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

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

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Speaker 1: you listen. It's Tuesday, the twentieth of February in London.

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Speaker 1: I'm Caroline Hepka.

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Speaker 2: And I'm Tom McKenzie. Coming up today, Barkley's announces plans

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Speaker 2: to reduce costs by two billion pounds and return more

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Speaker 2: cash to shareholders.

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Speaker 1: Markets shrug as Chinese banks cut their mortgage reference rate

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Speaker 1: by the most on record.

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Speaker 2: And hacking the hackers Global law enforcement agencies take control

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Speaker 2: of one of the world's most prolific ransomware sits.

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

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Speaker 2: Barkley says it will go on a major cost cutting

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Speaker 2: drive in an effort to boost returns above twelve percent

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Speaker 2: in the coming years. The British bank says it will

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Speaker 2: reduce costs by two billion pounds by twenty twenty six

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Speaker 2: and plans to return ten billion of capital to shareholders

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Speaker 2: over the next two years. The news comes as Barclay's

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Speaker 2: released its latest set of results, announcing a return on

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Speaker 2: tangible equity of nine percent for twenty twenty three. Net

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Speaker 2: interest income for the fourth quarter came in slightly ahead

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Speaker 2: of estimates at three point one four billion pounds.

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Speaker 1: Now Chapter One is buying Discover in the largest global

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Speaker 1: takeover deal of the year so far. The tie up

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Speaker 1: brings together two US consumer finance brands in the combined

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Speaker 1: firms surpassing long time rivals JP Morgan and City Group

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Speaker 1: in the market. More now on that story from Bloomberg's

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Speaker 1: Doug Krisner.

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Speaker 3: It's an all starck deal valued at thirty five point

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Speaker 3: three billion dollars, and it creates the largest US credit

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Speaker 3: card company by loan volume. Historically, Capital One is catered

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Speaker 3: to subprime customers who carry a balance on their cards

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Speaker 3: each month. In recent years, the bank's been trying to

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Speaker 3: attract premium customers. Discoverer is long focused on prime customers

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Speaker 3: with better credit ratings. This deal comes after major declines

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Speaker 3: in Discover shares during the second half of last year.

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Speaker 3: It followed a warning on lapses in compliance. The issue

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Speaker 3: ultimately led to the resignation of then CEO Roger Hawkschild

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Speaker 3: In New York, I'm Doug Prisner, Bloomberg Radio.

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Speaker 2: Now, China has ramped up support for the troubled property

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Speaker 2: sector with its biggest ever cut to a key mortgage

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Speaker 2: reference rate. Chinese lenders slashed their five year loan prime

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Speaker 2: rate by twenty five basis points to three point ninety

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Speaker 2: five percent. Head of China Financial and Property research at

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Speaker 2: Jeffries Shujin Chen says the move show's Beijing is focused

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Speaker 2: on curbing contagion risks from the property sector, but they

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Speaker 2: will need to do more.

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Speaker 4: China is doing like little by little and loosening purchase

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Speaker 4: restrictions and also providing more supportive or more liquidity injection

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Speaker 4: to the property developers, but unfortunately we haven't seen significant

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Speaker 4: support to stabilize the expectation of property price at this moment.

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Speaker 2: Shooting Chen's analysis was reflected in the markets with the

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Speaker 2: move Failey to lift sentiments. China's benchmark CSI three hundred

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Speaker 2: is currently up just two tenths of eight percent now.

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Speaker 1: Profits of the mining giant BHP have slipped by eighty

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Speaker 1: six percent in the first half of its financial year.

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Speaker 1: That says oversupply and the nickel market force the firm

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Speaker 1: to write down key holdings, including a two and a

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Speaker 1: half billion dollar charge on the value of its Australian assets.

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Speaker 1: Global supplies of nickel have balloons due to ramped up production,

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Speaker 1: causing benchmark prices to fall. Despite the disruption, though, the CEO,

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Speaker 1: Mike Henry, says that BHP still achieved growth.

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Speaker 5: In terms of underlying operations and financial performance. It was

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Speaker 5: a really strong half. We had EBITDA up by five percent,

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Speaker 5: net operating cash flock by a whole thirty percent. Balance

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Speaker 5: sheet remains strong with netded at twelve point six billion

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Speaker 5: dollars and all of that has allowed us to declare

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Speaker 5: an interim dividend of seventy two US cents per share. Now, yes,

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Speaker 5: we have had a couple of exceptionals, including in our

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Speaker 5: nickel business by way of a context, and nickel business

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Speaker 5: is the smallest buy by some margin business within the

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Speaker 5: BHP portfolio.

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Speaker 1: Mike Henry there talking about nickel being only a minor

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Speaker 1: part of the firm's business interests. The BHP says that

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Speaker 1: it is on track to meet targets, with demand in

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Speaker 1: China and India remaining stable.

