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

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

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Speaker 1: you listen. It's Thursday, the fifteenth of February in London.

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Speaker 1: I'm Caroline Hepka.

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Speaker 2: And I'm Stephen Carroll. Coming up today, Israel quit cease

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Speaker 2: fire negotiations as fears grow about its new Gaza offensive.

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Speaker 1: Vladimir Putin says Joe Biden would be a better US

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Speaker 1: president for Russia.

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Speaker 2: Plus why a shortage of dollars is driving international companies

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Speaker 2: out of Africa's largest economy.

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

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Speaker 2: The United States has told its allies that Russia could

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Speaker 2: deploy a nuclear weapon into space as early as this year.

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Speaker 2: Sources have told Bloomberg that Moscow is developing a space

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Speaker 2: based capability to knock out satellites. On Friday, US President

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Speaker 2: Joe Biden confirmed that the Kremlin had been developing an

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Speaker 2: anti satellite space weapon, but said there's no evidence Russia

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Speaker 2: had decided to move forward with the program.

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Speaker 3: There is no nuclear threat to the people of America

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Speaker 3: or anywhere else in the world with what Russia's doing

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Speaker 3: at the moment. So what we found out there was

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Speaker 3: a capacity to launch a system in the space that

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Speaker 3: could theoretically do something that was damaging hadn't happened yet,

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Speaker 3: and my expect, I hope, is it will not.

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Speaker 2: Joe Biden's comments come after the US House Intelligence Committee

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Speaker 2: chairman issued a cryptic statement about an unspecified national security threat.

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Speaker 2: Russian President Vlasimir Putin says he is categorically against the

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Speaker 2: deployment of nuclear weapons in space. A nuclear warhead in

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Speaker 2: orbit would violate the nineteen sixty seven Outer Space Treaty,

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Speaker 2: to which Russia is a signatory.

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Speaker 1: The Ministry of Defense insists that Britain's nuclear deterrent remains safe,

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Speaker 1: secure and effective, after confirming a triedent missile test failed,

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Speaker 1: sending it crashing into the sea. The embarrassment was compounded

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Speaker 1: by the fact that both the Defense Secretary, Grant Shaps,

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Speaker 1: and the head of the British Navy were on board

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Speaker 1: the submarine HMS Vanguard at the time. Sources insist that

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Speaker 1: the failure was linked to the fact that it was

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Speaker 1: a test. Had it been a real launch, it would

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Speaker 1: have been successful. However, the last known test of the

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Speaker 1: UK's triedent nuclear deterrent in twenty sixteen also failed. The

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Speaker 1: system costs around three billion pounds a year to maintain.

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Speaker 2: Almost two years after Russia began its full scale of

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Speaker 2: invasion of Ukraine, President Putin's forces have regained the initiative

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Speaker 2: and put Zelensky on the back foot. Their advances were

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Speaker 2: underscored by the capture of the eastern city of Advika

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Speaker 2: this weekend after months of fighting. At the same time,

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Speaker 2: a sixty billion dollar US military aid package for Ukraine

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Speaker 2: remained stuck in political limbo and Washington. Terry Haynes of

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Speaker 2: Pangaea Policy says the Biden administration has to do more

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Speaker 2: to get tough on Russia when it comes to the

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Speaker 2: war in Ukraine.

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Speaker 4: Effectiveness of Russian sanctions. Part of my point has always

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Speaker 4: been that they're badly enforced, if at all, combined with

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Speaker 4: late provision of weapons or no provision at all, and

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Speaker 4: on top of that, a lack of being able to

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Speaker 4: use all the tools of the presidency, including the Defense

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Speaker 4: Production Act, to top up stores for both the United

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Speaker 4: States and for allies. And what I get is somebody

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Speaker 4: that claims to be as forcefully supportive for Ukraine as possible,

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Speaker 4: but in fact is not being all I'm suggesting is

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Speaker 4: not a partisan point. I'm suggesting this is a whole

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Speaker 4: of government problem, not just a Democrat Republican problem.

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Speaker 2: Haines believes US military aid for Ukraine will make it

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Speaker 2: to the President's desk, but the legislation still faces for

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Speaker 2: medable obstacles in the House.

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Speaker 1: And now to some corporate news, profits at HSBC slumped

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Speaker 1: by eighty percent in the last three months of twenty

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Speaker 1: twenty three. The lender took a three billion dollar impairment

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Speaker 1: in the fourth quarter on its holdings in China's Bank

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Speaker 1: of Communication. CEO Noel Quinn said that the payment will

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Speaker 1: have minimal consequences.

