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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybak podcast, available every morning on Apple, Spotify or wherever

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Speaker 1: you listen. It's Wednesday, the twenty fourth of July here

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Speaker 1: in London. I'm Caroline Hepke and.

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Speaker 2: I'm Lizzie Burden. Coming up today, Deutsche Bank shares tumble

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Speaker 2: as the lender succumbs to its first loss in four years.

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Speaker 1: Tesla profits fall short again as Elon Musk demands investor

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Speaker 1: patients and kicks plans for a Robotaxi down the road.

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Speaker 2: Plus hitting the brakes. Eurozone activity comes to a standstill

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Speaker 2: as Germany struggles.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: We've had a slew of European bank earnings this morning,

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Speaker 2: Deutsche Bank reporting its first quarterly loss in four years.

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Speaker 2: Has trading slowed, and it booked a charge tied to

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Speaker 2: a legacy issue at its postbank retail unit. Currently shares

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Speaker 2: a down seven point eight percent, this after the German

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Speaker 2: lender reported a pre tax profit of four hundred and

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Speaker 2: eleven million euros versus a second quarter estimate of close

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Speaker 2: to four hundred and ninety million euros at one point

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Speaker 2: three billion Euro litigation provision and sluggish VIC trading dragged

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Speaker 2: down those numbers, and the CFO James von Moltke says

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Speaker 2: that charge is now behind the bank.

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Speaker 3: We're meeting our commitments to shareholders around expense management, so

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Speaker 3: we've delivered the second quarter in a row at a

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Speaker 3: five billion expense base, and we're managing the balance sheet

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Speaker 3: and also capital ratios, essentially powering through the setback that

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Speaker 3: we had, which was the postbank litigation provision.

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Speaker 2: James will Miltka added that the bank has now fully

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Speaker 2: booked that potential cost. Deutsche Bank is also one of

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Speaker 2: the few lenders that has chosen to take advantage of

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Speaker 2: a downturn in deal making to higher talent in recent months.

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Speaker 1: Now to BNP Paribau, which has missed estimates with net

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Speaker 1: income of three point four billion euros in the second quarter,

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Speaker 1: the French bank's results show profit four hundred and fifty

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Speaker 1: million euros higher than estimates on search actis trading revenues,

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Speaker 1: giving a boost to the CEO's plan to raise profitability.

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Speaker 1: BNP Piber's CFO Lars Nasil says that there has been

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Speaker 1: election volatility across Europe.

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Speaker 4: There was all that uncertainty that all of a sudden

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Speaker 4: started to crystallize out. Yeah, so you saw these evolutions.

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Speaker 4: You saw that what we had in the UK, you

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Speaker 4: saw it in France, you saw it in Belgium, you

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Speaker 4: saw it in many of those countries. And yes, there

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Speaker 4: was some overall European volatility related to the elections that

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Speaker 4: were going on all over the place.

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Speaker 1: That was the BNP piber CFO Lars Nasonil there speaking

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Speaker 1: to Baloomberg. The lender share price is down two point

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Speaker 1: seven percent this morning. That adds to the decline in

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Speaker 1: its share price that we've seen since the snap French

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Speaker 1: election was called in June.

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Speaker 2: Another bank earning, Santander, beat profit expectations in the second quarter,

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Speaker 2: even as net interesting comes slowed. Spain's largest lender posted

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Speaker 2: a profit of three point two billion euros compared to

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Speaker 2: the three point one three billion euros estimated by analysts,

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Speaker 2: but a surge in interesting come over the last year

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Speaker 2: and its half and half is now slowing as central

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Speaker 2: banks turn attention to ratecuts. Sometimes overtook Bay and Paper

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Speaker 2: About earlier this year to become the European Union's most

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Speaker 2: valuable bank on the back of those record profits and

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Speaker 2: increased plans to return capital to investors.

