WEBVTT - Daybreak Weekend: Boeing Earnings, UK Banks, BRICS Summit 0:00:02.960 --> 0:00:08.320 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.119 --> 0:00:13.720 This is Bloomberg day Break Weekend, our global look at 0:00:13.760 --> 0:00:15.840 the top stories in the coming week from our Daybreak 0:00:15.840 --> 0:00:18.480 anchors all around the world. Straight Ahead on the program, 0:00:18.520 --> 0:00:21.360 corporate earnings and Focus. We'll look ahead to results from 0:00:21.400 --> 0:00:25.400 the jetmaker Boeing and shipping giant ups. I'm Tom Busby 0:00:25.440 --> 0:00:26.000 in New York. 0:00:26.120 --> 0:00:28.440 Him Carolyn Hetge here in London, where we're charting the 0:00:28.520 --> 0:00:33.200 potential rise of British banking ahead of some key earnings reports. 0:00:33.440 --> 0:00:36.200 I'm dek Prisner, looking ahead to next week's Brick Summit 0:00:36.320 --> 0:00:38.720 hosted by Russian President Vladimir Putin. 0:00:43.920 --> 0:00:47.440 Let's all e struly head on Bloomberg Daybreak Weekend on 0:00:47.560 --> 0:00:52.040 Bloomberg eleven, TREEO, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:52.479 --> 0:00:57.320 Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius 0:00:57.480 --> 0:01:00.880 XM one twenty one, and around the world Bloomberg Radio, 0:01:00.920 --> 0:01:02.840 dot Com and the Bloomberg Business. 0:01:02.880 --> 0:01:10.160 A good day to you. I'm Tom Busby. We begin 0:01:10.200 --> 0:01:14.000 today's program with the troubled aerospace giant Boeing, the company 0:01:14.000 --> 0:01:16.920 making headlines for all the wrong reasons of late a 0:01:17.000 --> 0:01:21.360 crippling month long strike, mounting losses, layoffs, investigation since the 0:01:21.440 --> 0:01:23.720 safety of its aircraft and more. And amid all that, 0:01:24.560 --> 0:01:28.840 Boeing officially reporting its third quarter earnings this Wednesday, although 0:01:29.120 --> 0:01:32.479 some of those numbers were released last week. For more 0:01:32.560 --> 0:01:34.880 and what we can expect, we're joined by George Ferguson, 0:01:34.920 --> 0:01:39.880 Bloomberg Intelligence Senior Aerospace, Defense and Airlines analyst. George, thanks 0:01:39.920 --> 0:01:42.520 for joining us well before we talk about what's wrong 0:01:42.600 --> 0:01:45.040 at Boeing and maybe how to fix it, what do 0:01:45.080 --> 0:01:48.120 you expect to see from the Q three earnings this Wednesday? 0:01:48.960 --> 0:01:51.280 Yeah, I think we've already seen I think the most 0:01:51.280 --> 0:01:54.240 important part of Q three earnings, and that was when 0:01:54.280 --> 0:01:59.120 Boeing disclosed their cash balances and they and cash use 0:01:59.280 --> 0:02:02.800 for the quarter. Right, So during the quarter we saw 0:02:02.840 --> 0:02:08.000 a use of it's about a billion three So that 0:02:08.080 --> 0:02:11.320 was from operations I think a little bit better than 0:02:11.320 --> 0:02:15.880 what we had expected for usage. There's going to be 0:02:15.919 --> 0:02:18.119 some capex that piles on top of that, which will 0:02:18.840 --> 0:02:21.440 you know, give us our free cash flow for the 0:02:21.520 --> 0:02:25.160 quarter again, probably something close to two billion ish in use. 0:02:25.639 --> 0:02:28.120 They were down to about ten billion dollars in balances. 0:02:28.320 --> 0:02:31.480 I think ten and a half, and so this is 0:02:31.520 --> 0:02:34.640 a company that needs about ten billion dollars around the business. 0:02:35.440 --> 0:02:38.240 So the big indicator here was that, you know, they're 0:02:38.280 --> 0:02:40.600 they're at the point where they need to raise some money. 0:02:41.120 --> 0:02:43.720 Speaking of raising money now, they're now working on raising 0:02:43.760 --> 0:02:47.160 upwards of twenty five billion with new shares convertible bonds. 0:02:47.400 --> 0:02:49.520 I mean, is this going to go ahead? It's credit 0:02:49.600 --> 0:02:53.000 rating just above junk status? Is this what's next for Boeing? 