1>of UBS, Serja Emoti on the Bloomberg Talks podcast all

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<v Speaker 1>of our key conversations in one place. In terms of

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<v Speaker 1>the numbers, after stripping out the acquisition costs and negative

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<v Speaker 1>goodwill from the credit squeeze take of a pretext, profits

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<v Speaker 1>for UBS were a more modest one point one billion dollars.

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<v Speaker 2>We've also had the news about job cuts coming from UBS,

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<v Speaker 2>saying that they're going to cut an additional two thousand

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<v Speaker 2>Swiss jobs over the next few years, and a thousand

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<v Speaker 2>job cuts will result from the Swiss unit integration as well.

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<v Speaker 2>Turning to some other news, the Chinese developer Country Garden

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<v Speaker 2>has warned that it made default on its debt and

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<v Speaker 2>raised concerns about staying in business. The warning came as

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<v Speaker 2>the property giant posted a record first half loss of

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<v Speaker 2>almost seven billion dollars. Shazad Kasim, managing director of China

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<v Speaker 2>Beige Book, says investors should brace for more negative of news.

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<v Speaker 4>I think we get bad property news, more problems with

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<v Speaker 4>developers at least for the next couple of years, and

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<v Speaker 4>we really still haven't found the floor and property prices either,

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<v Speaker 4>so I think investors should breaze for more bad news ahead.

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<v Speaker 2>Over here, the deepening real estate slump in China mentioned

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<v Speaker 2>there bishez Ad Cazin was among a host of negative

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<v Speaker 2>factors that helped to push down the country's latest economic

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<v Speaker 2>survey data. China Services PMI dipped to fifty one in August,

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<v Speaker 2>while the reading above fifty indicated a slight expansion in

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<v Speaker 2>the sector.

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<v Speaker 1>A hedge fund founded by two former Citadel traders so

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<v Speaker 1>its portfolio dropped by a court up this year. Fifth

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<v Speaker 1>Delta was the biggest startup of its kind in twenty

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<v Speaker 1>twenty one, but it has struggled since then to meet expectations.

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<v Speaker 1>Data from Bloomberg shows that it's peers by an average

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<v Speaker 1>of over six percent this year.

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<v Speaker 2>The year long slump in the UK's private sector is

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<v Speaker 2>set to continue for at least three months. That's according

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<v Speaker 2>to new figures from the Confederation of British Industry. Bloomberg's

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<v Speaker 2>Jack Ryan reports.

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<v Speaker 5>This is the latest indicator of a gloomy outlook for

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<v Speaker 5>the UK economy. Business is surveyed by the CBI say

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<v Speaker 5>they're cutting back on investment as they suffer from lower demand,

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<v Speaker 5>cost pressures and higher debt repayments. The report shows manufacturing

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<v Speaker 5>output falling at the sharpest rate in almost three years,

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<v Speaker 5>while services continue to slide. The findings suggest that the

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<v Speaker 5>trend is likely to continue in the coming months, but

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<v Speaker 5>a separate survey from Lloyd's is more optimistic, with business

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<v Speaker 5>confidence surging to an eighteen month high. In August in London,

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<v Speaker 5>I'm Jack Ryan Bloomberg Daybreak Europe.

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<v Speaker 1>In the US Senate, Republican leader Mitch McConnell froze in

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<v Speaker 1>public for the second time in as many months. The

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<v Speaker 1>eighty one year old political veteran and struggled to answer

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<v Speaker 1>a reporter's question about his re election plans.

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<v Speaker 6>I'm sorry, I had heard out hearlier.

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<v Speaker 5>That's okay.

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<v Speaker 6>What are your thoughts on running for reelection.

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<v Speaker 5>In twenty twenty six?

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<v Speaker 6>I thought about what.

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<v Speaker 5>Running for re election in twenty four says?

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<v Speaker 6>Did you hear the question? Senator running for reelection in

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<v Speaker 6>twenty twenty six? All right, I'm sorry, you are were

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<v Speaker 6>going to need a minute.

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<v Speaker 1>The episode raises further health concerns for Mitch McConnell, who

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<v Speaker 1>is a major fundraiser and force in the Republican Party.

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<v Speaker 1>His spokesman said the senator felt momentarily lightheaded and pause

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<v Speaker 1>during his press conference and plans to consult a.

