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Speaker 1: This is Bloomberg Daybaker for this Tuesday, the second of

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Speaker 1: May in London.

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Speaker 2: Coming up today, HSBC hat trick a two billion dollar

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Speaker 2: buy back, special dividend and a tripling of pre tax profits.

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Speaker 1: Cutting through Morgan Stanley prepares for thousands of job losses

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Speaker 1: amid a slump in deal making.

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Speaker 3: Reaching the limit.

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Speaker 2: Gallen warrens the US Treasury may run out of cash

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Speaker 2: as soon as next month.

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Speaker 4: First Republic's new Management, back to School and Starmer's Uni Pledge.

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Speaker 4: Those of the stories we're looking at in today's papers.

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Speaker 3: I'm James Wilcock.

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Speaker 1: Plus less than Intelligent Samson bands employees from using AI

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Speaker 1: tools after staff upload sensitive data.

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Speaker 5: That's all straight ahead on Bloomberg Daybreak Europe. The business

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Speaker 5: news you need to start your day in just one

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Speaker 5: fifteen minute podcast on Apple, Spotify, the Bloomberg Business App

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Speaker 5: and everywhere you get your podcasts.

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Speaker 3: Good morning. I'm Stephen Carroll.

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Speaker 1: And I'm Caroline Hetger. Here are the stories that we're

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Speaker 1: following today.

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Speaker 2: HSBC is panning it up to two billion dollars buy

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Speaker 2: back after tripling its pre tax profit.

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Speaker 3: In the first quarter.

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Speaker 2: The London base lender posted a profit of twelve point

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Speaker 2: nine billion dollars, surging past analyst estimates by more than

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Speaker 2: four billion dollars. Speaking exclusively to Bloomberg, HSBC's CEO nol

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Speaker 2: Quinn says the results are proof that he has the

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Speaker 2: right strategy for the bank.

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Speaker 6: We said all along that we believe fastest and safest

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Speaker 6: way to get increased valuation, increased profit, increased dividends is

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Speaker 6: by focusing on the current strategy, and I think the

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Speaker 6: Q one results is powerful evidence of that statement.

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Speaker 2: That pointed assessment from nol Quinn comes ahead of a

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Speaker 2: pivotal AGM for the CEO, with the bank's largest shareholder,

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Speaker 2: Ping Ann calling for a split between the lenders major regions.

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Speaker 1: Now, Morgan Stanley is preparing to cut three thousand jobs

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Speaker 1: as recession fears delay a rebound in deal making. Around

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Speaker 1: five percent of the bank's global workforce will be affected.

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Speaker 1: Bloomberg understands the job losses will be focused on the

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Speaker 1: banking and trading divisions, and they are not the only

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Speaker 1: ones looking to make cuts. Here is City Group's CEO

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Speaker 1: Jane Fraser speaking to Bloomberg.

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Speaker 7: So this pent up demand is building and building. I

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Speaker 7: just don't think it's going to get released. As early

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Speaker 7: as we would like it to, and it's it certainly

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Speaker 7: feels much more like the back end of twenty three

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Speaker 7: for all of us than as we'd all kind of

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Speaker 7: been hoping would be early fall. I think, like every institution,

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Speaker 7: you make some adjustments around the capacity, but we're playing

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Speaker 7: the long game.

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Speaker 1: In imvestment banking, Jane Fraser's comments reflect the drop in

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Speaker 1: deal making fees across Wall Street City Group's investment banking

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Speaker 1: revenue slump to seven hundred and seventy four million dollars

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Speaker 1: in the first quarter, down twenty five percent from a

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Speaker 1: year earlier.

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Speaker 2: The US government could run out of cash as soon

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Speaker 2: as next month, according to Treasury Secretary Janet Yellen. Since

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Speaker 2: hitting the current limit of thirty one point four trillion

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Speaker 2: dollars in January, the US has been using special accounting

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Speaker 2: measures to stave off a possible default. Speaking to Bloomberg,

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Speaker 2: Republicans Senate Banking Committee member Bill Haggerty says both sides

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Speaker 2: need to come to the table.

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Speaker 8: We need to get the work on this, rather than

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Speaker 8: posturing and positioning and saying we're not going to negotiate.

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Speaker 8: This is what's been coming from the White House. We

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Speaker 8: need to sit down and negotiate and come to terms.

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Speaker 8: I think Kevin McCarthy has demonstrated his willingness to do it.

