WEBVTT - US Regional Bank Problem Not Over And Powell Hints At A Pause

0:00:02.920 --> 0:00:05.160
<v Speaker 1>This is Bloomberg Daybreak you up for this Thursday, the

0:00:05.200 --> 0:00:06.440
<v Speaker 1>fourth of May in London.

0:00:06.519 --> 0:00:10.000
<v Speaker 2>Coming up today, PacWest plunges. Shares in the US lender

0:00:10.080 --> 0:00:11.959
<v Speaker 2>hit a new low as the bank reveals it's in

0:00:12.039 --> 0:00:13.440
<v Speaker 2>discussions with investors.

0:00:13.680 --> 0:00:16.640
<v Speaker 1>Pause for thought. Powell hints that rates have peaked as

0:00:16.680 --> 0:00:18.279
<v Speaker 1>the FED hikes by a quarter.

0:00:18.079 --> 0:00:21.239
<v Speaker 2>Points twenty five or fifty, That is the question. The

0:00:21.280 --> 0:00:24.120
<v Speaker 2>ECB gets ready to reveal its latest rates decision.

0:00:24.440 --> 0:00:28.280
<v Speaker 3>Vodafone dials up a fifteen billion pounds UK mega merger.

0:00:28.600 --> 0:00:31.360
<v Speaker 3>Pay to Play and spending without Limits both are the

0:00:31.360 --> 0:00:33.080
<v Speaker 3>stories we're looking at in today's papers.

0:00:33.120 --> 0:00:38.279
<v Speaker 1>I'm James Wilcock, Pluss pulling more points. The world's largest brewer, ABMBV,

0:00:38.440 --> 0:00:40.960
<v Speaker 1>tops estimates as volumes rebound.

0:00:43.760 --> 0:00:47.600
<v Speaker 4>That's all straight ahead on Bloomberg Daybreak Europe. The business

0:00:47.640 --> 0:00:49.800
<v Speaker 4>news you need to start your day in just one

0:00:49.920 --> 0:00:54.400
<v Speaker 4>fifteen minute podcast on Apple, Spotify, the Bloomberg Business app

0:00:54.520 --> 0:00:56.680
<v Speaker 4>and everywhere you get your podcasts.

0:01:00.520 --> 0:01:02.120
<v Speaker 2>Good morning. I'm Stephen Carroll and.

0:01:02.080 --> 0:01:05.280
<v Speaker 1>I'm Caroline Hepger. Here are the stories that we're following today.

0:01:05.840 --> 0:01:09.600
<v Speaker 1>Only days after JP Morgan's CEO Jamie Diamond said that

0:01:09.680 --> 0:01:13.480
<v Speaker 1>he believed the regional banking crisis was over. Another US

0:01:13.600 --> 0:01:17.680
<v Speaker 1>lenders future is in question. PacWest has now confirmed Bloomberg's

0:01:17.680 --> 0:01:21.759
<v Speaker 1>reporting that it's discussing options, including a possible sale, with investors,

0:01:22.000 --> 0:01:25.080
<v Speaker 1>but the bank says that it has not experienced out

0:01:25.120 --> 0:01:28.640
<v Speaker 1>of the ordinary deposit flows. The initial report drove the

0:01:28.720 --> 0:01:31.720
<v Speaker 1>lenders share price down as much as sixty percent in

0:01:31.800 --> 0:01:35.640
<v Speaker 1>after hours trading. Bloomberg's Kenny Lyons says that a sale

0:01:35.920 --> 0:01:37.920
<v Speaker 1>presents its own challenges for the bank.

0:01:38.120 --> 0:01:41.160
<v Speaker 5>What our reporting indicates, according to sources familiar with the matter,

0:01:41.240 --> 0:01:43.280
<v Speaker 5>is that a sale has been hindered because not a

0:01:43.319 --> 0:01:46.440
<v Speaker 5>lot of potential buyers are interested in the whole bank.

0:01:46.480 --> 0:01:49.160
<v Speaker 5>We have seen this pattern emerging with the other bank failures,

0:01:49.160 --> 0:01:51.840
<v Speaker 5>that the banks who would be buyers know that their

0:01:51.880 --> 0:01:54.360
<v Speaker 5>in theory, would be a better deal from the FDIC

0:01:54.520 --> 0:01:58.120
<v Speaker 5>if ultimately receivership was how things ended. So it seems

0:01:58.120 --> 0:02:00.880
<v Speaker 5>at this time that a sale maybe difficult well to find.

0:02:00.920 --> 0:02:03.360
<v Speaker 5>So the bank is also, according to our reporting, looking

0:02:03.360 --> 0:02:05.360
<v Speaker 5>at potentially a breakup or a capital race.

0:02:06.080 --> 0:02:09.440
<v Speaker 1>Bloomberg's Kadie Lyons, highlighting that the news is really ignited

0:02:09.520 --> 0:02:11.880
<v Speaker 1>market fears about the stability of the sector, and led

0:02:11.919 --> 0:02:14.440
<v Speaker 1>to shares plunging at a number of regional banks.

0:02:14.639 --> 0:02:17.160
<v Speaker 2>Meanwhile, the Chair of the Federal reserved your own poals

0:02:17.160 --> 0:02:20.320
<v Speaker 2>as the issues in the banking sector are not systemic.