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<v Speaker 2>Doctor, so it's this tel Bloomberg, Apple is testing the

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<v Speaker 2>use of three D printers to produce the steel cases

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<v Speaker 2>for some of its upcoming smart watches. The story from

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<v Speaker 2>Bloomberg's Charlie Pallas.

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<v Speaker 7>It would herald a major change to how the company

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<v Speaker 7>manufactures products. The technique would do away with the need

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<v Speaker 7>to cut large slabs of metal into the product shape.

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<v Speaker 7>Sources say that would reduce the time it takes to

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<v Speaker 7>build devices, while also helping the environment by using less material.

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<v Speaker 7>The new approach has the potential to streamline Apple's supply

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<v Speaker 7>chain and kickoff a broader shift in New York. Charlie Power, Bloomberg, Daybreak, Europe.

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<v Speaker 1>And finally, Elon Musk's social media network X is planning

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<v Speaker 1>to gather more data from users than ever before. The network,

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<v Speaker 1>formerly known as Twitter, says that it will collect biometric data,

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<v Speaker 1>which can include account holders, retina pattern and thumbprint. X

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<v Speaker 1>also updated its privacy policy to collect information on account

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<v Speaker 1>holders employment and education history. We often like to talk

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<v Speaker 1>a little bit about lifestyle and what you spend your

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<v Speaker 1>cash on. Do you buy expensive handbags, watches, coats?

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<v Speaker 2>The most expensive thing I think I carry on with

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<v Speaker 2>myself as my wirelast and that I've had for about

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<v Speaker 2>ten years. It says a lot about me.

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<v Speaker 7>Probably.

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<v Speaker 5>Well.

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<v Speaker 1>Apparently now some of the big luxury houses you know

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<v Speaker 1>that have been obviously trying to grapple with fakes for

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<v Speaker 1>so long the trade in fakes, now they're using blockchain

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<v Speaker 1>to try to prove the origin of their most kind

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<v Speaker 1>of coveted items. And this was discovered by one of

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<v Speaker 1>our own reporters, Anna Irrera. She'd bought a handbag and

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<v Speaker 1>when she pulled out on the little card inside it

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<v Speaker 1>talked about how it was blockchain tracked.

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<v Speaker 2>I think this is really interesting because I feel as

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<v Speaker 2>if the promise of blockchain has been touted so much

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<v Speaker 2>and yet we're not seeing that many real world applications

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<v Speaker 2>of it. And this is, okay, granted, not exactly mass market,

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<v Speaker 2>but it is an indication of how you can use

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<v Speaker 2>something like the blockchain to validate the authenticity of something

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<v Speaker 2>that is so rare and treasured by many. I'm sure

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<v Speaker 2>perhaps it might be a little bit longer before we

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<v Speaker 2>see it in greater use in other parts of the world.

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<v Speaker 2>I mean, there's a lot of lot to talk about

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<v Speaker 2>how regulation has made it quite difficult to the employment

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<v Speaker 2>blockchain in the finance industry, for example, a good example

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<v Speaker 2>of a real world application of the blockchain.

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<v Speaker 1>Yeah, it was a Mew Mew handbag apparently film Frada

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<v Speaker 1>and they're using Aura blockchain. So if you wanted the

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<v Speaker 1>details on it. Anyway, there's more on that store on

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<v Speaker 1>the bloombig tuminal.

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<v Speaker 2>Well, let's bring you more now. Our top story in

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<v Speaker 2>the news that UBS posting its biggest ever quarterly profit

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<v Speaker 2>for a bank in the second quarter. The CEO of UBS,

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<v Speaker 2>Sergy or Muti, has been speaking to Bloomberg's editor at large,

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<v Speaker 2>Francine Lacqua, almost three months since the deal to acquire

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<v Speaker 2>Credit Suite was unveiled. Or Mutti says that combining the

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<v Speaker 2>firms will lead to job losses across their global workforce.