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Speaker 1: Meanwhile, lvm MAT's shares are down more than five percent

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Speaker 1: in trading this morning after the consumer giant reported muted

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Speaker 1: sales for the last quarter after market yesterday. Bloomberg's Tea

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Speaker 1: where Adabaio has more.

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Speaker 5: Its brands include the likes of Louis Vuitton Fendi, but

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Speaker 5: household names weren't enough to bolster sales at LVMH last quarter.

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Speaker 5: Wealthy customers reigned in spending, resulting in a one percent

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Speaker 5: rise in organic revenue from the fashion and leather goods unit.

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Speaker 5: That's just half the gain analysts expected. Demand was coolest

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Speaker 5: in China, which saw sales tumble fourteen percent during the quarter,

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Speaker 5: although the slump was partially offset by strong spending from

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Speaker 5: Chinese travelers overseas. Savvy shoppers from the country took advantage

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Speaker 5: of the week yen, prompting a fifty seven percent increase

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Speaker 5: in Japanese sales, but LVMH's CFO says the practice is

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Speaker 5: hurting their margins in London to added Bio Bloomberg Radio.

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Speaker 2: Meanwhile, Tesla shares have fallen after the ev maker reported

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Speaker 2: a fourth quarter in a row of disappointing profits. The

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Speaker 2: company's operating income was one point six billion dollars, compared

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Speaker 2: to estimates of one point eight billion dollars. The electric

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Speaker 2: vehicle giant also admitted that it won't unveil a highly

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Speaker 2: anticipated robotaxi until October, and that'll only be a prototype.

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Speaker 2: During the earnings call, CEO Elon Musk discussed the delay.

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Speaker 6: I wanted to make some important changes that I think

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Speaker 6: would improve the sort of the robot taxi. I think

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Speaker 6: that think that were the main thing that we're going

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Speaker 6: to show, and we're also going to show up a

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Speaker 6: couple of other things.

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Speaker 2: Musk's company is far off the pace of the one

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Speaker 2: point eight eight million cars it's sold last year and

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Speaker 2: one for a second time, that it expects to see

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Speaker 2: a notably lower growth rate in twenty twenty four. Tesla

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Speaker 2: shars fell eight percent in extended New York trading, eating

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Speaker 2: into the stock's recent rally but not fully erasing it.

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Speaker 1: So that's all the earnings I note, though. From politics,

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Speaker 1: presidential hopeful Kamala Harris is vowing to present her political

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Speaker 1: record against rival Donald Trump's. Speaking during her first campaign

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Speaker 1: rally in the swing state of Wisconsin. The Vice President

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Speaker 1: sought to draw a stark contrast between their agendas.

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Speaker 5: Do we want to live in a country of freedom,

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Speaker 5: compassion and role of law.

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Speaker 7: Or a country of chaos, fear and hate.

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Speaker 1: Vice President Kamala Harris speaking their ass an event in Milwaukee,

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Speaker 1: the likely Democratic nominee also promised to focus on healthcare

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Speaker 1: and childcare of elected, stating that building up the middle

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Speaker 1: class would be a defined Meanwhile, the Trump campaign has

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Speaker 1: complained to the Federal Election Commission that the transfer of

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Speaker 1: Joe Biden's ninety six million dollars in campaign funding to

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Speaker 1: Harris is unlawful.

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Speaker 2: And to UK politics now where Kis Starmer has suspended

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Speaker 2: seven of his own MPs for rebelling on a key vote.

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Speaker 2: It comes as the new UK Prime Minister met one

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Speaker 2: hundred and fifty business leaders to promise stability and called

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Speaker 2: for a new partnership with the private sector. James Wilcock

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Speaker 2: has more.

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Speaker 8: Kis Starmer suspended seven of his own MPs for daring

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Speaker 8: to vote against the new government last night. It's a

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Speaker 8: ruthless move designed to send a firm signal to his party. Rebellion,

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Speaker 8: especially from the left, will not be tolerated. The decision

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Speaker 8: also showcases Starmer's large majority. A less powerful prime minister

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Speaker 8: would have needed those votes. But it remains to be

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Speaker 8: seen if the move will end the issue or so

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Speaker 8: the seeds of further internal disagreements to come in London.