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Speaker 8: He's demonstrated Republican resolved to put a bill on the table.

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Speaker 8: The time now is to act.

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Speaker 2: Haggerty also told Bloomberg's Balance of Power that any deal

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Speaker 2: needs to include limits on spending. Just hours after the

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Speaker 2: news of Yellen's comments broke, President Biden culled a meeting

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Speaker 2: of top congressional leaders to discuss the debt limits standoff.

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Speaker 1: A top US regulator is considering a sweeping overhaul of

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Speaker 1: the country's deposit insurance mechanism. The FDIC says that advances

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Speaker 1: in online banking and comparatively low coverage for business deposits

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Speaker 1: were both issues that needed to be looked at. BNY

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Speaker 1: Mellon CEO Robin Vince told us a sound banking sector

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Speaker 1: is in everyone's best interests, to.

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Speaker 4: All of our interests, to have a safe and sound, trustworthy,

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Speaker 4: reliable bankings at the sector.

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Speaker 3: That's important. It helps to power US growth and US GDP.

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Speaker 4: At the end of the day, it's to no one's

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Speaker 4: benefit to have an unsafe sector.

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Speaker 1: Robin Vince spoke to us after JP Morgan agreed to

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Speaker 1: acquire failed lender First Republic in a government back to takeover.

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Speaker 1: It is the second biggest bank failure in US history

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Speaker 1: and the fourth regional lender to collapse Since early March.

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Speaker 2: Inflation and UK shops slowed for the first time this

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Speaker 2: year despite soaring food casts. Memberg Zer and Parts has

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Speaker 2: the details.

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Speaker 9: The British Retail Consortium says food price inflation hit a

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Speaker 9: record fifteen point seven percent in the year to April.

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Speaker 9: Ready meals, coffee and fresh producer among the grocery items

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Speaker 9: rising and price most steeply. More broadly, the overall measure

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Speaker 9: of shop prices showed a slowing in inflation to eight

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Speaker 9: point eight percent over the year due to heavy spring

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Speaker 9: discounts on clothing and furniture. That's still barely down from

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Speaker 9: a record high last month and only the second month

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Speaker 9: of cooling shop price inflation since the beginning of twenty

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Speaker 9: twenty two. More for the banking into way ahead of

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Speaker 9: next week's rate decision in London. I'm you in Pot's

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Speaker 9: been big day break Europe.

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Speaker 1: Okay, so a few of our top stories then for

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Speaker 1: you this morning, I want to bring you the interview

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Speaker 1: that we've done with nol Quinn of HSBC in full

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Speaker 1: in just a moment, especially because he talks about svb

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Speaker 1: UK and that apparently could add to costs for the bank,

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Speaker 1: But he talks about many issues after a huge quarter

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Speaker 1: for HSBC results. But actually a lot of the stories

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Speaker 1: on the terminal this morning, you know, away from banking,

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Speaker 1: they're about the dangers and promises of artificial intelligence. It's

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Speaker 1: absolutely everywhere, Stephen, Samsung has banned employees from using AI

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Speaker 1: tools because apparently some staff uploaded sensitive code to the platform.

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Speaker 1: Basically they it was an accidental leak, so they've stopped

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Speaker 1: that from happening. But you also had this company in

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Speaker 1: the US called cheg which provides like educational support services

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Speaker 1: kin'd of homework help, and they talked about ham hoatch

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Speaker 1: chat GPT is going to affect their business, going to

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Speaker 1: make it, you know, much more difficult to sort of

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Speaker 1: sell their services homework services to people, and it was

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Speaker 1: a massive hit to their share price.

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Speaker 2: Yeah, I mean, look, it sort of reflects the business

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Speaker 2: realities of what a challenge of things like generals of

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Speaker 2: AI pose because we i mean so much of us

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Speaker 2: have tried it for fun essentially, Yeah, been like, oh

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Speaker 2: try this, and a lot of us testing to see

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Speaker 2: whether or it could actually replace our jobs or not, like,

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Speaker 2: for example, asking it to write scripts. But this is

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Speaker 2: you know, these are some of the real world business

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Speaker 2: consequences we're seeing it and that's something that actually our

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Speaker 2: opinion column as Parmielson has picked up on as well,

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Speaker 2: talking about you know, it'd be great if AI could

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Speaker 2: tame itself. She's been digging in some of the comments

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Speaker 2: by the open Ai co found under Jared Kaplan abo

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Speaker 2: how exactly open ai could turn different I suppose.