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Speaker 2: Now after decades of occupying different business areas, the last

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Speaker 2: two remaining banks with links to the storied Rosschild name

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Speaker 2: are encroaching on each other's territory. Bloomberg Stewa Adebayo has the.

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Speaker 6: Details compared to the biggest global players Swiss private bank

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Speaker 6: edmund De Rosschild Group and rival Paris based Roschild and Co.

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Speaker 6: And Minnos in the two hundred and fifty trillion dollar

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Speaker 6: global wealth management industry. But five years after a bitter

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Speaker 6: legal dispute over use of the family name, some analysts

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Speaker 6: say a merger is looking more likely as the two

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Speaker 6: increasingly compete in the cutthroat investment banking and wealth management industries.

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Speaker 6: At the end of twenty twenty two, a combined Rosschild

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Speaker 6: firm would have had had about two hundred and eighty

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Speaker 6: billion dollars in assets under management. A merger has previously

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Speaker 6: been proposed by the French side, but rebuffed by the Swiss.

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Speaker 6: Neither Rothschild firm chose to comment on the matter. In London,

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Speaker 6: tiwa Adibayo Bloomberg Radio.

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Speaker 1: The Hacker group, which disrupted the twenty six billion dollar

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Speaker 1: US treasury market, has now had its own website. Compromise

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Speaker 1: Lockbit held the world's largest lender, the Industrial and Commercial

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Speaker 1: Bank of China, to ransom last year. Bloomberg's James Walcock

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Speaker 1: has more on the cracked and from authorities.

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Speaker 7: If you were to go to Lockbit's site on a

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Speaker 7: dark web this morning, you'd see a note saying it's

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Speaker 7: now under the control of the UK's National Crime Agency,

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Speaker 7: with more info to come later. It's a rare public

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Speaker 7: success for authorities cracking down on cybercrime. The gang is

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Speaker 7: the world's most prolific hacking group, with the FBI tracking

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Speaker 7: one hundred and forty four million ransoms paid. Part of

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Speaker 7: its success comes to its franchise model, where it uses

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Speaker 7: affiliate groups to conduct hacks. Those affiliate groups reportedly receive

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Speaker 7: their own message from law enforcement we have your information

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Speaker 7: and maybe in touch very soon. Have a nice day

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Speaker 7: in London. James Wilcock, Bloomberg Radio.

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Speaker 1: We are going to dive into the Barclays story in

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Speaker 1: just a moment. What's happening in UK European banking. But

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Speaker 1: this also caught my eye. So this is the latest

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Speaker 1: Markets Live Pulse survey. Bit worrying reading if you are

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Speaker 1: a food manufacturer, specifically a sort of junk food manufacturer,

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Speaker 1: because a lot of the investors three out of four

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Speaker 1: of the investors that Bloomberg spoke to say that actually

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Speaker 1: companies making these unhealthy foods need to course correct. Now.

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Speaker 1: Why is because of the popularity of these weight loss

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Speaker 1: drugs which suppress your appetite. Yes, most of them are injectable,

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Speaker 1: but they're going to pill form quite quickly, and so

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Speaker 1: apparently it's going to revolutionize the agri business business.

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Speaker 2: We've already heard from some CFOs and CEOs on earning

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Speaker 2: schools from some of those companies that make those sugar

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Speaker 2: rich and fat rich products and food stuffs. Some impact

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Speaker 2: coming through as customers take these appsites suppressing drugs and

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Speaker 2: turn away from some of those items. So good news

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Speaker 2: for health arguably, but maybe bad news if you're the

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Speaker 2: producer of something that's rich and sugary.

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Speaker 1: Yea, absolutely, and you can read more about it on

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Speaker 1: the Ternel. Because of course those drugs also we think

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Speaker 1: or there are indications that they affect other addictive things

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Speaker 1: like you know, drinking alcohol or gambling, and so maybe

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Speaker 1: ramifications more broadly across the market.

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Speaker 2: Anyway, understanding that, starting to understand the impact of this

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Speaker 2: phenomenon really.

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Speaker 1: Yeah, early days. Anyway, nice and interesting piece on the

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Speaker 1: terminal for you this morning. But let's go to our

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Speaker 1: bread and butter issues, shall we. On banking? Looking at Barclay's,

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Speaker 1: their share price doing particularly well this morning up six

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Speaker 1: percent at least. Barkley says that it's going on a

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Speaker 1: major cost cutting. The British Banking Chant is also looking

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Speaker 1: at divvying up its market it's business into five separate divisions.

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Speaker 1: Let's discuss with Bloomberg's Tom Metcalf, who leads our finance

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Speaker 1: coverage in Europe, the Middle East and Africa, the results

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Speaker 1: for the fourth quarter. Let's look back firstly, what did

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Speaker 1: we make of those three months?