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Speaker 8: James Wilcock, Bloomberg Radio.

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Speaker 1: And those are our top stories for you this morning.

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Speaker 1: But we should take a moment to think about the

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Speaker 1: PMI data and what it shows for Europe. The overall

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Speaker 1: figures were pretty interesting, I mean, European manufacturing in July

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Speaker 1: still in this slump of services though managing to see

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Speaker 1: some gains in positive territory, but not as much as

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Speaker 1: had been forecast.

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Speaker 2: Yeah, this weakness is the sort of data that Christine

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Speaker 2: Legard was talking about in Frankfurt last week when she

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Speaker 2: was saying that actually it would make sense to look

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Speaker 2: and wait till September when they have more data on

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Speaker 2: the health of the Euro's oone economy. You've got euro

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Speaker 2: dollar down off the back of these pmis by a

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Speaker 2: quarter of one percent at one oh eight, So that

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Speaker 2: would suggest that actually the markets are reading this dubbishly

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Speaker 2: and that potentially that September cut is on the card.

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Speaker 9: Yeah.

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Speaker 1: I will just note though the UK's composite PMI for

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Speaker 1: July fifty two point six, compared to France's forty nine

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Speaker 1: point five, Germany forty eight point seven. The July manufacturing

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Speaker 1: PMI for Europe was forty five point six. I mean, yeah,

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Speaker 1: very very difficult manufacturing and as you say, plays into

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Speaker 1: the ECB, so that on the PMI figures. Let's also

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Speaker 1: think about the earning season though, the European investor reaction

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Speaker 1: now after Santander BNP powered by UniCredit beat estimates, Deutsche

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Speaker 1: Bank took that hit on litigation also myths in terms

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Speaker 1: of trading revenue, but he makes eamea had of finance

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Speaker 1: and investing. Tom Metcalf is here to discuss. Tom, great

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Speaker 1: to see you. What's driving the issues then around Deutsche Bank.

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Speaker 1: Is this a blip, is this the litigation? Is it

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Speaker 1: something more serious?

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Speaker 7: Yeah, it's sort of a classic Deutsche Bank quarter from

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Speaker 7: the old days. Actually, this is the first time they've

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Speaker 7: posted a loss for I think it's four years, and

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Speaker 7: as ever, it's sort of these kind of idiosyncratic surprises

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Speaker 7: that you know, they've been trying to stamp out. So

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Speaker 7: the big reason they posted a loss was this massive

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Speaker 7: provision against post bank, which is this retail bank it bought.

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Speaker 7: You know, now it seems that the German government is

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Speaker 7: likely to sort there's a law suit where it seems

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Speaker 7: that they're going to have to pay up about one

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Speaker 7: point three billion at least that's the estimate they're provided for.

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Speaker 7: And you know, as I look at all of these results,

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Speaker 7: it's just it's very difficult to get through line across

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Speaker 7: all the banks that are important today. So as you say,

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Speaker 7: Dodge Back, shares really down dramatically. They said they'll scrap

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Speaker 7: the buyback in relation to the provision in But then

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Speaker 7: you look across at Santander, that's a pretty good set

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Speaker 7: of results, but swing over to Paris B and p

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Speaker 7: Parabat not so good. They had a very very strong

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Speaker 7: quarter in equities, which is a fascinating sort of aspect

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Speaker 7: of the capital markets right now. And then in Italy

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Speaker 7: Unique Credit, which you know, I think of all the

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Speaker 7: banks has been doing phenomenally in terms of aly share

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Speaker 7: price performance, up more than I think fifty percent so

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Speaker 7: far this year. Again, strong set of results, but I

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Speaker 7: think there's probably a bit of a sense that you know,

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Speaker 7: that's all being priced in because the shares there are

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Speaker 7: also slightly down.