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Speaker 5: I just want to make clear that has no impact

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Speaker 5: on our capital position of any significance. It does not

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Speaker 5: prohibit distribution because it's non capital impactful. It is a

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Speaker 5: technical accounting issue, and I also want to reiterate we

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Speaker 5: have strong confidence in the China economy. We believe there

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Speaker 5: are huge opportunities ahead, and we believe that our partnership

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Speaker 5: with BOCOM has been a good partnership for twenty years

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Speaker 5: and that status has not changed.

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Speaker 1: HSBC CEO Noel Quinn there his pay has almost doubled

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Speaker 1: to ten point six million pounds in twenty twenty three,

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Speaker 1: whilst the company's overall bonus pool rose by twelve percent.

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Speaker 1: The bank also announced a two billion dollar share buyback

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Speaker 1: and dividend of thirty one cents a share.

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Speaker 2: Turning next to City Group, which has increased pay for

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Speaker 2: its CEO, Jane Fraser by about six percent to twenty

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Speaker 2: six million dollars low last year. Fraser was the only

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Speaker 2: major bank poss to get a pay rise the previous year,

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Speaker 2: as well. City saw a thirty eight percent drop a

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Speaker 2: net income in twenty twenty three. Bloombergsdal Krasner has the details.

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Speaker 6: The bank awarded Fraser a total of one and a

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Speaker 6: half million dollars in salary plus twenty four and a

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Speaker 6: half million in stock based in cash and centive awards

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Speaker 6: for twenty twenty three. The increase comes after Fraser initiated

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Speaker 6: what's being called the largest reworking of City Group in decades.

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Speaker 6: The aim is to propel the bank from an underdog

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Speaker 6: to one competitive with its more profitable peers. Last month,

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Speaker 6: City said it would cut twenty thousand rolls in a

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Speaker 6: regulatory filing. The Compensation Committee said Fraser's priorities were sound.

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Speaker 6: Last year, City Group shares rose nearly fourteen percent after

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Speaker 6: three consecutive years of declines. In New York. I'm Doug Prisner,

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Speaker 6: Bloomberg Radio.

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Speaker 1: In the UK, Chancellor Jeremy Hunt is estimated to have

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Speaker 1: twenty three billion pounds of headroom for tax cuts in

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Speaker 1: his upcoming budget. That's according to the Residus Foundation think tank,

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Speaker 1: which says that that would give him space to cut

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Speaker 1: the basic rate of income tax by two percent. Bloomberg's

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Speaker 1: James Walcock has more.

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Speaker 7: The Chancellor has made no secret of his desire to

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Speaker 7: cut taxes. He made that clear to Bloomberg a number

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Speaker 7: of times in the last few months.

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Speaker 8: So I haven't seen the final figures from the Office

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Speaker 8: for Budget Responsibility, so I don't know the headroom that

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Speaker 8: I'm going to have to play with. But what I

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Speaker 8: can tell you is what I want to do if

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Speaker 8: I can. I want to reduce the tax burden.

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Speaker 7: But the question has been if he has the fiscal headroom.

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Speaker 7: The Resolution Foundation say lower borrowing costs and high tax

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Speaker 7: revenues mean he likely will, but the think tank also

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Speaker 7: points out those higher revenues come from freezing the thresholds

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Speaker 7: people start paying higher rates of tax. They argue that

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Speaker 7: despite Hunt's rhetoric, Britain is being offered a cut sandwich

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Speaker 7: between hefty tax rises in London. James Wilcock Bloomberg Radio.

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Speaker 1: Now, in a moment we'll bring you more details on

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Speaker 1: this possibility that a Russia could send nuclear weapons into

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Speaker 1: space and the warning from the United States, plus our

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Speaker 1: interview with the CEO of HSBC, Noel Quinn. You had

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Speaker 1: a little snippet of it, but of course we'll have

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Speaker 1: more for you on that in a moment after the

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Speaker 1: bank published its latest results.

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Speaker 2: No story that caught her eye this morning, though, from

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Speaker 2: Boomberg Opinion columnist Laura Williams, is about the dilemma of

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Speaker 2: climate proofing her home. So Lara's just recently moved into

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Speaker 2: her first home as a homeowner, and she's been looking

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Speaker 2: at the environmental considerations of making it more energy efficient.