0:02:21.480 --> 0:02:24.760
<v Speaker 6>Conditions in that sector have broadly improved since early March,

0:02:24.960 --> 0:02:27.840
<v Speaker 6>and the US banking system is sound and resilient. We

0:02:27.880 --> 0:02:30.880
<v Speaker 6>will continue to monitor conditions in the sector. We're committed

0:02:30.919 --> 0:02:33.480
<v Speaker 6>to learning the right lessons from this episode and will

0:02:33.480 --> 0:02:36.200
<v Speaker 6>work to prevent events like these from happening again.

0:02:36.840 --> 0:02:39.399
<v Speaker 2>There are those who don't share your own pals view, though,

0:02:39.440 --> 0:02:42.400
<v Speaker 2>Pershing squares Blackmann, tweeting that he believes the regional banking

0:02:42.440 --> 0:02:45.959
<v Speaker 2>system is at risk, adding that regulator's failure to update

0:02:45.960 --> 0:02:49.120
<v Speaker 2>and expand the insurance regime has quote hammered more nails

0:02:49.160 --> 0:02:50.359
<v Speaker 2>in the coffin well.

0:02:50.400 --> 0:02:53.960
<v Speaker 1>The growing concern over regional US lenders set the backdrop

0:02:54.120 --> 0:02:57.480
<v Speaker 1>to the Fed's latest policy meeting. The Central Bank matched

0:02:57.560 --> 0:03:00.800
<v Speaker 1>expectations with a quarter point hike, while the FED Chair

0:03:00.880 --> 0:03:03.600
<v Speaker 1>Jero Powell hinted that it could be their last. He

0:03:03.680 --> 0:03:06.000
<v Speaker 1>stopped short, though, of committing one way or the other.

0:03:06.720 --> 0:03:08.639
<v Speaker 6>That's going to be an ongoing assessment. We're going to

0:03:08.720 --> 0:03:11.920
<v Speaker 6>need data to accumulate on that, not an assessment that

0:03:11.919 --> 0:03:15.400
<v Speaker 6>we've made that would mean we think we've reached that point,

0:03:15.480 --> 0:03:18.160
<v Speaker 6>and I just think it's not possible to say that

0:03:18.160 --> 0:03:19.079
<v Speaker 6>with confidence now.

0:03:20.240 --> 0:03:23.040
<v Speaker 1>Paul also said that he believes a soft landing is

0:03:23.080 --> 0:03:26.560
<v Speaker 1>still possible, but conceded that the US may now enter

0:03:26.680 --> 0:03:27.800
<v Speaker 1>a mild recession.

0:03:28.120 --> 0:03:30.560
<v Speaker 2>We've got a policy decision from the European Central Bank

0:03:30.720 --> 0:03:33.919
<v Speaker 2>later today. Bloomberg's Max Ramsey has details on what to expect.

0:03:34.400 --> 0:03:36.880
<v Speaker 7>A hike has been well telegraphed by members of the

0:03:36.920 --> 0:03:40.600
<v Speaker 7>ECB's governing council. What's still to be seen is the

0:03:40.640 --> 0:03:44.160
<v Speaker 7>size of that hike. The ECB has repeatedly said it

0:03:44.200 --> 0:03:47.480
<v Speaker 7>is data dependent. In the past week, we've seen core

0:03:47.520 --> 0:03:51.520
<v Speaker 7>inflation easing slightly, while a recent bank lending survey pointed

0:03:51.560 --> 0:03:56.200
<v Speaker 7>to credit standards tightening more than expected. I'm leading economists

0:03:56.200 --> 0:03:59.280
<v Speaker 7>and investors to predict a twenty five basis point move

0:04:00.160 --> 0:04:03.360
<v Speaker 7>down in pace from the fifty we've seen in recent meetings,

0:04:03.400 --> 0:04:06.800
<v Speaker 7>as the ECB has gone on an aggressive hiking cycle

0:04:06.880 --> 0:04:09.760
<v Speaker 7>to try to get inflation back down to its two

0:04:09.800 --> 0:04:14.680
<v Speaker 7>percent target in Frankfurt, Max Ramsey, Bloomberg Daybreak Europe.

0:04:15.280 --> 0:04:18.560
<v Speaker 1>Meanwhile, we will get a policy decision from the ECB

0:04:18.680 --> 0:04:22.080
<v Speaker 1>that will come at one fifteen London time today. The

0:04:22.120 --> 0:04:25.600
<v Speaker 1>world's biggest brewer, ab Imbev, has seen that its earnings

0:04:25.720 --> 0:04:28.120
<v Speaker 1>grew by much more than had been expected in the

0:04:28.160 --> 0:04:31.599
<v Speaker 1>first quarter. It's adjusted ebit DAR gru by thirteen point

0:04:31.640 --> 0:04:35.320
<v Speaker 1>six percent versus estimates of just under five percent, but

0:04:35.400 --> 0:04:38.760
<v Speaker 1>its organic volume growth was slower than analysts had expected

0:04:38.839 --> 0:04:41.520
<v Speaker 1>at zero point nine percent. It still does expect full

0:04:41.600 --> 0:04:44.880
<v Speaker 1>year ebit DAR to grow between four and eight percent,

0:04:44.920 --> 0:04:47.279
<v Speaker 1>So those results in this morning from ab Imbev.