0:02:54.080 --> 0:02:57.320 Yeah, So I think you know, the company's calculus here 0:02:57.440 --> 0:02:59.560 is that if they're right up against the edge of 0:02:59.600 --> 0:03:02.000 what they need to run the company and they've got 0:03:02.040 --> 0:03:05.680 a strike going on, you know, obviously there's going to 0:03:05.680 --> 0:03:10.640 be well probably cast usage during the fourth quarter, so 0:03:10.680 --> 0:03:12.520 they need to go into the markets and shore up 0:03:12.560 --> 0:03:16.160 that liquidity position just to give them more leverage with 0:03:16.200 --> 0:03:19.680 the union. And so I do think it's going to occur. 0:03:19.840 --> 0:03:23.040 Right We've heard rumblings of them coming to the equity 0:03:23.080 --> 0:03:26.440 market for up to twenty five billion. They filed the 0:03:26.480 --> 0:03:29.079 shelf offering for twenty five billion. I don't think they 0:03:29.080 --> 0:03:31.519 want to use all twenty five billion right now. I 0:03:31.560 --> 0:03:34.040 don't think they want to be I don't think they 0:03:34.080 --> 0:03:36.960 want to skimp either on what they get from the marketplace, right. 0:03:37.000 --> 0:03:40.160 I think they want a couple quarters worth of liquidity 0:03:40.560 --> 0:03:42.320 so they can get the union back to the table 0:03:42.320 --> 0:03:44.320 and say, look, we've got a lot of staying power here, 0:03:44.720 --> 0:03:47.520 so you better be ready to go, you know, a 0:03:47.600 --> 0:03:51.440 quarter or more, you know, on this strike, which I 0:03:51.440 --> 0:03:53.120 think is going to be very hard right for the 0:03:53.120 --> 0:03:57.280 typical union rank and file. So you know, we kind 0:03:57.280 --> 0:04:00.680 of see ten to fifteen billion worth of cash raise 0:04:01.600 --> 0:04:04.160 again equity. The challenge will be that there'll be a 0:04:04.200 --> 0:04:09.080 fair amount of dilution for current shareholders. There's about ninety 0:04:09.080 --> 0:04:11.280 billion dollars in market cap right now in the company. 0:04:11.680 --> 0:04:15.480 Ten billion dollar raise is something like eleven percent dilution, 0:04:15.560 --> 0:04:17.240 so it's pretty significant. And that's why I think they 0:04:17.240 --> 0:04:19.440 don't want to go all the way to the twenty 0:04:19.480 --> 0:04:23.200 five billion dollar mark. I think equity sort of protects 0:04:23.279 --> 0:04:26.280 their credit rating or helps them, you know, with their 0:04:26.320 --> 0:04:31.240 credit rating, doesn't doesn't deteriorate their credit metrics. I'm sure 0:04:31.240 --> 0:04:33.720 the agencies are also concerned about the strike, so I'm 0:04:33.760 --> 0:04:36.240 not sure it gets them totally out of the woods 0:04:36.279 --> 0:04:39.800 on pressure for their credit rating, but it's definitely a 0:04:39.800 --> 0:04:42.039 lot better than them raising debt where I think the 0:04:42.080 --> 0:04:44.400 credit rating agencies we just have to downgrade them as 0:04:44.440 --> 0:04:45.159 soon as they did that. 0:04:45.600 --> 0:04:47.920 Yeah, yeah, but and it could happen right. 0:04:48.200 --> 0:04:51.920 Good again, I think there's still under pressure for credit ratings. 0:04:52.320 --> 0:04:55.520 The agencies have clearly been looking past current problems, right 0:04:55.560 --> 0:04:59.040 because you couldn't do a net debt to EBITDA analysis 0:04:59.080 --> 0:05:01.480 on them right now right, ebitdas quite low and their 0:05:01.760 --> 0:05:04.679 debts quite high. So the metrics are way out of whack. 0:05:04.760 --> 0:05:07.359 And you know, the credit acies are looking through this period. 0:05:07.560 --> 0:05:09.839 But the longer it goes on, the more they have 0:05:09.880 --> 0:05:12.840 to worry about the financial challenges of Boeing. And I 0:05:12.920 --> 0:05:14.520 think the less they can look through the period and 0:05:14.880 --> 0:05:15.960 have to take some action. 0:05:16.200 --> 0:05:18.200 Well, let's talk a little bit more about that strike. 0:05:18.520 --> 0:05:21.400 And I just want to be clear, this is just 0:05:21.440 --> 0:05:25.640 their Pacific Northwest manufacturing, right. There is manufacturing going on elsewhere. 