WEBVTT - Global Banks Under Pressure; Apple Work on New Tech

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Nathan Hager and I'm Amy Morris. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 3>We begin here in the US, where Moody's Investor Services

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<v Speaker 3>lowered the credit ratings for ten small and mid sized lenders,

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<v Speaker 3>and it also says bigger banks may face downgrades as well.

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<v Speaker 3>Bloomberg's Valerie Titel has more on the reasons behind the moves.

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<v Speaker 4>The first one is higher funding costs. We saw evidence

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<v Speaker 4>of this in the recent earnings announcement. We saw a

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<v Speaker 4>net interest margin compression. We know that it is eating

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<v Speaker 4>into these smaller banks profitability. Moody cites that as their

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<v Speaker 4>main reason. The second reason is regulatory capital weakness. We

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<v Speaker 4>know that the US regulatory capital framework is going under flux,

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<v Speaker 4>and they want to include a broader cast of banks

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<v Speaker 4>in this regulatory net. Third is their asset risk. Now

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<v Speaker 4>this is getting a lot of attention. Moody's is directly

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<v Speaker 4>pointing to their commercial real estate loans that a lot

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<v Speaker 4>of these small and mid size banks sit on.

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<v Speaker 3>Bloomberg's Valerie Titel notes some of the banks seeing ratings

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<v Speaker 3>cuts this morning include M and T Bank, Webster Financial,

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<v Speaker 3>Bank of Oklahoma Financial, and several others.

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<v Speaker 2>Banks are also under pressure in Europe. Italy's right wing

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<v Speaker 2>government spook markets with an unexpected tax on bank profits.

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<v Speaker 2>We get more from Bloomberg's Ton Metcalf in London.

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<v Speaker 5>Big surprise in a negative way for the sex and

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<v Speaker 5>not just initially but also the wider banks where we're

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<v Speaker 5>seeing always there all but yeah, the big Italian banks

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<v Speaker 5>are UNI credit down basically as much as six point

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<v Speaker 5>five percent at the open, which gives you indication of

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<v Speaker 5>how this is being received. I don't think it was expected.

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<v Speaker 5>And it's really interesting because obviously it comes against the

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<v Speaker 5>backdrop all those earnings where we were just talking about

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<v Speaker 5>how much money these banks making off the higher rate environment,

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<v Speaker 5>and now it looks like Rome is looking to sort

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<v Speaker 5>of take a piece of that, and about two billion

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<v Speaker 5>of people are expecting this tax to raise.

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<v Speaker 2>Bloomberg's Tom Metcalf notes Italian banks are the worst performers

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<v Speaker 2>in Europe this morning. Italy's main stock exchange is now

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<v Speaker 2>down one point sixty six percent.

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<v Speaker 3>Miami stocks fell in Asia over night after disappointing economic

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<v Speaker 3>data out of China. The country's exports fell for a

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<v Speaker 3>third straight month in July. Bloomberg Daybreak Asia anchor Brian

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<v Speaker 3>Curtis has more from Hong Kong.

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<v Speaker 6>Export slump fourteen and a half percent from a year earlier.

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<v Speaker 6>That's the worst decline since February of twenty twenty. Imports

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<v Speaker 6>contracted twelve point four percent, more than double estimates. I

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<v Speaker 6>left a trade surplus of eighty point six billion dollars

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<v Speaker 6>for the month. It's a double whammy for the economy.

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<v Speaker 6>Global demand is weak, and so is domestic consumption. There's

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<v Speaker 6>a plethora of issues here, sagging business and consumer confidence,

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<v Speaker 6>a deflating property market, and a government that is wary

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<v Speaker 6>of large scale stimulus in Hong Kong. Brian Curtis, Bloomberg.

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<v Speaker 7>Daybreak, Thank you, Brian.

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<v Speaker 2>Back here in the US, we have some news on

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<v Speaker 2>new tech coming out of Apple. Sources tell us the

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<v Speaker 2>company is testing a high end, next generation laptop processor.

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<v Speaker 2>More from Bloomberg's Doug Prisner.