0:04:47.560 --> 0:04:49.800
<v Speaker 2>Goldbyn Sachs is racing to settle one of Wall Street's

0:04:49.800 --> 0:04:53.400
<v Speaker 2>biggest gender discrimination cases, sources tel Bloomberg. The company has

0:04:53.400 --> 0:04:56.320
<v Speaker 2>discussed settlements as high as two hundred million dollars with

0:04:56.360 --> 0:04:59.880
<v Speaker 2>the lawyers representing Christina chen Aster and other plaintiffs in

0:05:00.200 --> 0:05:03.760
<v Speaker 2>class action lawsuits began back in two thousand and five.

0:05:04.279 --> 0:05:07.360
<v Speaker 2>A deal would allow Goldman executives to avoid testifying against

0:05:07.360 --> 0:05:11.920
<v Speaker 2>allegations of discrimination against women in pay and promotions. Those

0:05:11.960 --> 0:05:13.520
<v Speaker 2>are some of our top stories this morning.

0:05:13.800 --> 0:05:17.400
<v Speaker 1>Okay, thinking about recession fears, I think that's one of

0:05:17.480 --> 0:05:20.560
<v Speaker 1>the key issues, along with the kind of US banking

0:05:21.040 --> 0:05:23.920
<v Speaker 1>term or that has returned today the Milken Institute Global

0:05:23.920 --> 0:05:26.039
<v Speaker 1>Conference that's been taking place in Beverly Hills. I mean

0:05:26.080 --> 0:05:27.719
<v Speaker 1>it's a great kind of place to take the temperature

0:05:27.760 --> 0:05:32.000
<v Speaker 1>really of global investors. Idlieu, head of Cities at Global

0:05:32.040 --> 0:05:34.839
<v Speaker 1>Private Banking, talking about recession at the end of this year.

0:05:34.920 --> 0:05:38.000
<v Speaker 1>Jane Fraser that interview we had with her a bit

0:05:38.040 --> 0:05:40.679
<v Speaker 1>earlier this week, but she's the CEO of City of Course,

0:05:40.800 --> 0:05:42.640
<v Speaker 1>recession at the back end of this year. I mean,

0:05:42.680 --> 0:05:45.920
<v Speaker 1>there's just a lot of consensus now on the difficulties

0:05:45.920 --> 0:05:48.640
<v Speaker 1>that the US is going to face. And Walsh at Gougenheim,

0:05:48.880 --> 0:05:52.400
<v Speaker 1>the CIO there, says Midsummer, eighteen months after the start

0:05:52.440 --> 0:05:55.200
<v Speaker 1>of the Fed's hiking cycle, that is when the recession

0:05:55.360 --> 0:05:56.640
<v Speaker 1>is going to his Yeah.

0:05:56.480 --> 0:05:58.440
<v Speaker 2>Look, this is the conversation that we have quite regularly

0:05:58.480 --> 0:06:00.760
<v Speaker 2>with guests on this program as well. And there isn't

0:06:01.520 --> 0:06:05.880
<v Speaker 2>a consensus about, I suppose how bad a recession would be,

0:06:05.880 --> 0:06:08.400
<v Speaker 2>but the opinion it definitely has shifted in recent weeks

0:06:08.400 --> 0:06:11.760
<v Speaker 2>to more and more of those market participants that we

0:06:11.839 --> 0:06:14.800
<v Speaker 2>speak to saying that they are expecting recession in the US.

0:06:14.839 --> 0:06:15.000
<v Speaker 7>Course.

0:06:15.080 --> 0:06:17.960
<v Speaker 2>Drone Power says his forecast is from modest growth and

0:06:18.120 --> 0:06:19.039
<v Speaker 2>not recession.

0:06:19.760 --> 0:06:22.760
<v Speaker 1>Okay, let's turn our attention then to results that we've

0:06:22.760 --> 0:06:25.279
<v Speaker 1>had out from Alenda Here in the UK. Virgin Money

0:06:25.279 --> 0:06:28.720
<v Speaker 1>has reported quarterly results. Adjusted pre tax profit for the

0:06:28.760 --> 0:06:32.039
<v Speaker 1>first half of the year beat average analyst estimates, coming

0:06:32.080 --> 0:06:34.560
<v Speaker 1>in at three hundred and twelve million pounds versus estimates

0:06:34.560 --> 0:06:38.279
<v Speaker 1>of three hundred and three Also very interesting, the first

0:06:38.279 --> 0:06:41.520
<v Speaker 1>half net interest margin was a beat one point nine

0:06:41.680 --> 0:06:45.120
<v Speaker 1>one percent. The estimate was for one point eight nine percent.

0:06:45.160 --> 0:06:47.400
<v Speaker 1>We've had out earlier this week results from Barclays and

0:06:47.480 --> 0:06:50.120
<v Speaker 1>nat West. They both reported a jump in their net

0:06:50.120 --> 0:06:54.159
<v Speaker 1>interest incomes in the first quarter, although Lloyd's talked about

0:06:54.200 --> 0:06:58.360
<v Speaker 1>loan impairments increasing and added that the benefits from rate

0:06:58.440 --> 0:07:01.400
<v Speaker 1>hikes may have peaked. Well, I'm delighted to say that

0:07:01.520 --> 0:07:05.239
<v Speaker 1>Virgin Money CFO Clifford Abrams joins us this morning. Clifford,

0:07:05.240 --> 0:07:09.320
<v Speaker 1>good morning, good morning, Thank you so much for your time.

0:07:09.760 --> 0:07:13.440
<v Speaker 1>Is this quarter the peak of net interest margins for you?