0:05:25.839 --> 0:05:28.040 Yeah, So this is the machinist out of the Pacific 0:05:28.080 --> 0:05:33.760 Northwest they're responsible for. They build most of the commercial 0:05:33.800 --> 0:05:36.720 programs for Boeing, Right, so they would build the seven 0:05:36.800 --> 0:05:39.640 sixty seven, they'd build the Triple seven, they'd build the 0:05:39.680 --> 0:05:43.000 seven thirty seven of those airplanes, the seven thirty seven 0:05:43.120 --> 0:05:46.320 is the most important airplane to Boeing commercial that's the 0:05:46.400 --> 0:05:49.200 highest volume. It's where they generate their cash, make their 0:05:49.240 --> 0:05:52.200 profits out of. So that's why this strike is so 0:05:52.360 --> 0:05:56.839 debilitating to the company. They do manufacture seven eight sevens, 0:05:57.000 --> 0:06:00.760 I think their second most important commercial platform. They make 0:06:00.839 --> 0:06:04.880 them in the Carrollton in South Carolina near Charleston. That's 0:06:04.880 --> 0:06:08.600 a non union plant, so it's not affected there is 0:06:09.120 --> 0:06:12.279 you know what I've heard in the marketplaces, some of 0:06:12.320 --> 0:06:15.240 those seven eight sevens come back up to Everett, Washington 0:06:15.760 --> 0:06:18.240 and get worked a bit before they go to customers. 0:06:18.800 --> 0:06:21.240 So we're not going to say that they're not impacted 0:06:21.279 --> 0:06:23.400 at all by the strike, but I think they have 0:06:23.480 --> 0:06:26.960 the capability to continue to deliver in decent numbers close 0:06:27.000 --> 0:06:30.040 to their targets. That's seven eighty seven during the strike, 0:06:30.279 --> 0:06:33.479 and then the defense network really isn't affected except for 0:06:34.040 --> 0:06:37.240 KC forty six tanker. KC forty six tanker is the 0:06:37.360 --> 0:06:40.680 US aerial tanker program, another program Boeing has had a 0:06:40.720 --> 0:06:42.520 lot of problems on. Taking a lot of charges on 0:06:43.240 --> 0:06:47.120 the airframe goes down a line in the Northwest in 0:06:47.200 --> 0:06:50.920 the Seattle area up in Everett, and I think that's 0:06:51.040 --> 0:06:55.040 largely machinist in union labor, and so that's probably impacted 0:06:55.080 --> 0:06:57.320 as well by the strike, but a large portion of 0:06:57.360 --> 0:06:59.679 defense is not affected by the strike. 0:07:00.000 --> 0:07:03.440 Affected. Wow, well Boeing's latest earnings this Wednesday ahead of 0:07:03.480 --> 0:07:06.760 Wall Street's opening bell our Thanks to George Ferguson, Bloomberg 0:07:06.800 --> 0:07:11.440 Intelligence Senior Aerospace, Defense and Airlines analyst. We move next 0:07:11.440 --> 0:07:14.920 to the shipping and logistics company United Parcel Service UPS, 0:07:15.040 --> 0:07:18.240 reporting its third quarter earnings on Thursday. Now, UPS coming 0:07:18.280 --> 0:07:21.080 off a pretty rough second quarter after a drop in volume, 0:07:21.160 --> 0:07:23.160 will the third quarter be any different? 0:07:23.360 --> 0:07:23.720 For more? 0:07:23.760 --> 0:07:28.040 We're joined by Lee Clasgal, Bloomberg Intelligence Senior Transport, Logistics 0:07:28.040 --> 0:07:31.000 and Shipping Analysts. So, Lee, thank you for being here. 0:07:31.080 --> 0:07:33.520 What do you expect to see in UPS's third quarter 0:07:33.560 --> 0:07:34.360 earnings this week? 0:07:34.520 --> 0:07:36.560 Well, I think this print's going to be a much 0:07:36.560 --> 0:07:39.120 better print that we've seen in the first half. 0:07:38.880 --> 0:07:39.360 Of the year. 0:07:39.920 --> 0:07:42.120 In the third quarter, revenues are supposed to be up 0:07:42.200 --> 0:07:45.760 about mid single digits, same with earnings per share. That's 0:07:45.800 --> 0:07:49.239 good news, you know, because we're seeing earnings growth again 0:07:49.520 --> 0:07:52.040 and we expect that to really accelerate into twenty twenty 0:07:52.040 --> 0:07:53.600 five and a lot of that has to do with 0:07:53.640 --> 0:07:56.240 what the company has been doing through its pricing initiatives. 0:07:56.800 --> 0:07:59.520 The company has set a number of different search charges. 