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Speaker 1: Yeah, well this the idea is the kind of people

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Speaker 1: are now asking the question around the moral underpinning, what

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Speaker 1: are the rights and wrongs of AI? How do you

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Speaker 1: make the safest AI firm? And palme Elsen, you know,

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Speaker 1: talks about the fact that very few companies who are

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Speaker 1: trying to sell themselves now on AI leadership are actually

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Speaker 1: talking about creating a kind of safe or guided structure

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Speaker 1: for this massively powerful took. Anyway, I thought it was

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Speaker 1: really interesting all of the chat and the reporting around

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Speaker 1: AI that is on the Blueberg terminal this morning.

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Speaker 2: Well, let's get back to our top story around HSBC profits.

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Speaker 2: They're coming in well ahead of estimates twelve point nine

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Speaker 2: billion dollars a year on year in the first quarter.

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Speaker 2: HSBC announcing ten cent quarterly dividend, to be welcomed by

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Speaker 2: retail investors, as well as a share buyback of up

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Speaker 2: to two billion dollars. HSBC CEO nol Quinn has been

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Speaker 2: speaking to Bloomberg's Manus Cranny about the results, including what

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Speaker 2: seems a repast to its largest shareholder, ping Ann's push

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Speaker 2: just split the bank.

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Speaker 6: We said all along that we believed the face, fastest

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Speaker 6: and safest way to get increased valuation, increased profit, increased

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Speaker 6: dividends is by focusing on the current strategy, and I

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Speaker 6: think the Q one results is powerful evidence of that statement.

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Speaker 6: As I said, the rote for the quarter was nineteen

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Speaker 6: point three percent excluding notable items, and a headline reported

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Speaker 6: profit of twelve point nine billion, or if you exclude

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Speaker 6: those notable items, nine point two billion. Excluding those items,

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Speaker 6: we saw good broad based growth across all regions, across

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Speaker 6: all business lines, and I think the important thing as

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Speaker 6: well is there was growth in the non NII. This

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Speaker 6: is not all about interest rates. This is also about

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Speaker 6: tecost discipline and growth in fee and trading income, So

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Speaker 6: that was really pleasing, and our wealth balances were Our

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Speaker 6: revenue grew by thirteen percent in the quarter. And what

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Speaker 6: was particularly pleasing was THETNU invested us It's into the

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Speaker 6: bank in the quarter was twenty two billion, and over

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Speaker 6: the last twelve months we've had ninety three billion of

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Speaker 6: new invested US It's into our private bank. I see

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Speaker 6: management and wealth businesses globally, So that was really a

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Speaker 6: good outcome.

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Speaker 10: So I think strategy, you're charging on all cylinders there.

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Speaker 10: And the strategy obviously is pain to excuse upon pain

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Speaker 10: the dividend. I think what the market wants to know.

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Speaker 10: I look at this and I see this as you

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Speaker 10: taking really moving into an offense position against your decriers,

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Speaker 10: ping An and the other activist investors versus let's say defense,

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Speaker 10: you have a twenty meetings nor senior figures from the

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Speaker 10: bank with ping An.

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Speaker 3: Do you believe that this move.

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Speaker 10: To dividend, move to buy back will now clear some

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Speaker 10: of their angst and put this issue to bed between

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Speaker 10: the two of you.

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Speaker 6: Well, the most important thing is that we're delivering performance,

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Speaker 6: and I think these results show that that the strategy

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Speaker 6: is working. I'm really pleased that we've reinstalled the quarterly dividends,

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Speaker 6: so we've announced today a quarterly dividend of ten cents

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Speaker 6: per share. That's the same level that we had pre COVID.

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Speaker 6: I'm pleased with that, and at the same time we've

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Speaker 6: also been able to announce a two billion dollar buyback.

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Speaker 6: I think the business is well positioned going forward for

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Speaker 6: sustainable profits, sustainable referns, and an ability to generate a

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Speaker 6: lot of capital that can be return to shareholders via

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Speaker 6: dividend and via buyback. I think that's the most important

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Speaker 6: thing I'm focused on for all of our shareholders, including Pingang.

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Speaker 10: The two billion buyback that we see today is that

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Speaker 10: step one of a material series of buybacks.