0:07:15.200 --> 0:07:17.280
<v Speaker 8>Well, as you said, we're pleased with our net interest

0:07:17.400 --> 0:07:22.120
<v Speaker 8>margin and we've actually upgraded our net interest margin outlook

0:07:22.200 --> 0:07:25.680
<v Speaker 8>for this year to around one ninety so we do

0:07:25.840 --> 0:07:29.760
<v Speaker 8>expect our net interest margin to be broadly stable for here,

0:07:30.600 --> 0:07:33.400
<v Speaker 8>but we're feeling good about the drivers of the net

0:07:33.400 --> 0:07:38.280
<v Speaker 8>interest Margin's what's maintaining it is demand for our attractive

0:07:38.360 --> 0:07:42.520
<v Speaker 8>savings products, and we've also hedged our balance sheet over

0:07:42.560 --> 0:07:44.640
<v Speaker 8>the last couple of years and as that on wines

0:07:44.680 --> 0:07:48.200
<v Speaker 8>that supports our net interest margin. So while mortgage market

0:07:48.200 --> 0:07:53.280
<v Speaker 8>conditions are increasingly competitive, we feel we can maintain our

0:07:53.320 --> 0:07:56.080
<v Speaker 8>net interest margin from here for the next at least

0:07:56.120 --> 0:07:57.280
<v Speaker 8>for the next few quarters.

0:07:57.880 --> 0:08:01.360
<v Speaker 2>The Bank of England's reporting rising numbers of defaults and

0:08:01.440 --> 0:08:04.400
<v Speaker 2>mortgages and unsecured lending in the UK in the first

0:08:04.440 --> 0:08:07.960
<v Speaker 2>three months of twenty twenty three. How are you seeing

0:08:08.040 --> 0:08:12.040
<v Speaker 2>default rates on your loans given the broader economic pressure.

0:08:14.200 --> 0:08:16.640
<v Speaker 8>Look, we're happy with the resilience of our balance sheet,

0:08:16.720 --> 0:08:21.600
<v Speaker 8>so in general our loans credit quality is broadly stable.

0:08:22.000 --> 0:08:26.640
<v Speaker 8>But we're also seeing some ticking up in early stage rears,

0:08:26.680 --> 0:08:30.160
<v Speaker 8>particularly in our unsecured our credit card book, but it's

0:08:30.280 --> 0:08:34.600
<v Speaker 8>really from quite low levels which we've saw during the pandemic.

0:08:35.000 --> 0:08:37.920
<v Speaker 8>So some of these early signs we think is call

0:08:38.000 --> 0:08:42.199
<v Speaker 8>it normalization and broadly expected at this part of what

0:08:42.400 --> 0:08:44.439
<v Speaker 8>you know, what is an economic cycle. You know, it's

0:08:44.520 --> 0:08:50.079
<v Speaker 8>possible the economy will miss recession this year. It is possible,

0:08:50.360 --> 0:08:54.360
<v Speaker 8>but clearly conditions are a bit tougher, particularly for some

0:08:54.440 --> 0:08:56.760
<v Speaker 8>of our retail borrowers, given the cost of living issues

0:08:56.800 --> 0:08:57.480
<v Speaker 8>we've seen.

0:08:58.600 --> 0:09:01.640
<v Speaker 1>We've spent you know, the last couple of days really

0:09:01.679 --> 0:09:06.480
<v Speaker 1>focus on regional US lenders banking turmoil. There is big

0:09:06.520 --> 0:09:10.240
<v Speaker 1>concern around deposit flows. Only this morning we reported pac

0:09:10.320 --> 0:09:15.160
<v Speaker 1>West statement about that, you know, emphasizing the stability of deposits.

0:09:14.880 --> 0:09:17.560
<v Speaker 1>It's the focus in the industry. Now, tell us about

0:09:17.640 --> 0:09:21.240
<v Speaker 1>deposit flows for you that this is such an important issue.

0:09:21.240 --> 0:09:24.439
<v Speaker 7>Now, yeah, we've.

0:09:24.240 --> 0:09:26.800
<v Speaker 8>All followed those developments in the US. It tends to

0:09:26.800 --> 0:09:31.800
<v Speaker 8>happen at weekends, that uncertainty. But it's really clear that

0:09:31.920 --> 0:09:35.240
<v Speaker 8>in the US the regular vironment is a bit different

0:09:35.640 --> 0:09:38.040
<v Speaker 8>to hear in the UK. So a number of those

0:09:38.160 --> 0:09:41.319
<v Speaker 8>US lenders didn't mark to market some of their portfolios,

0:09:41.320 --> 0:09:44.000
<v Speaker 8>they didn't need to mark to market, and that caused

0:09:44.040 --> 0:09:46.560
<v Speaker 8>some of the some of the deposits to get nervous.

0:09:46.920 --> 0:09:52.600
<v Speaker 8>And so those banks, particularly with larger deposits, you know,

0:09:52.600 --> 0:09:55.600
<v Speaker 8>those customers sort of spread out their deposits. Now Here

0:09:55.600 --> 0:09:58.960
<v Speaker 8>in the UK we operate in a different environment and

0:09:59.080 --> 0:10:03.560
<v Speaker 8>In fact, deposits are pretty stable generally in the UK

0:10:04.120 --> 0:10:06.920
<v Speaker 8>and for us in particular, we've seen growth in our

0:10:06.920 --> 0:10:10.440
<v Speaker 8>deposits of around three percent during this period. So some

0:10:10.480 --> 0:10:13.600
<v Speaker 8>of our larger players have talked about, you know, their

0:10:13.640 --> 0:10:18.319
<v Speaker 8>customers paying down taxes or increasingly drawing on their current accounts.