0:08:00.320 --> 0:08:04.240 It's a volume specific surcharge, whether it's you know, charging 0:08:04.720 --> 0:08:10.000 more for weird shape or heavy freight that's not really conveyable, 0:08:10.040 --> 0:08:13.880 so it adds costs for UPS. And then they're also 0:08:14.040 --> 0:08:16.320 you know, they're constantly doing you know, not constantly, but 0:08:16.400 --> 0:08:18.360 once a year they do a general rate increase or 0:08:18.400 --> 0:08:22.200 a GRI and there's one on December twenty third, that's 0:08:22.240 --> 0:08:26.760 around five point nine percent. And we expect Historically UPS 0:08:26.800 --> 0:08:31.240 FedEx DHL, you know, they tend to heavily discount their 0:08:31.320 --> 0:08:34.480 GRIS and we expect those discounts to be a lot 0:08:34.600 --> 0:08:38.920 less this time around, just given all the labor inflation, 0:08:39.160 --> 0:08:44.199 equipment inflation that they need to mitigate through pricing initiatives. 0:08:44.320 --> 0:08:47.200 Now that labor inflation you spoke about, they had settled 0:08:47.240 --> 0:08:50.560 avoided to strike, yes, and but it really cost them, 0:08:50.559 --> 0:08:51.200 didn't it. 0:08:51.200 --> 0:08:53.679 It did, and you know it was front loaded, and 0:08:53.679 --> 0:08:56.000 that's something else that will benefit and in the second half, 0:08:56.559 --> 0:09:00.760 the comparables will become a lot easier for them. On 0:09:00.800 --> 0:09:04.240 that longer term contract with the team serves, So that 0:09:04.400 --> 0:09:06.400 is good news, and you know, now they know kind 0:09:06.400 --> 0:09:09.240 of what their costs are going to be as it 0:09:09.240 --> 0:09:11.920 relates to labor and they can work through that. And 0:09:11.960 --> 0:09:14.079 the company has been doing a lot of different things 0:09:14.120 --> 0:09:17.800 in terms of increasing the overall productivity. They've also focusing 0:09:17.880 --> 0:09:19.839 more on some of what they would i esteem their 0:09:19.880 --> 0:09:24.040 core business. They recently sold their freight brokerage business, which 0:09:24.120 --> 0:09:28.840 is called Coyote. They sold that to RXO and that 0:09:28.880 --> 0:09:31.880 should be a huge win for RXO because they can 0:09:32.240 --> 0:09:35.800 really take that business maybe a lot further than YOUWPS 0:09:35.840 --> 0:09:39.000 did because it really wasn't a focus for UPS management 0:09:39.040 --> 0:09:41.680 over the years. It was more of a complimentary business 0:09:42.000 --> 0:09:45.679 that probably works better outside of the UPS. 0:09:46.240 --> 0:09:46.320 Well. 0:09:46.360 --> 0:09:48.640 They also made some acquisitions correct Mexico. 0:09:49.080 --> 0:09:51.200 They do a lot of tucket acquisitions, and a lot 0:09:51.240 --> 0:09:55.000 of the acquisitions that they're doing they're trying to get 0:09:55.080 --> 0:09:57.839 kind of longer into the supply chain, if you will, 0:09:58.800 --> 0:10:01.199 So you know some of the acquisitions they've done a 0:10:01.240 --> 0:10:04.320 lot in healthcare industry. Healthcare is a is a very 0:10:04.320 --> 0:10:09.280 interesting industry from a logistics standpoint because it comes with 0:10:09.360 --> 0:10:11.600 higher margins. There's a lot of specialties that go on 0:10:11.640 --> 0:10:14.000 and I'm sure everyone remembers during the pandemic, you know, 0:10:14.080 --> 0:10:16.280 when we had the vaccines distributed. They had to be 0:10:16.320 --> 0:10:20.319 super super cold, and you know, those kind of services 0:10:20.360 --> 0:10:25.319 cost a lot more money than sending an envelope overseas, 0:10:25.640 --> 0:10:28.199 and therefore it usually comes with higher margins, so it's 0:10:28.240 --> 0:10:31.199 usually it's a very good business. And UPS and FedEx 0:10:31.240 --> 0:10:34.440 are also looking at, you know, a step down from 0:10:34.440 --> 0:10:37.440 the enterprise market, so the small to medium sized shipper, 0:10:37.640 --> 0:10:41.240 which tend to have better margins as well. So UPS, 0:10:41.280 --> 0:10:46.120 while they're divesting some businesses, they're leaning into other businesses 0:10:46.840 --> 0:10:49.040 through these bolt on acquisitions. 