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Speaker 1: Good morning. It's Wednesday, the twenty fifth of October in London.

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Speaker 1: This is the Bloomberg Daybreak Here podcast. I'm Stephen Carroll.

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Speaker 1: Coming up today. Israel demands that the head of the

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Speaker 1: United Nations resigns over comments he made about the Hamas attack.

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Speaker 1: Deutsche Bank warns of more cost cuts but promises to

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Speaker 1: pay out more to shareholders, while Santan Darren Lloyd's report

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Speaker 1: a beat in expected profits, and the UK is scrapping

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Speaker 1: the cap on bankers bonuses. Let's start with a roundup

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Speaker 1: of our top stories. Israel's ambassador to the United States

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Speaker 1: is called on the head of the UN to resign.

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Speaker 1: The demand came after Secretary General Antonio Guterres's speech at

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Speaker 1: a Security Council meeting to discuss the Israel Hamas war.

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Speaker 1: Here are the key moments from that address.

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Speaker 2: I have condemned an equivocally the odifying and unprecedented seven

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Speaker 2: October acts of terror by Hamas in Israel. Nothing can

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Speaker 2: justify the deliberate killing, injuring, and kidnapping of civilians, or

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Speaker 2: the launching of rockets against civilian targets. It is important

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Speaker 2: to also recognize the attacks by Amas did not happen

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Speaker 2: in a vacuum. The Palestinian people have been subjected to

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Speaker 2: fifty six years of suffocating occupation, but the grievances of

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Speaker 2: the Palatinian people cannot justify the appalling attacks by Amas,

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Speaker 2: and those appalling attacks cannot justify the collective punishment of

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Speaker 2: the Palestinian people.

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Speaker 1: Antonio Kutis's remarks led the Israeli Foreign Minister Eli Cohen

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Speaker 1: to cancel a meeting with the UN Secretary General. Country One.

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Speaker 1: Ambassador Gilad Erdan accused uarists of downplaying the Hamas attacks

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Speaker 1: the U and.

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Speaker 3: Is failing a new mister, Secretary General, have lost all

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Speaker 3: morality and impartiality. When you say those terrible words, that

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Speaker 3: these heinous attacks did not happen in a vacuum, you

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Speaker 3: are tolerating terrorism.

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Speaker 1: Gilad Erdan's response highlights the growing diplomatic tensions following the

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Speaker 1: Hamas attacks on Israel, which killed about one thousan four

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Speaker 1: hundred people. Gaza's Hamas run health ministry sells retaliatory airstrikes

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Speaker 1: have killed more than five thousand there, turning out to

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Speaker 1: some of today's corporate earnings. Deutsche Bank plans to accelerate

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Speaker 1: payouts to shareholders after hire, income from its corporate bank

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Speaker 1: and deposit inflows offset weaker trading results in the third quarter.

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Speaker 1: Revenue in the three months to the end of September

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Speaker 1: rose by about three percent from a year earlier to

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Speaker 1: seven point one three billion euros, in line with analyst estimates.

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Speaker 1: Speaking to Bloomberg, the Blenders CFO James von Milke said

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Speaker 1: it had more work to do on operating costs.

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Speaker 4: Yes, more coming. You know, we're going to continue to

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Speaker 4: work with discipline on the cost base. We've laid out

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Speaker 4: to investors a goal to run the company essentially flat

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Speaker 4: for a considerable period of time, and what that means

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Speaker 4: is that we're working sort of every day on cost

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Speaker 4: reduction measures which at the very least should offset the

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Speaker 4: impact of inflation and also allow us to invest in

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Speaker 4: the businesses with our own resources.

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Speaker 1: James van Malker's comments came after the bank vowed to

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Speaker 1: increase revenue while keeping costs in check. Deutsche Bank's CFO

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Speaker 1: Christian Saving, has pledged to return eight billion euros to

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Speaker 1: shareholders over five years. Shares in Deutsche Bank at the

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Speaker 1: open up five and a half percent. Lloyd's has set

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Speaker 1: aside less than expected for troubled loans in the third

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Speaker 1: quarter and says households are coping well with higher interest rates.

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Speaker 1: The news helped the bank beat earnings expectations for the

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Speaker 1: period and maintain its outlook for the year. Pre tax

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Speaker 1: profit jumped to an above estimate one point eight six

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Speaker 1: billion pounds for the quarter, while its net interest margin

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Speaker 1: was three point zero eight percent. Lloyd's shares down one

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Speaker 1: point two percent at the open. Suntannder earnings beat out

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Speaker 1: estimates as higher interest rates in Europe and Mexico continued

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Speaker 1: to boost revenue and offset a rise in loan lost charges.

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Speaker 1: CFO Jose Garcia Cantera had a positive outlook.

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Speaker 5: We have delivered another strong set of results, adding nine

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Speaker 5: million customers in the first nine months of the year,

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Speaker 5: growing revenue of double digits and improving efficiency as a

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Speaker 5: result of our transformation program. We have earned two point

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Speaker 5: nine billion in the quarter eight point one in the

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Speaker 5: first nine months of the year, both our record figures

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Speaker 5: for Santander.

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Speaker 1: Although Santanda's profit came in one hundred and ten million

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Speaker 1: euros higher than analysts had expected, the provisions for loan

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Speaker 1: losses were up by a fifth compared to last year.