0:10:18.440 --> 0:10:22.960
<v Speaker 8>What we've seen is customers shopping around for decent rates

0:10:23.080 --> 0:10:26.080
<v Speaker 8>because we've all seen you know, rates ticking up. You

0:10:26.120 --> 0:10:29.360
<v Speaker 8>can get four percent plus on your savings these days,

0:10:29.400 --> 0:10:32.280
<v Speaker 8>so why leave it in a current account, you know,

0:10:32.360 --> 0:10:36.440
<v Speaker 8>earning nothing. For us, even our current at customers do

0:10:36.520 --> 0:10:40.800
<v Speaker 8>earn interest and we have really attractive savings accounts, especially

0:10:40.840 --> 0:10:44.160
<v Speaker 8>for current account customers, but also fixed rate bonds and

0:10:44.200 --> 0:10:46.360
<v Speaker 8>we've seen good demand for that and that's why we've

0:10:47.040 --> 0:10:50.760
<v Speaker 8>perhaps broken the trend by growing deposits during this period.

0:10:50.960 --> 0:10:53.439
<v Speaker 2>How high do you see those saving of rates going.

0:10:53.559 --> 0:10:55.760
<v Speaker 2>We know that there has been criticism from politicians that

0:10:55.840 --> 0:10:58.400
<v Speaker 2>banks aren't passing on and off of the higher interest

0:10:58.480 --> 0:11:01.079
<v Speaker 2>rates in the Bank of England to say, is there

0:11:01.120 --> 0:11:02.040
<v Speaker 2>further growth there?

0:11:02.080 --> 0:11:02.480
<v Speaker 4>Do you think?

0:11:04.559 --> 0:11:07.320
<v Speaker 8>Look, we do expect deposit rates to move further. What

0:11:07.360 --> 0:11:10.920
<v Speaker 8>you see is for customers prepared to lock in their

0:11:11.000 --> 0:11:13.520
<v Speaker 8>money for a little time. There's some really good rates available,

0:11:13.600 --> 0:11:16.480
<v Speaker 8>so we offer four percent plus if you're prepared to

0:11:17.559 --> 0:11:20.040
<v Speaker 8>give us your funds for one or two years, and

0:11:20.160 --> 0:11:23.600
<v Speaker 8>customers increasingly doing that, and that means other banks are

0:11:23.600 --> 0:11:26.320
<v Speaker 8>responding by putting up their rates. So it's the natural

0:11:26.400 --> 0:11:29.640
<v Speaker 8>act of you know, competition. We live in competitive markets,

0:11:30.000 --> 0:11:33.800
<v Speaker 8>which means we need to offer our customers good products.

0:11:33.840 --> 0:11:36.160
<v Speaker 8>Now for Virgin Money, we've done that right the way

0:11:36.160 --> 0:11:40.199
<v Speaker 8>through the period when rates are quite low. So we're

0:11:40.280 --> 0:11:43.719
<v Speaker 8>keen to offer our customers good propositions because we want

0:11:43.720 --> 0:11:46.200
<v Speaker 8>to grow our customer base. And I'm pleased to say

0:11:46.200 --> 0:11:48.120
<v Speaker 8>that's what we've seen in the last six months.

0:11:49.640 --> 0:11:52.520
<v Speaker 1>Talk to me about the mortgage business. Approvals are falling.

0:11:52.720 --> 0:11:54.520
<v Speaker 1>How much pressure is that part of the business. And

0:11:54.720 --> 0:11:56.520
<v Speaker 1>I know that you're focused on trying to expand the

0:11:56.559 --> 0:11:59.640
<v Speaker 1>credit card business as opposed to mortgagees. You know the

0:11:59.720 --> 0:12:03.640
<v Speaker 1>talk of a ten or even twenty percent real term

0:12:04.080 --> 0:12:08.439
<v Speaker 1>drop in home values in the UK. Have mortgage approvals

0:12:08.440 --> 0:12:10.680
<v Speaker 1>ground to a hold? How would you characterize them?

0:12:11.360 --> 0:12:15.240
<v Speaker 8>Yeah, we've seen across the industry mortgage approvals down by

0:12:15.280 --> 0:12:20.079
<v Speaker 8>nearly a half sob around forty percent, So it's clear

0:12:20.080 --> 0:12:24.280
<v Speaker 8>that the housing market slowed, particularly from last September around

0:12:24.320 --> 0:12:26.560
<v Speaker 8>the time in the mini budget when rates spiked. It

0:12:26.600 --> 0:12:32.040
<v Speaker 8>obviously caused concerns across the market. So we're seeing that

0:12:32.120 --> 0:12:35.080
<v Speaker 8>in our business and you can see our mortgage book

0:12:35.120 --> 0:12:37.720
<v Speaker 8>is down a little bit over the last six months,

0:12:37.720 --> 0:12:43.080
<v Speaker 8>down around one percent, reflecting that. Now, what we saw

0:12:44.040 --> 0:12:46.600
<v Speaker 8>at the end of last year was really a sharp

0:12:47.120 --> 0:12:51.400
<v Speaker 8>decline reflecting that shop pick up in rates and nervousness

0:12:51.400 --> 0:12:55.280
<v Speaker 8>around the housing market. It's really encouraging to see some

0:12:55.440 --> 0:12:58.480
<v Speaker 8>return to stability in the last month or two, I

0:12:58.480 --> 0:13:01.440
<v Speaker 8>would say since jan this year what we've seen as