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Speaker 8: Yeah, it's quite interesting, right, They're slightly overshadowed by all

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Speaker 8: these plans that the bank has going forward for its

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Speaker 8: new three year plan.

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Speaker 9: Yeah.

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Speaker 8: I don't think there's any you know, no disasters in there.

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Speaker 8: I don't think they were you know, super strong or

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Speaker 8: super weak. So you know, so far, my take has

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Speaker 8: been like, okay, that's parked, and probably like most shareholders,

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Speaker 8: like what can we look forward to or what is

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Speaker 8: the bank Trana do going forward? So I suspect that

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Speaker 8: big jump in the share price I saw it was

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Speaker 8: up to five percent six percent is probably driven by

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Speaker 8: by some of the details that the executives are going

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Speaker 8: to be sharing. They've already shared for our statements, but

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Speaker 8: probably going to be detailing later this morning.

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Speaker 2: Yeah, and I have to wonder to what extent is

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Speaker 2: down down to the share buyback plans, what leads at

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Speaker 2: the return of cash to shareholder. As you say, the

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Speaker 2: stock six hundred now the top performer is Barclay's up

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Speaker 2: six point six percent, So investors reacting very positively to

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Speaker 2: what they've been hearing. Give us a little bit more

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Speaker 2: more detail on their plans going forward for returning cash

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Speaker 2: to Shell.

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Speaker 8: Yeah, so the big number is ten billion pounds, you know,

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Speaker 8: both by dividends and buybacks, and that's coming through I

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Speaker 8: think by twenty twenty six, so between twenty twenty four

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Speaker 8: and twenty twenty six. So yeah, that is a nice focus.

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Speaker 8: I think investors will see it as on you know, returns,

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Speaker 8: and obviously they're sort of very much embracing that. And

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Speaker 8: I've just got an alert send Barklays and now seven percent,

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Speaker 8: so they're really enjoying it. So you know, so that

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Speaker 8: is one element, and then the other thing is is

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Speaker 8: really relation to the investor bank that's in many people

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Speaker 8: view why the shares might be a bit depressed or

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Speaker 8: struggles against peers just because it takes up something like

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Speaker 8: sixty three percent of risk weighted assets for the whole

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Speaker 8: group and what the Bark is saying today as expected,

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Speaker 8: we're going to see that reduced down or we're going

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Speaker 8: to try and make that reduced down to about fifty percent.

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Speaker 8: And that's not by necessarily cutting the investment bank, but

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Speaker 8: that's by really focus on the retail side of things

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Speaker 8: and other more like kind of solid and stable revenue types.

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Speaker 1: Cs men Kata Krishnan, the CEO, also talking about being

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Speaker 1: upbeat on the UK. I mean, what is our view

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Speaker 1: then of his three year plans? You say there's going

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Speaker 1: to be more detail to emerge, cost cutting and reorganization

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Speaker 1: the focus as well.

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Speaker 9: Yeah, exactly.

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Speaker 8: The reorganization was interesting. That's new to me. They previously

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Speaker 8: set up as three basically divisions. Now they've got five,

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Speaker 8: with you know, basically where you had the corporate and

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Speaker 8: investment bank, you now have a Corporate UK corporate bank

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Speaker 8: separate to an investment bank. And I think again that's

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Speaker 8: probably in part the idea of giving people as much

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Speaker 8: information as they can so they can see which parts

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Speaker 8: of the bank are really you know, generating returns. I suppose,

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Speaker 8: and I don't know. I'm just reading a research note

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Speaker 8: here from our RBI team, and you know, they are saying, hey, look,

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Speaker 8: we really welcome that focus on capital distributions and some

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Speaker 8: of these new financial targets.

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Speaker 1: I e.

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Speaker 8: Barkley is looking at a thirty billion pound twenty twenty

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Speaker 8: six revenue goal. We again, great, but that does look

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Speaker 8: tricky to meet, just because it's like thirteen percent above

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Speaker 8: apparently what analysts are predicting. So there's definitely some ambition here,

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Speaker 8: but I think like other people are going to see

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Speaker 8: what actually gets delivered.

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Speaker 1: Yeah, And one other major deal that's happening sort of

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Speaker 1: away from Barclays, this global takeover deal, Capital One buying Discover.

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Speaker 1: I mean, I know it's over in the US, but

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Speaker 1: it is the biggest global deal of the year so far.

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Speaker 1: What did you make of it?

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Speaker 8: Thirty five billion dollars all stock, you know, Capital One

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Speaker 8: Discover Financial Services. So this will basically create the largest

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Speaker 8: US credit card company at least by loan volume. So

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Speaker 8: it's really fascinating because you can see, you know, some

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Speaker 8: of the behem offs over there will probably be looking

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Speaker 8: over their shoulders a bit now. Yeah, announced late last night.