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Speaker 6: Well, I think we were originally planning a buy back

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Speaker 6: in the second half of the year, but because of

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Speaker 6: the positive business performance with evidenced in Q one, we

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Speaker 6: were able to pull that forward to Q one. I

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Speaker 6: think what I've evident, what I think we see going

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Speaker 6: forward is continue sustainable profits and therefore the potential for

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Speaker 6: a series of buybacks. We've always said the buybacks have

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Speaker 6: a place and have a place alongside dividends to distribute

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Speaker 6: excess capital. We want to retain sufficient capital to continue

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Speaker 6: to grow the business, But based on what we've see

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Speaker 6: in at the moment, we think we have the potential

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Speaker 6: for a series of capital distributions via dividend and buyback

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Speaker 6: over the coming years.

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Speaker 10: You said when we took to when we took the

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Speaker 10: pre tax and stripped the exceptional items, that you were

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Speaker 10: happy that this wasn't all interest business. But of course

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Speaker 10: we want to get your sense whether we are at

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Speaker 10: peak interest flow for you, the FED will meet this week,

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Speaker 10: needs to be in.

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Speaker 3: The Bank of England.

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Speaker 10: Do you think you're at peak at net interest for

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Speaker 10: twenty twenty three. The guidance remain steady.

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Speaker 6: I think we've had a good NII performance in Q one,

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Speaker 6: but I think it's fair to say we've always said

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Speaker 6: that twenty twenty three will probably be the year that

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Speaker 6: NII tops out through purely through rates. NII can continue

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Speaker 6: to grow through underlying growth in the balance sheet and

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Speaker 6: economic activity, but from the rates benefit we always said

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Speaker 6: twenty three will probably be the peak year from a

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Speaker 6: rates benefit point of view, and I think that still

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Speaker 6: holds true. As you go up the rate curve, you

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Speaker 6: get the law of diminishing returns kicking in on how

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Speaker 6: much of those rate benefits you can hold on to

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Speaker 6: versus the competitive pressure.

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Speaker 10: So if the bank is cranking on gas, the strategy

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Speaker 10: is working, the buyback is in place. I listened to

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Speaker 10: Goldman Sachs that come in overnight. Morgan Sanley are cutting jobs.

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Speaker 10: Jane Fraser said she's ready to adjust headkind. I think

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Speaker 10: your previous CFO said the onlyinging worried about what was

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Speaker 10: costs and whether you went to bed happy at night

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Speaker 10: with costs under control? Are you ready to take headkind

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Speaker 10: out of the business again? And it's a tough subject, Noel,

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Speaker 10: Are you actively considering scaling back any of the areas?

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Speaker 10: Are you ready to cut headcoind and investment banking?

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Speaker 6: Noll manice, We've taken a significant amount of cost out

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Speaker 6: of the bank over the last three and a half years.

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Speaker 6: That's all been very focused on in our transformation program.

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Speaker 6: Our Q one cost performance. At a reported level, our

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Speaker 6: costs were down around about two percent if you adjus

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Speaker 6: on a sort of a constant currency on a target basis,

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Speaker 6: we were up around about two percent against the target

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Speaker 6: of three percent, So our cots are well control. This

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Speaker 6: is now embedded as a day to day BEAU cost

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Speaker 6: discipline in the organization, and that's after three and a

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Speaker 6: half years of strong focus on cost. The other thing,

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Speaker 6: I'll draw your attention to Madison Q one. Most of

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Speaker 6: that cost growth in Q one against target was all

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Speaker 6: technology spent. It was digitization of the bank. So that's

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Speaker 6: good spend, not bad spend.

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Speaker 1: Okay, So that was no Quinn the CEO of HSBC,

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Speaker 1: speaking to Buney Beggs and Manners Cranny. HSBC shares have

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Speaker 1: jumped in Hong Kong trading after the first quarter results,

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Speaker 1: so there are as much as three and a half percent.

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Speaker 1: Earlier this morning, Morgan Stanley saying that HSBC's earnings are

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Speaker 1: a good set of results.

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Speaker 3: Okay.

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Speaker 2: Up next, Fresh Republic's new management, back to school and

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Speaker 2: Starmer's UNI pledge.

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Speaker 5: Now the paper review on Bluebird Daybreak Europe. The news

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Speaker 5: you need to know from today's papers.

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Speaker 1: Tony us this morning, b Begs James Willcock, Good morning James,

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Speaker 1: and let's start with then the major story of course

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Speaker 1: around the bank holiday weekend in the financial world. The

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Speaker 1: Wall Street Journal talking about the new JP Morgan team

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Speaker 1: in charge of First Republic.

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Speaker 4: Good morning, Karen, and it is such a major acquisition.