0:10:49.720 --> 0:10:51.200 Now, I want to talk go back to something you 0:10:51.200 --> 0:10:55.720 said about the search charges. Consumers are definitely pulling back 0:10:55.760 --> 0:11:00.000 on their money. Fed X has said, UPS maybe had 0:11:00.080 --> 0:11:02.800 said the same thing, that people are choosing a cheaper 0:11:02.840 --> 0:11:06.560 option ground transportation instead of air freight to save money. 0:11:07.040 --> 0:11:10.240 I mean, is that being offset by these higher search charges? 0:11:10.320 --> 0:11:13.080 And what does that mean as we head into the 0:11:13.120 --> 0:11:16.000 most important season for them, you know, the holiday season? 0:11:16.800 --> 0:11:19.040 Yeah, so I mean we're definitely seeing a trade down 0:11:19.080 --> 0:11:22.440 effect to your point, So it maybe instead of having 0:11:22.559 --> 0:11:25.400 expedited freight or freight that or a package that has 0:11:25.440 --> 0:11:27.560 to go overnight. Maybe people are willing to take three 0:11:27.679 --> 0:11:30.920 or five days. I know personally anecdotally. You know, when 0:11:30.960 --> 0:11:33.319 I when I'm doing online shopping, there's a lot more 0:11:33.360 --> 0:11:36.720 options there, like of not having it overnight, and usually 0:11:36.720 --> 0:11:39.319 when it's not overnight, then it's usually free, and I'm 0:11:39.320 --> 0:11:40.800 always going to pick the free. 0:11:40.600 --> 0:11:43.400 Option, always only always always. 0:11:43.400 --> 0:11:45.439 I mean, I don't need a pair of pants that bad. 0:11:45.760 --> 0:11:47.760 I can wait a week. And so you know, you 0:11:47.880 --> 0:11:51.120 are seeing that, you're also seeing an interesting shift. So 0:11:51.160 --> 0:11:54.080 you know, we talked earlier that volumes are expected to 0:11:54.200 --> 0:11:57.439 increase mid single ditch for their domestic market and slightly 0:11:57.559 --> 0:12:00.800 up for their international market. Some of the volume growth 0:12:00.840 --> 0:12:04.400 is coming out of China with these relatively new e 0:12:04.440 --> 0:12:09.840 commerce providers like Sheen and Timu, And that's interesting because 0:12:10.120 --> 0:12:13.880 they're kind of going under the radar with some duties 0:12:14.240 --> 0:12:16.719 where there's a deminimus rule. I know this again a 0:12:16.760 --> 0:12:20.320 little wonky now, where if the value of the products 0:12:20.440 --> 0:12:24.480 under eight hundred dollars, they don't face an extra duty. 0:12:24.840 --> 0:12:27.679 And so a lot of freight is coming in from 0:12:27.800 --> 0:12:31.679 China because you know, without a duty, and it's a 0:12:31.720 --> 0:12:34.640 lot cheaper and kind of undercutting maybe things that people 0:12:34.679 --> 0:12:37.160 could buy here in the United States. So the Biden 0:12:37.200 --> 0:12:39.760 administration is looking at that and that that could change 0:12:39.840 --> 0:12:43.760 some volumes on a negative aspect, because it's been a 0:12:43.800 --> 0:12:47.280 good area of growth for the fedexes and eps's of 0:12:47.320 --> 0:12:47.720 the world. 0:12:48.080 --> 0:12:51.120 Well ups third quarter earnings out this Thursday. That's ahead 0:12:51.120 --> 0:12:53.679 of Wall Street's opening bell are thanks to Lee Glasgow, 0:12:53.760 --> 0:12:58.920 Bloomberg Intelligence Senior Transport, Logistics and Shipping analyst. Coming up 0:12:58.960 --> 0:13:01.520 on Bloomberg day Break, we again we'll chart the potential 0:13:01.600 --> 0:13:05.400 rise of British banking with some prominent UK banks reporting 0:13:05.400 --> 0:13:09.000 their latest earnings. I'm Tom Busby and this is Bloomberg. 