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<v Speaker 8>The new chip is the M three Max, and it'll

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<v Speaker 8>be at the heart of a high end MacBook Pro

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<v Speaker 8>lap top, expected to debut next year. The central processing

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<v Speaker 8>unit includes twelve high performance cores for demanding task like

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<v Speaker 8>video editing, and for efficiency cores for less intensive applications

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<v Speaker 8>like browsing. The web v M three chip will mark

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<v Speaker 8>the first time Apple is shifting to a three nanometer

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<v Speaker 8>production process for Mac chips. The aim is to provide

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<v Speaker 8>better battery life and strong performance gains. In New York,

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<v Speaker 8>I'm Doug Krisner, Bloomberg Daybreak.

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<v Speaker 3>Okay, Doug, thanks for watching shares of Tesla this morning.

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<v Speaker 3>They're down about one percent. That comes on news the

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<v Speaker 3>chief financial officer, Zachary Kirkhorn is stepping down after thirteen

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<v Speaker 3>years at Tesla. Longtime Tesla investor Kathy Woods reacting to

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<v Speaker 3>the news, we spoke with the Ark Investment CEO late yesterday.

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<v Speaker 7>It's a tough job.

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<v Speaker 8>It's a tough, tough job.

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<v Speaker 6>So I guess thirteen years was a really good run

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<v Speaker 6>for zach.

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<v Speaker 5>Can't say enough good things about him and what he

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<v Speaker 5>did for Tesla.

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<v Speaker 3>Tesla is the largest individual contributor to Kathy Woods flagship

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<v Speaker 3>Arc Innovation ETF. The company's chief accounting officer will take

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<v Speaker 3>over the CFO role in addition to his current duties.

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<v Speaker 2>That's what's happening on Wall Street. Let's catch you up

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<v Speaker 2>now on the latest political news. We're learning more about

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<v Speaker 2>Donald trump presidential campaign strategy. Sources say he plans to

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<v Speaker 2>hold rival events to deny his challengers the public spotlight.

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<v Speaker 2>Joan Donegher has details from our Bloomberg ninety nine to

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<v Speaker 2>one newsroom in Washington.

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<v Speaker 9>The former president plans to skip appearances with other Republican candidates. Instead,

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<v Speaker 9>sources tell Bloomberg he'll hold separate events surrounded by his allies.

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<v Speaker 9>His aim to make sure his rivals don't get the

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<v Speaker 9>exposure they need to chip away at his status as

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<v Speaker 9>the front runner in the nomination race. The sources say

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<v Speaker 9>this will allow Trump to draw attention away from lower

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<v Speaker 9>polling candidates and shore up his own lead. The plan, however,

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<v Speaker 9>does not mean he'll skip this month's Republican National Committee

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<v Speaker 9>candidates debate. He may still take part. Joan Doneger Bloomberg Daybreak.

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<v Speaker 3>Joan thanks. There's also a controversial special election on the

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<v Speaker 3>schedule today. Voters in Ohio will vote on constitutional amendments

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<v Speaker 3>tied to abortion rights. Bloomberg's Ed Baxter has the story.

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<v Speaker 7>It is Ohio's Issue one, and if it's approved, a

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<v Speaker 7>sixty percent super majority would be required to amend the constitution.

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<v Speaker 7>Currently it's a simple majority. Now, this is a GOP

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<v Speaker 7>back referendum that was called to proceed before an expected

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<v Speaker 7>vote in November on a proposed amendment that would enshrine

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<v Speaker 7>abortion rights in Ohio's constitution. The White House has even

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<v Speaker 7>chimed in now saying it strongly opposes any attempts to

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<v Speaker 7>take away a woman's choice. I'm at Baxter Bloomberg Daybreak.

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<v Speaker 2>Time now for look at some of the other stories

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<v Speaker 2>making news around the world. And for that we are

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<v Speaker 2>joined by Bloomberg's John Tucker.

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<v Speaker 10>Good morning, John, and Amy, Good morning to you. That's

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<v Speaker 10>hal the size of golf balls falling in Huntington, West Virginia.

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<v Speaker 10>As a deadly storm system hammered the eastern half of

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<v Speaker 10>the nation from New York to Georgia. At least two

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<v Speaker 10>people died, thousands of flights were canceled or delayed, and

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<v Speaker 10>more than one point one million homes and businesses lost power.