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Speaker 2: So beyond the big things like double glazing her insulation,

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Speaker 2: Lara's done a fascinating dive into the running costs and

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Speaker 2: carbon costs of all of her appliances, So not just

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Speaker 2: how much they're costing are in terms of electricity bills,

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Speaker 2: but also what the carbon cost would be both of

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Speaker 2: the ones that she owns already obviously the carbon going

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Speaker 2: into the manufacturing of these processes, but also what the

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Speaker 2: carbon cost would be if you were to replace them

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Speaker 2: with something new, which might be more energy efficient but

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Speaker 2: nonetheless is going to end up with more carbon consumption.

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Speaker 1: Yeah, I look, I think that the day is totally fascinating.

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Speaker 1: She's got her own appliances that she's measured, She's measured

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Speaker 1: the ones that she could buy and done a little comparison,

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Speaker 1: but she's sort of gone all, you know, all the

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Speaker 1: way around in order to come back to the point,

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Speaker 1: which is you should keep hold of your machines, even

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Speaker 1: if they are less energy efficient, because actually buying a

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Speaker 1: new one is so kind of environmentally costly. So I

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Speaker 1: really like that. Although I didn't, I did notice that

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Speaker 1: Lara only puts her tumble dryer on twice a week,

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Speaker 1: and I thought that that in and of itself was

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Speaker 1: pretty energy efficient. In the UK, which is very cold

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Speaker 1: and wet.

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Speaker 2: Some of us are still drying our clothes in our

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Speaker 2: living rooms on tumble dryer inside. One actually interesting factors

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Speaker 2: piece that I really struck out for me is that

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Speaker 2: residential electricity consumption in the UK has actually fallen by

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Speaker 2: twelve percent in the ten years to twenty eighteen. And

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Speaker 2: this is because of improvements and things like the light

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Speaker 2: bulbs were using.

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Speaker 1: And surprise that it has allowed us to be so

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Speaker 1: much more energy efficient. And yet, having said that UK

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Speaker 1: homes are among the biggest kind of large polluters in

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Speaker 1: the UK, there's still a huge way to go in

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Speaker 1: terms of insulation and home heating and so much more.

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Speaker 1: But anyway, really nice piece by Lara Williams on the

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Speaker 1: Bloomberg terminal this morning.

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Speaker 2: Let's turn back to our top story. Now, the US

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Speaker 2: has told allies that Russia could deploy a nuclear weapon

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Speaker 2: in space as early as this year. It comes as

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Speaker 2: Putin's war and Ukraine has turned in the Russian president's

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Speaker 2: favor with Russian forces, putting Ukraine's Vladimo Zelenski on the

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Speaker 2: back first joining us now for more as Flavia christ

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Speaker 2: jacksonn Executive editor for Economics and Government in Europe, the

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Speaker 2: Middle East, Africa and Latin America. Flavia, good morning to you.

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Speaker 2: Russia is said to be planning to deploy nukes in space.

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Speaker 2: Is this a new arms race? Is it saber rattling?

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Speaker 9: I mean, it's an absolutely sort of terrifying prospect, isn't it.

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Speaker 9: And as we were trying to sort of craft that headline,

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Speaker 9: I think it was inevitable that people were going to

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Speaker 9: be transported back to a time of Cold War and

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Speaker 9: nineteen fifty three and threats and Oppenheim irish sort of read.

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Speaker 9: And I think it's important to sort of underline a

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Speaker 9: few things. I mean, these are there's definitely a lot

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Speaker 9: of stable rattling, and the sort of climate between the

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Speaker 9: US and Russia right now is so grim and there's

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Speaker 9: no trust whatsoever. But you know, it's important to say

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Speaker 9: that this is something that's not being directed at someone

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Speaker 9: or at something. But it certainly indicates that all the

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Speaker 9: rules that had been in place and that had given

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Speaker 9: people's certain degree of guarantees during the Cold War are

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Speaker 9: now no more. Russia has remained on its smart agreements,

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Speaker 9: and you know, if true, this would be a violation

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Speaker 9: of the Outer Space Treaty. Now, of course Putin has

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Speaker 9: denied that, but he also denied that he was about

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Speaker 9: to invade Ukraine. Then he did.