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<v Speaker 3>Well, of course, in our industry, is very difficult to

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<v Speaker 3>do restructuring the deep restructurally necessary a credit suits and

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<v Speaker 3>extract the synergies without going through people and account having

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<v Speaker 3>say that there is a big element of the cost

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<v Speaker 3>that is driven by real estate planning, by rationalizing legal entities,

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<v Speaker 3>and by it platforms shutdowns on the account front. First

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<v Speaker 3>of all, we are counting a lot on natural attrition

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<v Speaker 3>on retirements and internal mobility and shifting all so our

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<v Speaker 3>permanent to external account ratio. Having say that, of course

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<v Speaker 3>we're going to have to take some paractic actions in

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<v Speaker 3>redundancies in the years to come, mainly in Switzerland, no,

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<v Speaker 3>I think this is something that will affect, of course,

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<v Speaker 3>our entire workforce as much as you know. In Switzerland,

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<v Speaker 3>we expect from a proactive standpoint of view, we will

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<v Speaker 3>have around three thousand jobs that will be made redundant

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<v Speaker 3>over the next years. One thousand are in relation to

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<v Speaker 3>our decision to integrate the Swiss Bank. If we would

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<v Speaker 3>have chosen to spin off the Swiss Bank, we would

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<v Speaker 3>have had to reduce it by six hundreds, So the

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<v Speaker 3>delta is four hundred people. Then we have another two

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<v Speaker 3>thousand people that needs to be that will go through

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<v Speaker 3>our redundancy because of the need of the restructuring. Now

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<v Speaker 3>it's good and we are lucky that we have a

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<v Speaker 3>very healthy labor market in Switzerland. You know, according to

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<v Speaker 3>the the Swiss the Association of the employers in the

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<v Speaker 3>banking industry, there are more than six thousand jobs open.

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<v Speaker 3>Open jobs in Switzerland is not one for one the profile,

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<v Speaker 3>but is a healthy market, and and so we are

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<v Speaker 3>also helping our the people affected with financial retraining riskilling

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<v Speaker 3>UH and UH and and and so we try to

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<v Speaker 3>mitigate this issue, but of course it's the painful part

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<v Speaker 3>of the job is to go through this exercise.

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<v Speaker 6>Overall, thirty five thousand jobs. Too soon to say what

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<v Speaker 6>your final headcount will look like in two years.

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<v Speaker 3>We will. We are not talking about it counts. So

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<v Speaker 3>other than this is a specific Swiss situation because of

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<v Speaker 3>course the size of the country, the relevance of the

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<v Speaker 3>both organization to the country, we want to be specific

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<v Speaker 3>about giving clarity on this issue. But broadly speaking, you

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<v Speaker 3>will see as the quarter goes by how the workforce

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<v Speaker 3>is changing. What I can tell you is that since

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<v Speaker 3>the beginning of the year at Credit Suizz we already

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<v Speaker 3>had eight thousand reduction in workforce between internal and external.

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<v Speaker 3>This is a consequence of the cost measures that Credit

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<v Speaker 3>Squiz has initiated itself, recognizing the need of our restructuring,

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<v Speaker 3>and we have been accelerating that in the second quarter.

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<v Speaker 2>That was the CEO of UBS, Sergio or Maati, speaking

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<v Speaker 2>to Boomberg's editor at large, Francine Laque.

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<v Speaker 1>And Fancine joins us now to discuss the interview with

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<v Speaker 1>the man of the moment, Matty. Good morning, Fancine, Thanks

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<v Speaker 1>so much for taking the time to speak to us

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<v Speaker 1>on Bloomberg Radio. Just listening to that interview, good morning,

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<v Speaker 1>and Marti seems really quite confident about the combination. It's

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<v Speaker 1>been well received by vesus A share price is up today.

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<v Speaker 1>Having said that, talk of job cuts on the way.

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<v Speaker 6>Yes, and we always knew that A good morning to

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<v Speaker 6>both of you, that a lot of job cuts were coming.

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<v Speaker 6>He was very careful, and I think this is out

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<v Speaker 6>of respect to employees that must be feeling very uncertain

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<v Speaker 6>about their future. Again, this was a shock to many

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<v Speaker 6>that this craty sweet, huge bank got taken over. So

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<v Speaker 6>he did talk for the first time about job cuts,

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<v Speaker 6>but he really kept it very specific to the Swiss Bank. Again,

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<v Speaker 6>this is a political hot potato in a country that

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<v Speaker 6>will also go to the polls in two three months,

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<v Speaker 6>so I think he wanted to put that to bed

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<v Speaker 6>and make sure that everyone knew where they were standing.

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<v Speaker 6>When you look at the profit, it's a huge number

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<v Speaker 6>reported a twenty nine billion dollar profit, but again the

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<v Speaker 6>boost came primarily from this accounting concept item called goodwill,

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<v Speaker 6>So I don't know if it's a huge, wonderful profit.