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<v Speaker 10>The storm spread, it was massive, with tornado watches and

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<v Speaker 10>warnings posted across ten states from Tennessee to New York

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<v Speaker 10>and anders. In South Carolina, a fifteen year old boy

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<v Speaker 10>was killed when a tree fell on him, and Florence,

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<v Speaker 10>Alabama police say a twenty eight year old man was

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<v Speaker 10>struck by lightning and died. Former President Trump's legal team

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<v Speaker 10>made their late afternoon deadlines respond to a protective order

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<v Speaker 10>request of evidence in the twenty twenty election charges against him.

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<v Speaker 10>Trump's attorneys say he shouldn't be subject to a blanket

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<v Speaker 10>gag order seeking to narrow the scope of sensitive materials

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<v Speaker 10>in the case. New York City officials investigating a shark

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<v Speaker 10>attack at Rockaway Beach Monday evening, where a fifty year

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<v Speaker 10>old woman surfing near the shoreline was bitten in the

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<v Speaker 10>left leg. Beachgoers were told to leave.

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<v Speaker 11>Everybody was leaving the beach and they were just like,

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<v Speaker 11>just don't get in the water.

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<v Speaker 10>I was like, what happened? He was like, somebody got

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<v Speaker 10>bit by a shot utter reaching the shore. The woman

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<v Speaker 10>was taken to Jamaica Hospital in critical condition. The Red

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<v Speaker 10>Cross now following the FDA's new guidance on blood donations,

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<v Speaker 10>announcing that all donors will answer the same eligibility questions

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<v Speaker 10>regardless of gender or sexual orientation, and will be assessed

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<v Speaker 10>for blood donation based on individual risk factors, not on

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<v Speaker 10>sexual orientation. Secretary of State Anthony Blincoln says the US

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<v Speaker 10>is backing regional efforts to bring a diplomatic resolution to

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<v Speaker 10>the extremely traveling situation in Niger. West African heads of

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<v Speaker 10>state are preparing to meet later this week to discuss

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<v Speaker 10>the crisis in the nation where soldiers seized control of

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<v Speaker 10>the state and took the president hostage and a committee

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<v Speaker 10>of scientific expert says the South Korean based research center

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<v Speaker 10>behind the claims of a breakthrough in superconductor technology will

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<v Speaker 10>be providing it with samples required for the validation process

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<v Speaker 10>in as early as two weeks. That material LK ninety nine,

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<v Speaker 10>they claim, is capable of conducting electricity with zero resistance

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<v Speaker 10>at root temperature in pressure. Global News twenty four hours

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<v Speaker 10>a day, Power Buy more than twenty seven hundred journalist

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<v Speaker 10>and analysts at more than one hundred and twenty countries.

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<v Speaker 10>I'm John Tucker. This is Bloomberg Gamy.

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<v Speaker 2>All right, thank you John. Time now for our Bloomberg

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<v Speaker 2>Sports update. For that, we bring in John stash.

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<v Speaker 12>Hour amby Baseball handed down Suspension's after that big fight

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<v Speaker 12>that took place at second base on Saturday, Tim Anderson

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<v Speaker 12>of the White Sox Jose Ramirez of the Guardians squaring off.

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<v Speaker 12>Anderson took a month to the face, but he was

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<v Speaker 12>evidently seen as the instigator because he got hit. With

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<v Speaker 12>a six game suspension, Ramirez will sit for three games

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<v Speaker 12>baseball in Boston, the Red Sox out to end a

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<v Speaker 12>four game losing streight, tied two to two with the

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<v Speaker 12>Royals bases loaded, bottom of the ninth hitch swing, gonna

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<v Speaker 12>dry your left field, higher deep toward the pole.

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<v Speaker 3>It ISAA Paul rod It hit the poll.

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<v Speaker 12>The Red Sox walking up a grand slam.

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<v Speaker 7>By Poplo reyis can you believe it? His first home

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<v Speaker 7>run as a member of the Red Sox, and the

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<v Speaker 7>Red Sox win at six to two.

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<v Speaker 12>I'll walk off grand slam EEI in Boston with the call,

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<v Speaker 12>and the Red Sox are ahead of the Yankees. Now

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<v Speaker 12>on the Al East is the Yanks lost in Chicago

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<v Speaker 12>the White Sox.

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<v Speaker 5>Five to one.