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Speaker 8: Obviously it still requires regulatory approval and whatnot, but it

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Speaker 8: does look like it will be shaping up the consumer

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Speaker 8: face inside of US banking, So you know, big deal.

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Speaker 2: Okay, it's on metcalf from our finance team of course,

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Speaker 2: leading the coverage here on Barclay's as we've been to

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Speaker 2: talking about the invested reaction to all those earnings and

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Speaker 2: that stitute plan being taking very positively. You currently stock

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Speaker 2: up five point six percent. Yeah.

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Speaker 1: Let's switch our focus now to China, though, where the

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Speaker 1: People's Bank of China cut the key mortgage reference rate,

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Speaker 1: the five year loan prime rate by twenty five basis

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Speaker 1: points to three point ninety five percent in its biggest

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Speaker 1: ever cut. But the additional support for the troubled property

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Speaker 1: sector didn't really dispel all the gloom around Chinese equities.

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Speaker 1: Let's discuss with Blinberg economists who covers China and Hong Kong.

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Speaker 1: Eric Zu, Good morning, Eric, thanks for being back with

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Speaker 1: us on radio. How much do you think the cut

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Speaker 1: will help home buyers or perhaps support the Chinese consumer?

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Speaker 9: Yeah, I think that's a true fold. The intention for

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Speaker 9: the party makers one nears for new home buyers, obviously,

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Speaker 9: the lower lpre will allow them to pay a lower

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Speaker 9: mortgage to lowering the burden for buying a home. And

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Speaker 9: it's also probably more benefiting that existing home buyers who

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Speaker 9: you know, are paying a high mortgage given the high

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Speaker 9: interest rates in the past, but now they can they're

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Speaker 9: allowed to reprise into the new LPR. That's also going

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Speaker 9: to save some money on mortgage payments. And the hope

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Speaker 9: that the intention for the government is trying, you know,

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Speaker 9: the lower mortgage can allow them to spending more on

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Speaker 9: consumption and helping the call me to recover. We know

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Speaker 9: the economy is still struggling with deflation problems, so the

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Speaker 9: demand is too low, so people don't have income, ahad

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Speaker 9: job the hit. So the government hopes this can help

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Speaker 9: them to recover some spending power.

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Speaker 2: What about Eric, what about the property crisis? Overall? Where

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Speaker 2: do things stand and why why a policy makers not

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Speaker 2: being more aggressive? I mean, we're still at around four

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Speaker 2: percent for this benchmark lending rate. Some would see that

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Speaker 2: is still relatively high in an economy that is struggling

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Speaker 2: with the challenges that China faces.

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Speaker 9: Yeah, but I think you have to I have to

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Speaker 9: say that the key issue here is probably not the

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Speaker 9: high interest rates, right the property market downton. Part of

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Speaker 9: the downton is actually engineered by the government. They want

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Speaker 9: to reduce economy reliance on property market. They warry it's overheating,

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Speaker 9: so they're the big financial risks, so they want to prevent.

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Speaker 9: They want to you know, col this market before it

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Speaker 9: develops into some bigger crisis. But I think probably they

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Speaker 9: they are not sure that actually the I think the

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Speaker 9: market is now into some over correction, so people are

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Speaker 9: more gloomy, more pessimistic on the on the price expectation.

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Speaker 9: They'll worry the price will go even down, so they're

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Speaker 9: holding back you know, new home purchase. So that's actually

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Speaker 9: we did some an asset's actually the demand right now

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Speaker 9: is actually below we had projected by the fundamental demand.

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Speaker 9: So I think there's some over correction in the market,

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Speaker 9: and the government now has to bring more support measures,

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Speaker 9: trying to at least to you know, stimulating back so

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Speaker 9: these fundamental demand. But once it's already you know, overcred

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Speaker 9: to that extent, it's probably more harder to bring them

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Speaker 9: back because expectation is quite difficult to overturn at this point.

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Speaker 1: Early indications though, of the health of the Chinese consumer

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Speaker 1: emerging from the Lunar New Year holiday a huge you

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Speaker 1: know eight day celebration where people travel so much. What

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Speaker 1: are the first indicators then of how much people spent,

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Speaker 1: how confident they were.

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Speaker 9: Yeah, obviously we don't have the homelands data yet, but

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Speaker 9: the data from spending travel in their holidays suggests the

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Speaker 9: headline looks quite robust, lots of people traveling for the

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Speaker 9: first time in several years after COVID. But if you

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Speaker 9: look at more details, actually look at per capture, per

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Speaker 9: day consumption, actually the number is not as impressive as

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Speaker 9: the headline suggests. Right, So I think the big story

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Speaker 9: is people are traveling, Yeah, but they're not really spending

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Speaker 9: as much as before.