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Speaker 2: Yeah, interesting to see that kind of mixed reaction, not

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Speaker 2: exactly what you would expect. It was also interesting to

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Speaker 2: hear Ollie Crook, our colleague interviewing the CFO from Deutsche

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Speaker 2: Bank earlier and him trying to say, you know, all

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Speaker 2: of these issues with Postbank aren't going to dent the

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Speaker 2: medium term plans to return capital to shareholders. But evidently

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Speaker 2: traders not buying that this morning. How come you're seeing

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Speaker 2: this charge so much overshadowing the operational strength at Deutsche Yeah.

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Speaker 7: I particularly love it when the doutsche Bank's CFO is on.

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Speaker 7: He is extremely sort of understated, and you already have

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Speaker 7: to listen quite carefully, and in case of something material

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Speaker 7: being said, Yeah, look, I mean I think this was expected,

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Speaker 7: that was known, there was going to be this provision.

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Speaker 7: I think, you know, that's really the story behind all

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Speaker 7: these banks is shareholders to sort of justify holding them

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Speaker 7: given the political risks, the regulatory risks. They want those buybacks,

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Speaker 7: and Deutsche Bank now saying, hey, we won't do a

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Speaker 7: second one. While that's expected, I think the confirmation of

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Speaker 7: it is sort of really dentse that story. They're saying

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Speaker 7: of hey, we're going to pay back eight billion over

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Speaker 7: the next few years. Now they're saying, hey, we'll still

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Speaker 7: do that, but you can understand why shareholders, you know,

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Speaker 7: a bit more cautious. And of course for all these banks,

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Speaker 7: all the shares have enjoyed a pretty strong performance recently,

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Speaker 7: so there's a little bit of kind of pullback there

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Speaker 7: as well.

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Speaker 1: Yeah, absolutely, I mean throwing forwards though, how does the

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Speaker 1: rest of the year or the next twelve months look

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Speaker 1: for these European banks. I mean, surely the volatility around

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Speaker 1: the French election that's not going to last. I mean,

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Speaker 1: will that be replaced by US presidential race volatility or

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Speaker 1: other political volatility. And how do they see things going forwards?

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Speaker 7: Yeah, I think there will. Yeah, it's a year for

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Speaker 7: a lot of market volatilety, so I reckon you might

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Speaker 7: well still see sort of continued out performance, particularly on

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Speaker 7: the equity side, even amongst European banks. And that's why

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Speaker 7: it's a bit of a head scratch of this owning

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Speaker 7: season so far, because it's not like every bank is

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Speaker 7: posting incredible you know, kind of nim or. The rape

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Speaker 7: rise environment is very much case by case. Santander doing

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Speaker 7: very well, but it's exposed to Spain and Brazil, and

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Speaker 7: then you look at say A B and P parabouand

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Speaker 7: the story is a bit less sort of positive there

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Speaker 7: on the rate environment. So I think we'll just see

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Speaker 7: a divergence and you know, basically it's how banks execute

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Speaker 7: their own particular markets and challenges.

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Speaker 2: All right, Blimberg's EMA head of Finance and Investing, Tom Metcalf,

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Speaker 2: we thank you, and we're going to go to another

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Speaker 2: Tom m now on more earnings, because we've had somewhat

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Speaker 2: of a disappointing start to the mag seven earnings out

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Speaker 2: of the US. We've heard from the likes of the

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Speaker 2: Google parent, Alphabet and Tesla, and Tom McKenzie, our anchor,

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Speaker 2: of course, has been passing those earnings. Tom, what stood

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Speaker 2: out to you, Well, we can start.