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<v Speaker 6>Certainly the share prices up five percent because this was

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<v Speaker 6>probably a good deal, and we've been speaking to a

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<v Speaker 6>lot of investors. They say, look, they bought pretty sweez.

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<v Speaker 6>They're going to integrate it. As long as they execute

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<v Speaker 6>and do the execution. Well, this is a positive because

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<v Speaker 6>they didn't overpay for it. And at the end of

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<v Speaker 6>the day, what we were worried about back then, remember

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<v Speaker 6>it was only five months ago that this combination or

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<v Speaker 6>takeover happened, was that they would find something very ugly

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<v Speaker 6>in the Credit Slaase investment bank unit, which they haven't,

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<v Speaker 6>and so they seem to be in a good place,

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<v Speaker 6>making good pace. But then it's all about the execution

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<v Speaker 6>and you could always see surprises down the line.

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<v Speaker 2>Yeah, and on that point, Francine, what is the biggest

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<v Speaker 2>complexity facing UBS now as they try to continue that integration.

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<v Speaker 6>I mean, they're huge complexity. First of all, the global

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<v Speaker 6>wealth management new money is sixteen point two billion dollars.

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<v Speaker 6>That's great. Can they continue We also spoke with Surgiromodi

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<v Speaker 6>about how much time does he spend on focusing on

0:12:49.559 --> 0:12:52.880
<v Speaker 6>the integration, But also the future of the bank. Remember

0:12:53.000 --> 0:12:57.319
<v Speaker 6>he's basically building a plane, which is this megabank, whilst

0:12:57.320 --> 0:12:59.439
<v Speaker 6>at the same time trying to keep UBS on the road,

0:13:00.160 --> 0:13:03.400
<v Speaker 6>trying to keep clients happy. So this is complex. He

0:13:03.480 --> 0:13:06.360
<v Speaker 6>did say twice in our interview that look, this is

0:13:06.559 --> 0:13:12.239
<v Speaker 6>a competitive market landscape, but it's really not the concern

0:13:12.640 --> 0:13:16.520
<v Speaker 6>about risky businesses. It's more about the complexity of it.

0:13:16.600 --> 0:13:19.480
<v Speaker 6>So they just had to make it right in terms

0:13:19.480 --> 0:13:21.880
<v Speaker 6>of what they sell off, how they do that they

0:13:21.920 --> 0:13:24.360
<v Speaker 6>go to the market in the right way, so it's

0:13:24.360 --> 0:13:26.440
<v Speaker 6>not like they're less of some kind of bombshell that

0:13:26.480 --> 0:13:28.160
<v Speaker 6>they don't know what to do with. I think the

0:13:28.240 --> 0:13:31.480
<v Speaker 6>complexity is making sure that they get everything right that

0:13:31.559 --> 0:13:34.440
<v Speaker 6>it fits without culture clashes or people wanting to leave.

0:13:35.640 --> 0:13:38.880
<v Speaker 1>Yeah, and I mean obviously Sergia and MOSTI having been

0:13:38.960 --> 0:13:45.640
<v Speaker 1>the CEO formally, is also extremely knowledgeable about the UBS business.

0:13:46.200 --> 0:13:49.080
<v Speaker 1>So how do you think success is going to be

0:13:49.120 --> 0:13:50.319
<v Speaker 1>measured going forwards?

0:13:51.640 --> 0:13:54.280
<v Speaker 6>Well, this is probably the billion dollar question. A lot

0:13:54.320 --> 0:13:57.320
<v Speaker 6>of it will be on execution, when what he's trying

0:13:57.360 --> 0:13:59.000
<v Speaker 6>to do is saying, look, this is what we've done

0:13:59.000 --> 0:14:02.200
<v Speaker 6>at UBS that worked, so we're going to replicate that

0:14:02.280 --> 0:14:04.160
<v Speaker 6>for credit suitese to we also at the same time

0:14:04.320 --> 0:14:08.439
<v Speaker 6>integrating it. We've covered many many banking and then a

0:14:08.760 --> 0:14:11.000
<v Speaker 6>huge deals and at the end of the day, culture,

0:14:11.000 --> 0:14:12.719
<v Speaker 6>if you don't change the culture of the company that

0:14:12.800 --> 0:14:15.600
<v Speaker 6>you've bought, or if there's a massive shift in that,

0:14:15.600 --> 0:14:19.080
<v Speaker 6>that's when it becomes really difficult. And remody so far

0:14:19.160 --> 0:14:22.400
<v Speaker 6>has said that they've seen some formidable momentum when it

0:14:22.400 --> 0:14:26.280
<v Speaker 6>comes to winning back client money. Does that continue? Also,

0:14:26.480 --> 0:14:28.600
<v Speaker 6>you know how big are the losses that UBS expects

0:14:28.600 --> 0:14:30.720
<v Speaker 6>from the one down of some of the non strategic assets.