0:13:01.600 --> 0:13:05.280
<v Speaker 8>rates have stabilized. You know, the government is clearly keen

0:13:05.400 --> 0:13:08.839
<v Speaker 8>to ensure things are sort of strong and stable here

0:13:08.880 --> 0:13:13.199
<v Speaker 8>in the UK. Rates have stabilized, we've seen some confidence returning,

0:13:13.600 --> 0:13:16.400
<v Speaker 8>so a pick up perhaps from some of those lows

0:13:16.600 --> 0:13:20.040
<v Speaker 8>last year. But we still expect the mortgage market to

0:13:20.160 --> 0:13:23.120
<v Speaker 8>be down year on year and certainly down from the

0:13:23.160 --> 0:13:27.640
<v Speaker 8>peak times during COVID. And what we've seen is margins,

0:13:27.640 --> 0:13:31.200
<v Speaker 8>so as banks compete for a smaller pool of customers,

0:13:31.400 --> 0:13:35.719
<v Speaker 8>we've seen margins continuing under pressure and in the same way,

0:13:35.760 --> 0:13:38.040
<v Speaker 8>the mortgage market is picked up a little bit. We've

0:13:38.040 --> 0:13:41.120
<v Speaker 8>seen actually spreads returning a little bit over the last

0:13:41.160 --> 0:13:44.160
<v Speaker 8>month or two, and we factored all those developments in

0:13:44.200 --> 0:13:45.520
<v Speaker 8>the guidance we've given today.

0:13:46.600 --> 0:13:48.959
<v Speaker 2>What are you doing to control costs in a situation

0:13:49.000 --> 0:13:51.760
<v Speaker 2>where you're having to pay higher rates to savers and also,

0:13:51.800 --> 0:13:54.320
<v Speaker 2>as you say, starting to see early stage arrears tacking

0:13:54.400 --> 0:13:55.480
<v Speaker 2>up for your credit cards.

0:13:56.840 --> 0:14:00.400
<v Speaker 8>Well, we have long term cost targets. So little over

0:14:00.400 --> 0:14:02.360
<v Speaker 8>a year ago we set out our cost target. We

0:14:02.440 --> 0:14:07.040
<v Speaker 8>wanted to be below fifty percent cost income ratio, so

0:14:07.080 --> 0:14:10.400
<v Speaker 8>that costs around half of our total income. We're a

0:14:10.440 --> 0:14:14.880
<v Speaker 8>little above that this period at fifty one percent, and

0:14:15.280 --> 0:14:17.720
<v Speaker 8>our costs are absolutely costs have actually gone up over

0:14:17.720 --> 0:14:20.040
<v Speaker 8>the last year, so they've gone up around five percent.

0:14:20.560 --> 0:14:24.160
<v Speaker 8>We've clearly seen inflation, and we've awarded you know, wage

0:14:24.240 --> 0:14:28.280
<v Speaker 8>riders to our to our staff, which is important to

0:14:28.320 --> 0:14:32.640
<v Speaker 8>retain and attract the best staff. We've also invested in it.

0:14:33.720 --> 0:14:36.840
<v Speaker 8>We've put more staff into our contact centers because we've

0:14:36.880 --> 0:14:42.120
<v Speaker 8>seen customers in volatile times increasingly want to speak to

0:14:42.160 --> 0:14:45.040
<v Speaker 8>someone and and that's you know, we've been pleased to

0:14:45.080 --> 0:14:48.120
<v Speaker 8>do that, and that's cost money, and that's behind the

0:14:48.200 --> 0:14:51.440
<v Speaker 8>rise in our expenses of five percent, and what we've

0:14:51.440 --> 0:14:53.840
<v Speaker 8>seen because income has gone up, our cost income ratios

0:14:53.880 --> 0:14:57.560
<v Speaker 8>have gone down. Now going forward we do expect to

0:14:57.600 --> 0:15:01.240
<v Speaker 8>deliver on that cost income ratio below fifty and that's

0:15:01.400 --> 0:15:03.880
<v Speaker 8>likely to be because costs are actually coming down in

0:15:03.920 --> 0:15:07.120
<v Speaker 8>normal terms, and that reflects a few things. Really. One,

0:15:07.160 --> 0:15:10.440
<v Speaker 8>we do expect to inflation to be sustained at least

0:15:10.440 --> 0:15:13.280
<v Speaker 8>for a little while. But what we're seeing all that

0:15:13.400 --> 0:15:18.120
<v Speaker 8>investment in digitization enables us to be more efficient and

0:15:18.160 --> 0:15:21.960
<v Speaker 8>those cost savings will earn through and in particular as

0:15:22.040 --> 0:15:26.840
<v Speaker 8>our as the volume through our contact center starts to stabilize,

0:15:26.840 --> 0:15:30.000
<v Speaker 8>which we've seen already, then we can we can wind

0:15:30.040 --> 0:15:32.000
<v Speaker 8>down some of the investment that we put in over

0:15:32.000 --> 0:15:36.040
<v Speaker 8>the last six nine months or so. So we've reconfirmed

0:15:36.080 --> 0:15:39.880
<v Speaker 8>our outlook and our for this year and in particular,

0:15:40.200 --> 0:15:43.120
<v Speaker 8>you know our commitment for our targets next year. You

0:15:43.160 --> 0:15:43.920
<v Speaker 8>know we're on track.

0:15:44.640 --> 0:15:46.640
<v Speaker 1>Clifford, thank you so much for your time this morning.