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Speaker 9: With Tesla because it's a smaller company by market cap

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Speaker 9: to Alphabet, but it is interesting on a number of

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Speaker 9: fronts in terms of what Elon Musk is trying to

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Speaker 9: convince investors of. He's trying to convince investors to basically

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Speaker 9: hold the line because this is a company that is

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Speaker 9: facing challenges this year in terms of sales. So we've

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Speaker 9: seen a fourth straight quarter consecutive quarter where earnings have

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Speaker 9: missed estimates, and we've seen an overall slowdown in EV sales,

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Speaker 9: not just Tesla but other companies as well, and a

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Speaker 9: price cutting warp, so they're suffering from that. But what

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Speaker 9: Elon Musk has pitched is that in the years to come,

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Speaker 9: you're going to see a turnaround. Part of that is

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Speaker 9: going to come down to new models in in the

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Speaker 9: line so a cheaper model that's going to come online

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Speaker 9: potentially as early as the first half of next year,

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Speaker 9: a Robotaxi as well, and then this humanoid robot which

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Speaker 9: is very futuristic, maybe being sold in twenty twenty six.

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Speaker 9: The problem is those timeframes are little uncertain. He's pushed

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Speaker 9: back the Robotaxi already was meant to be August. Now's

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Speaker 9: pushed it back to octob but that's only being a prototype.

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Speaker 9: We have no idea when it's actually going to hit

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Speaker 9: the market, and the model lineup really needs to be refreshed,

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Speaker 9: and there's a little uncertainty, quite frankly, as to whether

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Speaker 9: or not they can actually start producing those cheaper models

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Speaker 9: in the first half of next year. And then there's

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Speaker 9: a question of Taris, which is really fascinating. He's supporting

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Speaker 9: President Trump. President Trump say he's going to be at

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Speaker 9: taris in place. Tesla will be impacted by that in theory,

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Speaker 9: so he has paused the build out of his factory

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Speaker 9: in Mexico until they wait for that result in November.

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Speaker 1: Well, although Musk was asked about that on the call,

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Speaker 1: and he was saying that he thought that the CHANMP

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Speaker 1: tarifs would hurt his competition more than they would hurt Tesla.

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Speaker 1: You know, he had some caveats to for example in

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Speaker 1: the long run and so on, but still quite so.

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Speaker 9: He was saying that the removal of subsidies which is

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Speaker 9: part of the Inflation Reduction Act, which is benefit Tesla.

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Speaker 9: You get about seven thousand dollars in terms of off

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Speaker 9: the price of a Tesla as a result of the

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Speaker 9: Inflation Reduction Act. If that Inflation Reduction Act is unwound

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Speaker 9: by a Trump administration and those subsidies are removed, then

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Speaker 9: he said it would impact Tesla, but it would be

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Speaker 9: far more detrimental for their competitors, and that longer term

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Speaker 9: Tesla would probably benefit. But he did say there's no

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Speaker 9: point investing in Mexico right now because of the threat

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Speaker 9: of tariffs, and so they have put that factory on hold.

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Speaker 2: I'm sorry, but when he's dangling the robotaxi and the

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Speaker 2: humanoid robot down for further and further away, surely investors

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Speaker 2: are just going to be hugely disappointed by that. It

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Speaker 2: did just seems to get pushed back and back and back.

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Speaker 9: It does. And this is a stock that's not trading

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Speaker 9: at a cheap premium. It's trading at a high valuation.

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Speaker 9: There is a premium to this stock. Essentially flat year

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Speaker 9: to date, it's seen a bit of a run up

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Speaker 9: in the last few months. It's currently down on the

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Speaker 9: back of this news by about eight percent. That was

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Speaker 9: a move lower, So let's see if more investors bail

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Speaker 9: on Tesla. Others of course, would say, look, this is

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Speaker 9: a company that sits on this huge amount of data.

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Speaker 9: They're building out AI as well. That's part of the

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Speaker 9: mix there, and that when it comes to autonomous if

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Speaker 9: any company is positioned to take advantage of that, and

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Speaker 9: we've been talking about autonomous driving for a long time,

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Speaker 9: but if it finally comes to fruition, then Tesla, the

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Speaker 9: argument we go, is very well placed to take advantage

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Speaker 9: of that.

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