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Speaker 4: Their biggest one for JP Morgan since the two thousand

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Speaker 4: and eight financial crisis and takes them from having ten

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Speaker 4: percent of US deposits to twelve percent above regulationary limits.

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Speaker 4: So it is just an incredible one. And now attention

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Speaker 4: is turning to who will run this bank. And one

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Speaker 4: fascinating thing about JP Morgan is there's not one man,

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Speaker 4: but two women who are in charge of JP Morgan's

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Speaker 4: massive consumer division, and that is Marianne Lake and Jennifer Peepzac.

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Speaker 4: Now the thing for Marion lately you'd find fast end collact.

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Speaker 4: She went to University of Reading here and is a

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Speaker 4: UK British Jial national with a degree in physics. Now

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Speaker 4: they these two don't view themselves as competitors. According to

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Speaker 4: this piece in the Wall Street Journal, all about where

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Speaker 4: they come next. What is fastating for them now is

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Speaker 4: they need to find a way to take on this

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Speaker 4: massive amount of money and First Republic which is known

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Speaker 4: for these kind of high interest, low principal kind of

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Speaker 4: wards to the ultra wealthy in Silicon Valley.

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Speaker 3: And one big challenge for JPMorgan.

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Speaker 4: Is how to absorb all that Silicon Valley money that

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Speaker 4: it has been a big business area for the bank

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Speaker 4: for quite some time. That is one of the reasons

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Speaker 4: it's taken over First Republic. So a big challenge for

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Speaker 4: these two new co CEOs of what was one of

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Speaker 4: the US's largest regional banks.

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Speaker 2: And that story in the Wall Street Journal this morning.

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Speaker 2: Let's go to the Financial Times next, pandemic graduates struggling

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Speaker 2: with teamwork.

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Speaker 3: So this is about Deloitte and PwC.

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Speaker 4: Stephen who are in the Financial Times talking about some

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Speaker 4: of the challenges they're facing with the work from home generation,

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Speaker 4: leaving school in university. And just to give you a

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Speaker 4: sense of scale, I went and looked up how many

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Speaker 4: graduates are actually on these programs. Deloitte take about seven

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Speaker 4: hundred a year and PwC one nine hundred. So the

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Speaker 4: size of a small company the civil service fast Stream

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Speaker 4: only employs over one thousand people. So when these two

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Speaker 4: big four organizations say they are seeing massive issues with

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Speaker 4: confidence in meetings and young people in giving presentations, in

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Speaker 4: having sort of these sort of temerity to speak up

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Speaker 4: to manage when something is going wrong, is a sign

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Speaker 4: of things to come in the wider employment sector. And

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Speaker 4: what I find fasting it's a dual prong problem. It

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Speaker 4: is both seniors needing to coach down and they've started

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Speaker 4: putting on training for how juniors engage with their own

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Speaker 4: senior teams.

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Speaker 1: Okay, very interesting, just very briefly kissed Starmer and the

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Speaker 1: free university tuition pledge, so.

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Speaker 4: The Times are reporting that he may be set to

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Speaker 4: ditch it very soon. In the broadly, Caroline Starmer's worried

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Speaker 4: about Labour spend e comitments and is one big glaring

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Speaker 4: hole that they haven't worried back on yet, and they're

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Speaker 4: taking the bet that even by aggravating the party's left,

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Speaker 4: Starmer's commitment to fiscal discipline will be able to win

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Speaker 4: support in kind of the center, part of a wider

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Speaker 4: story of where Labour.

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Speaker 3: Are going ahead of the next general election. This is

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Speaker 3: Bloomberg Daybreak Europe.

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Speaker 2: You're a morning brief on the stories making news from

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Speaker 2: London to Wall Streets and beyond.

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Speaker 1: Look for us on your podcast feed every morning, on Apple,

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Speaker 1: Spotify and anywhere else you get your podcasts.

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Speaker 2: You can also listen live each morning on London Dab Radio,

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Speaker 2: the Bloomberg Business app, and Bloomberg dot Com.

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Speaker 1: Our Flag New York station is also available on your

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Speaker 1: Amazon Alexa devices. Just say Alexa. Play Bloomberg eleven thirty.

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Speaker 3: I'm Caroline Hepka, and I'm Stephen Carol.

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Speaker 2: Join us again tomorrow morning for all the news you

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Speaker 2: need to start your day, right here on Bloomberg Daybreak

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Speaker 2: Europe