0:14:30.760 --> 0:14:33.200
<v Speaker 6>For the moment, everything could you know, seems okay, but

0:14:33.360 --> 0:14:36.480
<v Speaker 6>it could turn and how fast can it make this

0:14:36.720 --> 0:14:40.920
<v Speaker 6>energy from integrating credit suite. So I think timeline is important.

0:14:41.320 --> 0:14:43.440
<v Speaker 6>I think how he measured success is where he'll probably

0:14:43.480 --> 0:14:46.280
<v Speaker 6>be in January and February. At the moment. Central bank

0:14:46.360 --> 0:14:49.680
<v Speaker 6>action also makes it easier for banks to make money.

0:14:49.680 --> 0:14:52.640
<v Speaker 6>But if there's a fun and downturn, if there's a recession,

0:14:53.120 --> 0:14:56.600
<v Speaker 6>we don't one hundred percent know what this large uber bank,

0:14:57.160 --> 0:15:00.640
<v Speaker 6>how they'll deal with those kinds of tests stresses.

0:15:01.200 --> 0:15:03.400
<v Speaker 2>It was big news fan scene when Sergio Ramarti came

0:15:03.440 --> 0:15:07.280
<v Speaker 2>back to lead this bank through this takeover. What was

0:15:07.320 --> 0:15:10.560
<v Speaker 2>your gauge of how he is feeling his mood now

0:15:11.040 --> 0:15:11.720
<v Speaker 2>this far in.

0:15:13.800 --> 0:15:16.960
<v Speaker 6>Well, he was very respected chief executive. Is there's one

0:15:17.000 --> 0:15:20.600
<v Speaker 6>person that has both the confidence of politicians because Swiss,

0:15:20.600 --> 0:15:23.720
<v Speaker 6>but also understands ubs deeply. It was probably him. I

0:15:23.760 --> 0:15:26.480
<v Speaker 6>think he likes the challenge. We've spoken a couple of times,

0:15:27.160 --> 0:15:30.080
<v Speaker 6>you know, since this happened, and then again today. He's

0:15:30.120 --> 0:15:34.480
<v Speaker 6>one that doesn't shy away from something difficult. He did

0:15:35.240 --> 0:15:38.239
<v Speaker 6>highlight many times a strong brand of the client relationship

0:15:38.680 --> 0:15:41.080
<v Speaker 6>that he's had. It was also the first time that

0:15:41.160 --> 0:15:43.640
<v Speaker 6>he was a bit punchy, and I thought that was

0:15:43.680 --> 0:15:46.560
<v Speaker 6>interesting just in his state of mind and saying, look,

0:15:46.760 --> 0:15:48.920
<v Speaker 6>you know the question that they have now because the

0:15:49.000 --> 0:15:52.360
<v Speaker 6>share prices up five percent because they have this twenty

0:15:52.480 --> 0:15:55.760
<v Speaker 6>nine billion dollar negative goodwill is well, was it a

0:15:55.760 --> 0:15:57.920
<v Speaker 6>fair deal for the eighty one? Is that last everything?

0:15:58.040 --> 0:16:01.960
<v Speaker 6>Should they have had actually a better deal, because if

0:16:01.960 --> 0:16:03.640
<v Speaker 6>you're a landholder at the time and you were in

0:16:03.720 --> 0:16:06.760
<v Speaker 6>eighty one, you were completely wiped out. And that he

0:16:06.880 --> 0:16:08.760
<v Speaker 6>really pushed back against and saying, look, this was not

0:16:08.840 --> 0:16:12.000
<v Speaker 6>only a liquidity problem. You know, pretty sweet had concerned

0:16:12.040 --> 0:16:13.480
<v Speaker 6>on how it was managed and I thought that was

0:16:13.520 --> 0:16:14.760
<v Speaker 6>nite bunche. It was the first time I.

0:16:14.760 --> 0:16:15.360
<v Speaker 7>Heard him say it.

0:16:16.320 --> 0:16:19.040
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0:16:19.120 --> 0:16:22.160
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