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<v Speaker 12>The Cubs were red hot, they had won thirteen and sixteen,

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<v Speaker 12>but they lost to the Mets in New York eleven

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<v Speaker 12>to two, the Mets ending at sixteen closing streak. Giants

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<v Speaker 12>sent the Angels to a seventh loss in a row,

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<v Speaker 12>eight to three. Seventh straight win for Texas five to

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<v Speaker 12>three at Oakland, and the Rangers now have a three

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<v Speaker 12>game lead in the Al West. Teddy Bridgewater signing with

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<v Speaker 12>the Detroit Lions. This will be his six different teams,

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<v Speaker 12>also played with Carolina, Denver, Minnesota, New Orleans and Miami.

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<v Speaker 12>He'll be the backup to Jared Goff on the Lions.

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<v Speaker 12>John Stanshaw were Bloomberg Sports.

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<v Speaker 11>From coast to coast, from New York to San Francisco,

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<v Speaker 11>Boston to Washington, d nationwide on SIRIUSXAM, the Bloomberg Business

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<v Speaker 11>Appen Bloomberg dot Com. This is Bloomberg Daybreak. Good morning.

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<v Speaker 11>I'm Nathan Hager. Banks are under pressure around the globe

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<v Speaker 11>this morning. Multiple risks have led Moody's Investor Service to

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<v Speaker 11>cut the credit rating on nearly a dozen small and

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<v Speaker 11>mid sized firms in the US and to put several

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<v Speaker 11>others on notice. Meantime, a surprise windfall tax on banks

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<v Speaker 11>in Italy has European lenders on notice this morning. Bloomberg

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<v Speaker 11>Radio and TV Markets correspondent Valerie Titlsman tracking developments in

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<v Speaker 11>the financial sector for US this morning, and val is

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<v Speaker 11>back here with us now. There's been a debate for

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<v Speaker 11>a while here Valerie on whether the worst was over

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<v Speaker 11>for small and mid sized banks in this country after

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<v Speaker 11>the regional turmoil following the Silicon Valley and Signature Bank collapses.

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<v Speaker 11>But I guess Moody's now is saying not so fast.

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<v Speaker 4>Well, perhaps the worst is over, but there are still

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<v Speaker 4>some overhanging risks, and moody citing in this sweeping overhaul

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<v Speaker 4>citing three reasons for these downgrades. Now, the first one being,

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<v Speaker 4>which they talked at length about, was higher funding costs. Now,

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<v Speaker 4>we have heard a lot about this recently, especially in

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<v Speaker 4>this round of earning seasons, when we saw that net

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<v Speaker 4>interest margin compression from a lot of these smaller lenders.

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<v Speaker 4>That's because they are having to pay up a bit

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<v Speaker 4>more to hold on to these deposits, and it's really

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<v Speaker 4>eroding their profitability and hurting their costs of capital. So

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<v Speaker 4>that being one of the key reasons why Moody's decided

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<v Speaker 4>to do this sweeping assessment of these lenders. The other

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<v Speaker 4>one they cited Nathan was regulatory capital weaknesses. Now we

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<v Speaker 4>know that the US is wanting to overhaul the regulatory framework,

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<v Speaker 4>especially when it comes down to capital ratios of these

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<v Speaker 4>banks in the US, and instead of just targeting the

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<v Speaker 4>largest banks, this new overhaul is going to target a

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<v Speaker 4>broader stretch of banks, and it's going to impact the

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<v Speaker 4>smaller lenders, and Moody's citing in this report that perhaps

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<v Speaker 4>their balance sheets won't be ready for those tougher capital rules.

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<v Speaker 4>The third one they raise is this asset risk. They

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<v Speaker 4>specifically cite the commercial and real estate loans, which we

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<v Speaker 4>know these smaller lenders in the US have a huge

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<v Speaker 4>proportion of on their balance sheet, citing that as a

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<v Speaker 4>key risk if we do enter a mild recession that

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<v Speaker 4>could be a big vulnerability to these small lenders.

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<v Speaker 3>It sounds valerie like the analysts are pointing to more

0:12:28.559 --> 0:12:31.760
<v Speaker 3>systemic risks for some of these small and mid sized

0:12:31.840 --> 0:12:35.000
<v Speaker 3>lenders rather than some of the idiosyncratic issues that we

0:12:35.080 --> 0:12:38.160
<v Speaker 3>saw with Silicon Valley and Signature Bank. Is that the

0:12:38.240 --> 0:12:38.839
<v Speaker 3>right read on.