0:15:46.640 --> 0:15:49.320
<v Speaker 1>That is Virgin Money is Chief financial Officer Clifford Abram

0:15:49.360 --> 0:15:52.440
<v Speaker 1>speaking to us after the bank reported their results this morning.

0:15:52.800 --> 0:15:55.560
<v Speaker 2>Up next, Votaphone dials up a fifteen billion pounds UK

0:15:55.680 --> 0:15:59.040
<v Speaker 2>mega merger, pay to play and spending without limits.

0:16:00.840 --> 0:16:04.400
<v Speaker 4>Now The Paper review on blue Bird Daybreak Europe. The

0:16:04.480 --> 0:16:06.680
<v Speaker 4>news you need to know from today's papers.

0:16:07.240 --> 0:16:09.920
<v Speaker 1>I'm joining us this morning to discuss this Bllloonbag's James Wilcock.

0:16:10.000 --> 0:16:13.760
<v Speaker 1>The Times has a story about the London Stock Exchange

0:16:13.840 --> 0:16:17.760
<v Speaker 1>chief Julia Hoggart commenting on executive pay. I mean, this

0:16:17.800 --> 0:16:19.120
<v Speaker 1>is a hornet's nest, isn't it.

0:16:19.560 --> 0:16:21.160
<v Speaker 3>Well, it is Carolina and this is kind of the

0:16:21.160 --> 0:16:23.520
<v Speaker 3>problem for the UK, and that it is a hornet's nest.

0:16:23.560 --> 0:16:25.880
<v Speaker 3>Cost of living crisis is up and people are very

0:16:25.880 --> 0:16:27.800
<v Speaker 3>worried about sort of how they're going to get paid.

0:16:27.840 --> 0:16:29.920
<v Speaker 3>They don't really mind what executives are paid, but they

0:16:29.960 --> 0:16:32.160
<v Speaker 3>don't want it going up. But on the other hand,

0:16:32.440 --> 0:16:35.720
<v Speaker 3>the NC chief Julia Hogget is saying, if we don't

0:16:35.880 --> 0:16:38.480
<v Speaker 3>try and have a competitive pay for CEOs, we're going

0:16:38.520 --> 0:16:41.040
<v Speaker 3>to lose out. I went and pulled the numbers. The

0:16:41.080 --> 0:16:44.680
<v Speaker 3>average FOOTZY one hundred chief executive is paid three point

0:16:44.800 --> 0:16:46.800
<v Speaker 3>nine million pounds at least in the years twenty twenty

0:16:46.800 --> 0:16:49.320
<v Speaker 3>one to twenty two. So comparison the average S and

0:16:49.320 --> 0:16:52.920
<v Speaker 3>P five hundred CEO, that was fourteen point ninety four

0:16:53.400 --> 0:16:55.920
<v Speaker 3>million pounds in the same year. And if you look

0:16:55.920 --> 0:16:59.240
<v Speaker 3>at say that number compared to the median employee, the

0:16:59.320 --> 0:17:02.400
<v Speaker 3>TUC figures and the high PA figures, say that is

0:17:02.440 --> 0:17:05.520
<v Speaker 3>about one hundred and nine times the medium full time

0:17:05.600 --> 0:17:08.920
<v Speaker 3>worker versus the SMP, where that's one hundred and ninety

0:17:08.960 --> 0:17:12.120
<v Speaker 3>three times greater. So there is a big mismatch there

0:17:12.680 --> 0:17:14.879
<v Speaker 3>in terms of if you want sort of the larger

0:17:14.920 --> 0:17:16.800
<v Speaker 3>capital inflows, you may need to put up with higher

0:17:16.840 --> 0:17:18.680
<v Speaker 3>inequality or high exec pay.

0:17:19.480 --> 0:17:22.320
<v Speaker 2>Okay, I mean, it's a really interesting conversation and to

0:17:22.640 --> 0:17:25.000
<v Speaker 2>draw those comparisons there as well. Let's go to Finatal

0:17:25.080 --> 0:17:29.000
<v Speaker 2>Times next though, James reporting on a potential big murderer

0:17:29.080 --> 0:17:30.199
<v Speaker 2>in the mobile sector.

0:17:30.560 --> 0:17:33.760
<v Speaker 3>Yes, so, Vodafone and Seeker Hutchinson are reportedly close to

0:17:33.800 --> 0:17:37.320
<v Speaker 3>agreeing a combination of their UK telecoms businesses. It would

0:17:37.320 --> 0:17:40.720
<v Speaker 3>create the country's largest mobile operator, Steven, with twenty eight

0:17:40.880 --> 0:17:44.040
<v Speaker 3>million customers. According to the FT, the deal is set

0:17:44.080 --> 0:17:46.840
<v Speaker 3>to value the equity of the combined group at roughly

0:17:47.000 --> 0:17:49.720
<v Speaker 3>nine billion pounds. And a big problem here is that,

0:17:49.760 --> 0:17:52.200
<v Speaker 3>obviously we've been talking about the Microsoft Activision deal getting

0:17:52.240 --> 0:17:55.360
<v Speaker 3>blocked in the UK earlier this week. There is absolutely

0:17:55.400 --> 0:17:57.800
<v Speaker 3>no guarantee that the deal would be allowed to go

0:17:57.840 --> 0:18:00.920
<v Speaker 3>ahead for these two The UK Competition and Regulation Authority

0:18:00.920 --> 0:18:04.359
<v Speaker 3>has already intervened previously when it felt like there would

0:18:04.359 --> 0:18:07.320
<v Speaker 3>only be three telecoms companies in the UK, and there

0:18:07.320 --> 0:18:09.600
<v Speaker 3>are also big national security concerns. This deal is by

0:18:09.680 --> 0:18:12.600
<v Speaker 3>no means completed, but the FET's reporting is saying it

0:18:12.640 --> 0:18:13.320
<v Speaker 3>may be close.