0:13:19.600 --> 0:13:22.040 This is Bloomberg day Break weekend, our global look ahead 0:13:22.080 --> 0:13:24.160 at the top stories for investors in the coming week. 0:13:24.400 --> 0:13:26.880 I'm Tom Busby in New York. Up later in our 0:13:26.960 --> 0:13:29.840 program we'll look ahead to the sixteenth annual Brick Summit 0:13:29.880 --> 0:13:32.880 in Russia. But first, ahead of upcoming earnings from some 0:13:32.920 --> 0:13:36.680 of the UK's largest banks like Lloyd's and Barclay's, analysts 0:13:36.720 --> 0:13:40.040 are turning more positive on the sector. Jeffries, Ubs and 0:13:40.120 --> 0:13:43.720 Goldman all bullish on British banking shares. Can the results 0:13:43.760 --> 0:13:46.320 live up to the expectations for more. Let's go to 0:13:46.400 --> 0:13:50.160 London and bring in Bloomberg Daybreak europe banker Caroline Hepger. 0:13:50.280 --> 0:13:53.720 Tom the boost to British banking brought about by high 0:13:53.840 --> 0:13:57.480 interest rates could linger longer than thought, and Lissa turning 0:13:57.520 --> 0:14:01.280 positive on the likes of nat West and Lloyd's, citing 0:14:01.320 --> 0:14:04.920 the rewards of what they call the structural hedge, hundreds 0:14:04.920 --> 0:14:08.120 of billions of pounds invested in the swaps market to 0:14:08.240 --> 0:14:12.559 reduce sensitivity to interest rate movements. There's also a new 0:14:12.600 --> 0:14:15.560 government in town if you haven't noticed, one determined to 0:14:15.720 --> 0:14:19.640 bolster growth and bring in investment. That's something that UK 0:14:19.800 --> 0:14:23.160 banks should be poised to profit from. Blueberg has been 0:14:23.200 --> 0:14:27.680 speaking to Lloyd's CEO Charlie Nunn at the UK Investments 0:14:27.680 --> 0:14:32.000 Summit recently. None told Bloomberg's Farsi Laqua that he is 0:14:32.120 --> 0:14:34.280 optimistic about Britain's future. 0:14:35.000 --> 0:14:35.640 I think the really. 0:14:35.520 --> 0:14:37.640 Important thing to get more investment in the UK is 0:14:37.680 --> 0:14:40.880 first the clarity and a clear direction of the country. 0:14:40.920 --> 0:14:43.720 And so the stability in the clarity this government's trying 0:14:43.720 --> 0:14:45.000 to give, I think is really important. 0:14:45.240 --> 0:14:46.960 Investors want to invest. 0:14:46.600 --> 0:14:47.040 In the UK. 0:14:47.400 --> 0:14:49.520 They're looking at the UK relative to Europe and the 0:14:49.600 --> 0:14:52.080 US and Asia, and at the moment the UK looks 0:14:52.120 --> 0:14:54.920 like a good destination. But the first thing is clarity instability. 0:14:55.280 --> 0:14:57.600 The second thing is tell me where you're going to 0:14:57.640 --> 0:14:59.720 invest alongside us, and do it in a way that 0:14:59.800 --> 0:15:02.960 they us to bring private capital to work. We estimate 0:15:03.000 --> 0:15:06.040 that there's about forty to fifty billion pounds worth of 0:15:06.080 --> 0:15:08.960 investment per year for the next twenty years, so the 0:15:09.000 --> 0:15:11.280 government can't afford that, but the private sector. 0:15:10.960 --> 0:15:13.360 Really can make a difference. And then the third thing 0:15:13.440 --> 0:15:15.160 is really enable the financial. 0:15:14.800 --> 0:15:18.480 Services sector to unlock its potential to support that investment. 0:15:18.680 --> 0:15:20.960 But Charlie, so you're one of the key components actually 0:15:21.000 --> 0:15:23.640 try and get this foreign direct investment into the country. 0:15:23.880 --> 0:15:24.840 Where would you deploy it? 0:15:24.880 --> 0:15:26.040 Where will it be deployed? 0:15:26.480 --> 0:15:27.720 Well, I know the government's going to come out with 0:15:27.720 --> 0:15:28.800 their kind of industrial plan. 0:15:28.920 --> 0:15:31.960 They're talking about eight sectors. Two examples that I think 0:15:32.000 --> 0:15:35.360 there's huge opportunity. One is around the energy transition, and 0:15:35.840 --> 0:15:39.320 the UK's already a leader around offshore wind, but floating wind, 0:15:39.440 --> 0:15:42.280 onshore wind, the growth in solar, and then some of 0:15:42.320 --> 0:15:46.120 the new technologies like carbon capture and hydrogen. There's huge 0:15:46.120 --> 0:15:49.160 opportunities to invest and that also needs a clear plan 0:15:49.320 --> 0:15:52.640 for the national grid and the electrical infrastructure. That's one 0:15:52.640 --> 0:15:56.200 example of a huge opportunity for investment. Another's housing. So 0:15:56.640 --> 0:15:58.480 the government's made a