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Speaker 1: Yeah, so this huge threat, as you say, it is

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Speaker 1: kind of apocalyptic, isn't it. If it is true or

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Speaker 1: were to happen. But then this also makes us think

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Speaker 1: about where Putin is in terms of the invasion of

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Speaker 1: Ukraine that was two years ago on the twenty fourth

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Speaker 1: of February. There is now grave concern that the war

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Speaker 1: is shifting in Russia's favor.

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Speaker 9: So almost incredible to sort of look at the way

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Speaker 9: the conflict has turned on its head, right, I mean,

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Speaker 9: if you look at the first year, it was very

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Speaker 9: much you know, the Western allies themselves thought that Russia

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Speaker 9: would be in Keith's stores within days, and that proved

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Speaker 9: to not be true. And the resistance by the courageous

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Speaker 9: Ukrainian people was sort of surprised allies and convinced them

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Speaker 9: to give money and then give all sorts of weapons.

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Speaker 9: And certainly there was an expectation the first year that

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Speaker 9: the counter offensive had actually made some gains and maybe

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Speaker 9: it was even possible that Ukraine could win its conflict.

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Speaker 9: And then you've probably reached a sort of peak of

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Speaker 9: when Fragozen and his march on on Moscow, which was

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Speaker 9: the biggest threat to put them authority in absolute decades,

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Speaker 9: And I think that sort of center signal to the

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Speaker 9: world of like maybe his grip on Russia was such

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Speaker 9: as strong as people thought, but of course that proved

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Speaker 9: to be misguided as well, and there's much vaunted counter

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Speaker 9: offensive just ground to a halt our opinions. I think

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Speaker 9: now very frustrated with the idea that Western stage fastness

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Speaker 9: isn't isn't there, and that you know, somehow things have

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Speaker 9: really radically not gone in their favor now. But I

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Speaker 9: think it's also important to know, you know, and just

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Speaker 9: looking at the timeline and the upsim the downs that

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Speaker 9: you know, you know, we don't know or there's lots

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Speaker 9: of unknowns right we don't know how the how the

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Speaker 9: election is going to go, and you know, who knows

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Speaker 9: things that could change. But right as things are right now,

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Speaker 9: certainly if you're putin you're feeling quite smoke.

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Speaker 2: Okay, Flavia christ Jackson, our executive eddor for Economics and Government,

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Speaker 2: thank you very much for joining us.

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Speaker 1: Now let's turn our attention to the results from HSBC,

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Speaker 1: the bank reporting a slump in fourth quarter profit, hit

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Speaker 1: by a three billion dollar charge over its stake in

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Speaker 1: a Chinese bank, and also the sale of its French business.

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Speaker 1: HSBC announcing a two billion dollar share buy back. Now

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Speaker 1: Noel Quinn has been speaking to Bloomberg's Farcina Laqua. So

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Speaker 1: in terms of the CEO pay, Noel Quinn nearly doubling

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Speaker 1: his pay in twenty twenty three to over ten million

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Speaker 1: pounds that is about thirteen million dollars. So the results

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Speaker 1: from HSBC, not the only company reporting, of course, in

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Speaker 1: Nvidia after market in the United States will be absolutely vital.

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Speaker 1: We've had Rio Tinto out just earlier this morning too,

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Speaker 1: We'll have glen Core. But HSBC's Noel Quinn speaking to

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Speaker 1: Bloomberg just this morning, so I want you to have

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Speaker 1: a listening to that key interview.

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Speaker 5: Well, I'm very pleased with the fact that we've been

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Speaker 5: able to report thirty billion of PB two, which is

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Speaker 5: obviously a record, but also I'm very pleased with the

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Speaker 5: return on tangible equality. We've been working hard after the

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Speaker 5: past four years to make sure we deliver mid teen's returns,

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Speaker 5: and we did that last year, you know, before not

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Speaker 5: material notable items, we had a return on tangible equity

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Speaker 5: of fifteen point six percent. I'm also really pleased with

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Speaker 5: the dividends. We've been ound sixty one cents, which is

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Speaker 5: the highest dividend for the full year since two thousand

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Speaker 5: and eight. And we completed seven billion dollars a buyback

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Speaker 5: and we announced another two billion dollar up to two

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Speaker 5: billion dollar buy back this year. So I'm really pleased

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Speaker 5: with the strong capital generation and I believe with the

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Speaker 5: CET one ratio of fourteen point eight percent, we got

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Speaker 5: strong potential future capital distribution as well. In the fourth quarter,