0:18:13.720 --> 0:18:16.040
<v Speaker 1>Yeah, I mean twenty eight million customers. That would be

0:18:16.040 --> 0:18:20.040
<v Speaker 1>the biggest provider in the country that will be closely watched.

0:18:20.080 --> 0:18:25.600
<v Speaker 1>Wente the Guardian, who also writing about UK government spending

0:18:25.720 --> 0:18:28.920
<v Speaker 1>and the Treasury in particular. This is so interesting, it.

0:18:28.920 --> 0:18:32.000
<v Speaker 3>Really is, Caroline. So since the David CAMERONIRA, there's been

0:18:32.000 --> 0:18:34.479
<v Speaker 3>a big focus on government spending and government departments are

0:18:34.520 --> 0:18:38.480
<v Speaker 3>required to tell the public and they're closed any cost

0:18:38.480 --> 0:18:40.960
<v Speaker 3>that was more than twenty five k and anything that

0:18:41.000 --> 0:18:43.480
<v Speaker 3>officials put on the government credit card that has more

0:18:43.520 --> 0:18:45.439
<v Speaker 3>than five hundred pounds for a single spend. They are

0:18:45.440 --> 0:18:48.480
<v Speaker 3>supposed to do that every month. The Treasury's last release

0:18:48.600 --> 0:18:51.560
<v Speaker 3>is for December twenty twenty one, which they put out

0:18:51.600 --> 0:18:54.359
<v Speaker 3>in March twenty twenty two, so it has been over

0:18:54.400 --> 0:18:57.159
<v Speaker 3>a year and since they have updated those figures. They

0:18:57.160 --> 0:18:59.160
<v Speaker 3>are by far the worse for doing this in terms

0:18:59.160 --> 0:19:02.399
<v Speaker 3>of transparency of departments. And it goes without saying, but

0:19:02.440 --> 0:19:04.080
<v Speaker 3>the Treasury are the ones who are holding all the

0:19:04.119 --> 0:19:06.880
<v Speaker 3>other departments to account and spending when there is big

0:19:06.920 --> 0:19:09.879
<v Speaker 3>pressure on some of these governments spending targets, be they

0:19:09.920 --> 0:19:12.199
<v Speaker 3>sort of on strikes, on business investing, on all these

0:19:12.240 --> 0:19:14.639
<v Speaker 3>kind of big pushies for the government perth. It is

0:19:14.720 --> 0:19:16.760
<v Speaker 3>fascinating that they have fallen behind in this way and

0:19:16.840 --> 0:19:18.520
<v Speaker 3>something that I imagine this guard your report will kick

0:19:18.560 --> 0:19:20.520
<v Speaker 3>up a lot of stir about and as a journalist

0:19:20.640 --> 0:19:22.240
<v Speaker 3>it stops me from having a look into them. I

0:19:22.280 --> 0:19:23.800
<v Speaker 3>went to look at the December figures and I found

0:19:23.880 --> 0:19:27.040
<v Speaker 3>quite fascinatingly one of the big headline numbers is the

0:19:27.040 --> 0:19:29.919
<v Speaker 3>Telegraph subscription that the Treasury we're putting on the credit

0:19:29.960 --> 0:19:33.040
<v Speaker 3>card for about one hundred pounds at the time, so

0:19:33.640 --> 0:19:35.840
<v Speaker 3>it is interesting. Now the Treasury, for its worth, have

0:19:35.920 --> 0:19:39.680
<v Speaker 3>said internal staffing changes have led to a delay in publication,

0:19:40.520 --> 0:19:43.520
<v Speaker 3>but says they will publish all required data in due course.

0:19:45.320 --> 0:19:47.919
<v Speaker 2>This is Bloomberg Daybreak Europe. You're a morning brief on

0:19:48.000 --> 0:19:51.160
<v Speaker 2>the stories making news from London to Wall streets and beyond.

0:19:51.440 --> 0:19:55.440
<v Speaker 1>Look for us on your podcast feed every morning, on Apple, Spotify,

0:19:55.520 --> 0:19:57.480
<v Speaker 1>and anywhere else you get your podcasts.

0:19:57.520 --> 0:20:00.560
<v Speaker 2>You can also listen live each morning on London DA Radio,

0:20:00.600 --> 0:20:03.280
<v Speaker 2>the Bloomberg Business app, and Bloomberg dot Com.

0:20:03.320 --> 0:20:06.080
<v Speaker 1>Our flagship New York station is also available on your

0:20:06.119 --> 0:20:10.840
<v Speaker 1>Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.

0:20:11.080 --> 0:20:12.360
<v Speaker 1>I'm Caroline Hepka and.

0:20:12.320 --> 0:20:14.960
<v Speaker 2>I'm Stephen Carol. Join us again tomorrow morning for all

0:20:15.000 --> 0:20:17.440
<v Speaker 2>the news you need to start your day right here

0:20:17.480 --> 0:20:21.000
<v Speaker 2>on Bloomberg Daybreak Europe