commitment to build a one point 0:15:58.520 --> 0:16:01.760 five million new homes. We need more social and affordable 0:16:01.760 --> 0:16:04.400 homes specifically, that's something we have called for as Lloyd's 0:16:04.400 --> 0:16:07.240 Banking Group, and we really need to get the money invested, 0:16:07.360 --> 0:16:10.560 start going behind breaking down the planning laws and building 0:16:10.560 --> 0:16:13.359 more homes and that'll be good for jobs and productivity 0:16:13.360 --> 0:16:15.640 and create an environment that we can get the skills 0:16:15.720 --> 0:16:16.840 for the investment in business. 0:16:17.680 --> 0:16:20.240 Charlie, So, I guess a lot of people are concerned 0:16:20.400 --> 0:16:22.760 by the fact that, of course this government needs banks, 0:16:23.000 --> 0:16:25.440 as you say, to bring in private capital, to deploy 0:16:25.480 --> 0:16:27.840 some of the money to help them actually also help 0:16:27.840 --> 0:16:29.880 with the National Wealth Fund. At the same time they're 0:16:29.920 --> 0:16:31.440 trying about taxing the banks. 0:16:31.520 --> 0:16:32.560 So how do you square the two. 0:16:33.080 --> 0:16:36.400 Well, see taxations a matter for the government to talk about, 0:16:36.800 --> 0:16:39.600 but irrespective of whatever kind of political decision they take 0:16:39.640 --> 0:16:42.600 on that. As Lloyd's Banking Group, as an example, we've 0:16:42.640 --> 0:16:44.680 got a nine hundred billion pound balance sheet. 0:16:44.840 --> 0:16:47.000 We do eighty to one hundred billion pounds worth of 0:16:47.080 --> 0:16:49.280 lending per year. We have two hundred. 0:16:49.080 --> 0:16:51.600 Billion pounds worth of pension assets we manage on behalf 0:16:51.640 --> 0:16:54.240 of Britain pensioners. We need to put that money to 0:16:54.280 --> 0:16:56.240 work and then we partner with some of the biggest 0:16:56.240 --> 0:16:59.120 world's pension funds, private credit funds, and our job is 0:16:59.120 --> 0:17:01.600 to bring our expertise to channel out into the UK. 0:17:01.840 --> 0:17:05.119 So there's huge opportunity for us to continue to deploy 0:17:05.119 --> 0:17:08.960 that capital in smarter ways that derives productivity, growth and 0:17:09.080 --> 0:17:12.520 jobs to get the UK economy to being the fastest 0:17:12.560 --> 0:17:15.960 growth economy in the G seven, which is a really 0:17:16.040 --> 0:17:16.800 bold ambition. 0:17:17.320 --> 0:17:19.679 A number of your competitors now Western Guard players have 0:17:19.800 --> 0:17:24.760 done recent acquisitions showing basically that they really support this economy. 0:17:25.040 --> 0:17:26.920 Are you looking to do something likely as well? 0:17:27.320 --> 0:17:29.359 So you know, we are now three years into the 0:17:29.359 --> 0:17:32.119 five year strategy I laid out and the great uses 0:17:32.160 --> 0:17:34.719 it's very much a growth strategy and we're delivering well 0:17:34.760 --> 0:17:36.879 against that. We're going to do an update in February 0:17:37.080 --> 0:17:40.040 next year on the first checkpoint in that strategy and 0:17:40.080 --> 0:17:42.399 I'm really pleased with the progress we've made. We've done 0:17:42.440 --> 0:17:45.119 some Bolton acquisitions, but the core of our strategy is 0:17:45.119 --> 0:17:47.440 an organic growth strategy and the great thing for Lloyd's 0:17:47.440 --> 0:17:50.520 Banking Group is we are typically the number one or 0:17:50.600 --> 0:17:53.720 number two player in every segment and product we participate in, 0:17:53.720 --> 0:17:56.199 including in fact an investment in the UK project finance, 0:17:56.240 --> 0:18:00.480 infrastructure finance, housing finance, where we lead in the UK. No, 0:18:00.600 --> 0:18:04.479 we'll look at acquisitions opportunistically. Our core strategy is organic 0:18:04.560 --> 0:18:05.159 and we're. 0:18:05.000 --> 0:18:06.080 Feeling good about where we're going. 0:18:06.400 --> 0:18:07.560 What do you want on pensions? 0:18:07.760 --> 0:18:08.160 Pensions? 