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Speaker 5: we did have some noise in the numbers. We had

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Speaker 5: three principal items that pulled down the profit. The first

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Speaker 5: one was we rebooked the loss on sale of our

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Speaker 5: French operation that we completed that transaction. It's neutral for

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Speaker 5: the year because we took a credit on that in

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Speaker 5: Q one and we've taken a charge in Q four,

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Speaker 5: so that nets each other out and neutral. There was

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Speaker 5: an adjustment for hyper inflation in Argentina driven by the

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Speaker 5: devaluation that took place. That's really a technical issue. And

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Speaker 5: then the third issue technical issue was Bocoon. We have

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Speaker 5: had had an investment in bocon for twenty years. Every

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Speaker 5: quarter we have to do a valuation in use test.

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Speaker 5: We did that again this quarter, updated the model and

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Speaker 5: it compares the value in use to the carrying value,

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Speaker 5: and value in use dropped below and that resulting in

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Speaker 5: a three billion charger. I just want to make clear

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Speaker 5: that has no impact on our capital position of any significance.

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Speaker 5: It does not prohibit distribution because it's non capital impactful.

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Speaker 5: It is a technical accounting issue, and I also want

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Speaker 5: to reiterate we have strong confidence in the China economy.

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Speaker 5: We believe there are huge opportunities ahead, and we believe

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Speaker 5: that our partnership with BOCOM has been a good partnership

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Speaker 5: for twenty years and that status has not changed and.

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Speaker 10: Not given what you just explained, are there any large

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Speaker 10: asset sales ahead? Is there anything else that you're thinking

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Speaker 10: either that you need to sell off or actually that

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Speaker 10: there could be some kind of accounting concern.

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Speaker 5: Well, I think we've got the final leg of our

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Speaker 5: disposal of Canada to come at the end of Q one.

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Speaker 5: That will be a big sale completion. We're on track

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Speaker 5: for that at the end of Q one. That will

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Speaker 5: allow us to as we've already announced first use of proceeds,

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Speaker 5: we would like to use the first use of proceeds

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Speaker 5: as a special dividend of twenty one sense. We continue

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Speaker 5: to look at the portfolio to make sure the portfolio

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Speaker 5: is strategically correctly positioned and no businesses are underperforming, but

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Speaker 5: I think we've done the material transactions, but we will

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Speaker 5: continue to adapt and change if we feel as though

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Speaker 5: part of the portfolio is not strategic or is underperforming.

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Speaker 5: I also want to recap on Q four if you revert,

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Speaker 5: if you take the profit the underlying before more material notables,

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Speaker 5: Q four reports would have been a seven point three

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Speaker 5: billion PBT, which is well up on the prior quarter

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Speaker 5: in twenty twenty two.

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Speaker 10: No, just going back to some of your potential significant sales,

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Speaker 10: are you also close to identifying any potential new Bolton acquisitions?

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Speaker 5: We keep looking at boltons and we've done quite a few.

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Speaker 5: I was really pleased that we were with announced the

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Speaker 5: acquisition of Citybank's wealth business in China. That follows two

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Speaker 5: other investments we've put into China recently, taken our shareholding

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Speaker 5: in our insurance joint venture from fifty percent to one

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Speaker 5: hundred percent and the securities joint venture from fifty percent

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Speaker 5: to ninety percent. So you can see our confidence in

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Speaker 5: China is still strong and we're investing and we've done

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Speaker 5: three boltons there. We'll continue to look for boltons, particularly

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Speaker 5: in our wealth management business. We believe buying additional product capability,

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Speaker 5: specialism or distribution capability would be interesting, but we're only

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Speaker 5: an id send anything on that as and when we

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Speaker 5: got a transaction to complete.

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Speaker 10: Have you identified anything at the moment and in which

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Speaker 10: part of.

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Speaker 5: The world we're always looking. The world is more around

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Speaker 5: our wealth business and we're trying to really build out

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Speaker 5: our international wealth and international retail banking proposition, and wherever

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Speaker 5: we see opportunity to enhance that and accelerate the organic

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Speaker 5: growth plan, we'll consider those boltons, but nothing in the

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Speaker 5: near term pipeline at the moment.

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Speaker 2: This is Bloomberg Daybreak Europe. You're morning brief on the

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Speaker 2: stories making news from London to Wall Streets and beyond.

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Speaker 2: I'm Caroline Hepka and I'm Stephen.

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Speaker 6: 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