0:12:38.800 --> 0:12:42.960
<v Speaker 4>That look likely? I mean, there was twenty seven moves

0:12:43.080 --> 0:12:46.240
<v Speaker 4>by Moody's overnight reading. Each report will delve into the

0:12:46.280 --> 0:12:53.160
<v Speaker 4>specifics on each single stock, but collectively, these those three

0:12:53.200 --> 0:12:56.920
<v Speaker 4>developments I named the higher funding costs, the capital weaknesses,

0:12:56.960 --> 0:13:01.600
<v Speaker 4>the regulatory capital weaknesses, and that asset exposure to CRE

0:13:02.040 --> 0:13:06.640
<v Speaker 4>has really just lowered the credit profile of smaller lenders

0:13:06.640 --> 0:13:09.640
<v Speaker 4>in the US just generally. And a lot of people

0:13:09.640 --> 0:13:12.520
<v Speaker 4>were asking me this morning, oh, but in these earning announcements,

0:13:12.520 --> 0:13:16.960
<v Speaker 4>we heard so much about these smaller lenders divesting loans

0:13:17.280 --> 0:13:20.600
<v Speaker 4>and repairing their balance sheets. But Moody calls out specifically

0:13:20.640 --> 0:13:23.120
<v Speaker 4>that yes, that is a good thing, but that also

0:13:23.200 --> 0:13:25.640
<v Speaker 4>means that they've pulled back on new lending. If they

0:13:25.679 --> 0:13:28.559
<v Speaker 4>pull back on new lending, they're not taking advantage of

0:13:29.040 --> 0:13:33.280
<v Speaker 4>lending at these new higher yields, which they need to

0:13:33.360 --> 0:13:37.080
<v Speaker 4>do because their profitability is being eroded by having to

0:13:37.120 --> 0:13:38.559
<v Speaker 4>pay more for those deposits.

0:13:38.800 --> 0:13:41.800
<v Speaker 3>And if we start to see more of that happen

0:13:42.000 --> 0:13:45.240
<v Speaker 3>pulling back on lending, that raises the question about whether

0:13:45.520 --> 0:13:49.920
<v Speaker 3>the US could actually be headed for a recession and

0:13:50.160 --> 0:13:53.040
<v Speaker 3>potentially put more of a spotlight on what the FED

0:13:53.120 --> 0:13:53.679
<v Speaker 3>does next.

0:13:54.360 --> 0:13:56.959
<v Speaker 4>Well, we know that what makes the smaller lenders in

0:13:57.000 --> 0:14:00.559
<v Speaker 4>the US very different from those larger banks in the

0:14:00.640 --> 0:14:03.720
<v Speaker 4>US is that the smaller medium sized lenders are really

0:14:03.760 --> 0:14:07.000
<v Speaker 4>key to extending credit to the new economy, and if

0:14:07.200 --> 0:14:11.680
<v Speaker 4>they are continually under pressure on their balance sheets, you know,

0:14:11.800 --> 0:14:15.200
<v Speaker 4>pulling back on on these new loans could really impact

0:14:15.200 --> 0:14:17.800
<v Speaker 4>the US economy, especially when it comes to commercial real estate.

0:14:17.840 --> 0:14:20.480
<v Speaker 4>We know they're very involved in that, but a lot

0:14:20.480 --> 0:14:24.040
<v Speaker 4>of people say that these headwinds for these smaller banks

0:14:24.320 --> 0:14:27.720
<v Speaker 4>really don't end until the FED does cut, because that

0:14:28.240 --> 0:14:30.480
<v Speaker 4>would be the one thing that would really help them

0:14:30.520 --> 0:14:34.120
<v Speaker 4>with their profitability. Right to reinvert the curve, to see

0:14:34.120 --> 0:14:37.240
<v Speaker 4>those two year ee olds sink way lower than ten

0:14:37.280 --> 0:14:40.400
<v Speaker 4>year yields will help them with their profitability. But if

0:14:40.440 --> 0:14:43.080
<v Speaker 4>the US economy is still holding in strong due to

0:14:43.160 --> 0:14:47.080
<v Speaker 4>this government spending we're seeing from the Biden administration, you know,

0:14:47.280 --> 0:14:50.160
<v Speaker 4>the turn of the cycle from the Fed could still

0:14:50.200 --> 0:14:51.000
<v Speaker 4>be a long way off.

0:14:53.760 --> 0:14:56.680
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