0:18:08.160 --> 0:18:09.920 But also there's a lot of talk on actually risk 0:18:10.000 --> 0:18:14.000 taking and this takes years not months that the government has. 0:18:14.040 --> 0:18:16.680 Yeah, so pensions are such an important part of the puzzle. 0:18:16.720 --> 0:18:18.760 As I said, we are a leading pensions provider in 0:18:18.800 --> 0:18:21.040 the UK two hundred billion pounds worth of pension money 0:18:21.880 --> 0:18:23.840 and I think there's a few things that really matter. 0:18:23.920 --> 0:18:26.520 The first is we need to get more of our 0:18:26.560 --> 0:18:27.920 customers money into pensions. 0:18:28.080 --> 0:18:29.480 About forty percent. 0:18:29.200 --> 0:18:31.919 Of the UK households aren't on track for even a 0:18:31.920 --> 0:18:35.119 basic living standard, and obviously giving them financial resilience is 0:18:35.160 --> 0:18:37.880 good for the economy, so we need to increase enrollment 0:18:37.960 --> 0:18:40.159 around pensions. The second thing is how can we invest 0:18:40.200 --> 0:18:43.080 it safely and appropriately for them in high risk assets? 0:18:43.440 --> 0:18:46.680 And actually that's more about conduct risk and fiduciary risk 0:18:46.960 --> 0:18:50.639 than it is around changing or asking the investment managers 0:18:50.640 --> 0:18:53.600 to invest more in those kinds of projects. We need 0:18:53.640 --> 0:18:56.000 to look at how do you support customers to make. 0:18:55.880 --> 0:18:57.080 Those choices in this country. 0:18:57.359 --> 0:18:59.280 And that's something we're talking closely with the government and 0:18:59.359 --> 0:18:59.960 the regulators about. 0:19:00.680 --> 0:19:03.480 You know, the new Investment Minister, how many questions do 0:19:03.480 --> 0:19:06.640 you think she'll feel from international investors about the budget? 0:19:06.960 --> 0:19:09.320 Is this investment summit a little bit too soon as 0:19:09.359 --> 0:19:11.399 we don't really know what happens to non darms, what 0:19:11.440 --> 0:19:14.240 happens aster carried interest and other questions? 0:19:14.800 --> 0:19:16.280 Well, no, And if the first thing to say is 0:19:16.280 --> 0:19:18.320 you can hear the buzz in the room today, it's 0:19:18.359 --> 0:19:20.640 great to see the excitement about investing in the UK 0:19:20.680 --> 0:19:23.680 and have the international investors here. It's very very early 0:19:23.760 --> 0:19:26.199 days for the new Investment ministrating four or five days in. 0:19:27.520 --> 0:19:30.680 I know her ambition is to increase overseas investment into 0:19:30.680 --> 0:19:33.200 the UK. And the kind of investors we're talking about 0:19:33.240 --> 0:19:36.520 are the big international pension funds, the big international sovereign 0:19:36.560 --> 0:19:39.919 wealth funds, the private credit funds, and they're going to 0:19:39.920 --> 0:19:42.639 be looking for good projects with a good return with 0:19:42.800 --> 0:19:45.280 a government and a country that's getting behind making those 0:19:45.400 --> 0:19:48.119 investments successful, that's what will matter. It won't be some 0:19:48.160 --> 0:19:50.480 of the things you're talking about, and so I hope 0:19:50.520 --> 0:19:53.640 that she's really focused on engaging those kinds of organizations 0:19:54.000 --> 0:19:57.080 and then working with our financial services sector which has 0:19:57.119 --> 0:19:59.480 the expertise to put that money to work, and we're 0:20:00.040 --> 0:20:02.000 d and financial service sector in the world. 0:20:02.080 --> 0:20:03.919 Let me say that. 0:20:03.240 --> 0:20:07.080 That was Lloyd's Bank CEO Charlie Nunn, perhaps Keir Starman 0:20:07.240 --> 0:20:11.080 managing to calm the city's jitters with that investment summit 0:20:11.200 --> 0:20:15.919 ahead of the autumn budget. So what is driving the 0:20:16.080 --> 0:20:19.880 positive trajectory of the UK banking sector. It's something that 0:20:19.920 --> 0:20:24.280 I've been talking to our finance reporter about, Harry Wilson. 0:20:24.680 --> 0:20:26.960 I think there's a few things. Obviously, we're now heading 0:20:27.000 --> 0:20:30.320 into a interest rate cutting cycle and people are looking 0:20:30.320 --> 0:20:32.760