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Speaker 1: The results come just one day after another one of

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Speaker 1: Europe's big lenders, Barclay's, lowered its forecast for lending profitability,

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Speaker 1: leading to a slump in the British bank's share price.

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Speaker 1: The UK is scrapping its cap on banker bonuses, enforcing

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Speaker 1: plans unveiled by Liz Truss's government last year. The cap

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Speaker 1: limiting bonuses to a maximum of twice a banker's base

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Speaker 1: pay will be lifted at the end of the month.

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Speaker 1: The Prudential Regulation Authority says banks will be able to

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Speaker 1: pay staff as they like for the current finan year.

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Speaker 1: Financial firms now face the challenge of how to cut

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Speaker 1: elevated fixed pay to rebalance compensation packages. To US politics

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Speaker 1: and Trump ally, Mike Johnson is the latest Republican to

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Speaker 1: attempt to be the next Speaker of the House of Representatives.

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Speaker 1: The Louisiana representative is the fourth nominee in three weeks

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Speaker 1: as Republican in fighting leaves the Legative Chamber rudderless. He

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Speaker 1: promised this time will be different.

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Speaker 5: You're going to see this group looking working like a

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Speaker 5: will oil machine.

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Speaker 1: Johnson's nomination comes after former President Donald Trump torpedoed the

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Speaker 1: previous candidate's chances. Yesterday, Mike Johnson was involved directly in

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Speaker 1: the campaign to invalidate the twenty twenty presidential election results,

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Speaker 1: making moderate support difficult when he faces a House vote

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Speaker 1: later today. And the Chinese property developer Country Garden has

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Speaker 1: defaulted on a dollar bond for the first time. The

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Speaker 1: company's fallen into distress underlines the severe crisis in the

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Speaker 1: property sect. The firm is now likely headed for what

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Speaker 1: would be one of the country's biggest every structurings. Construction

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Speaker 1: broadly accounts for about twenty percent of GDP in the

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Speaker 1: world's second largest economy. Well, let's get the latest on

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Speaker 1: the situation in the Middle East now, and those tense

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Speaker 1: exchanges at the UN Security Council last night, Israel's ambassador

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Speaker 1: to the United Nations calling for the resignation of Secretary

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Speaker 1: General Antonio Guterrist. This as the UN's aid agency in

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Speaker 1: Gaza says it will run out of fuel by the

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Speaker 1: end of today. Bloomberg's Oliver Crook has the latest for

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Speaker 1: us from Tel Aviv this morning. Good morning to you, Oliver.

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Speaker 1: What happened at the UN Security Council last night?

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Speaker 6: Yeah, that's right, Steven, So Yeah, the UN Secretary General

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Speaker 6: on Tuna. Gutierrez was pointing to what he called clear

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Speaker 6: violations of international humanitarian law on the part of Israel

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Speaker 6: in Gaza. And I'll quote here just so we have

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Speaker 6: everything in context. He said that the grievances of the

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Speaker 6: Palestinian people cannot justify the appalling attacks by Hamas. He

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Speaker 6: also said, and those appalling attacks cannot justify the collective

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Speaker 6: punishment of the Palestinian people. However, what he also said

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Speaker 6: is it is important to recognize the attacks by Hamas

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Speaker 6: did not happen in a vacuum, adding that the Palestinians

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Speaker 6: have been subjected to fifty six years of suffocating occupation.

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Speaker 6: This was obviously not at all well received by the Israelis.

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Speaker 6: The Israeli Foreign Minister canceled a meeting with Gutierra's The

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Speaker 6: Israeli Ambassador for the United Nations demanded Gutierra's resigns. He

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Speaker 6: said this speech was shocking and it proved, he said,

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Speaker 6: quote conclusively, beyond any doubt that the Secretary General is

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Speaker 6: completely disconnected from the reality in our region. He said

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Speaker 6: that it expressed an understanding for terrorism and murder, and

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Speaker 6: of course the step back here is that you know

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Speaker 6: Israel's stated objective is to dismantle Hamas, which is not

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Speaker 6: after October the seventh, an acceptable regime and entity that

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Speaker 6: can be bordering with Israel. And of course Hamas is

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Speaker 6: still attacking and bombing Israel. Of course the main offensive

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Speaker 6: is by the Israel and Gaza, but it's still going

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Speaker 6: in the other direction. The Israelis from the beginning of

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Speaker 6: said they are not targeting civilians. They're making every effort

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Speaker 6: to preserve human life. But they're fighting, they say, an

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Speaker 6: enemy that deliberately disguises itself in the civilian population. The

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Speaker 6: meaningful point here, though, is that the death toll, according

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Speaker 6: to the authorities there has exceeded five thousand people, and

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Speaker 6: most of those people are civilians. And this brings into

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Speaker 6: the question of self defense. Most nations have affirmed Israel's

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Speaker 6: right to self defense. The question is where does the line?

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Speaker 6: Where is the line? And different nations will have different

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Speaker 6: answers to that question. Even the United States has said

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Speaker 6: that it's important how Israel goes about this, and of

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Speaker 6: course we've heard echoes from the Arab world. We have

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Speaker 6: said that the message they're getting from the West and

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Speaker 6: Israelis is that Palestinian lives matter less.

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Speaker 1: Yeah, and this is a time of course that we're

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Speaker 1: watching the very small number of trucks carrying aid being

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Speaker 1: allowed into Gaza as well what progress is being made

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Speaker 1: on getting more aid into Gaza. We've had this warning

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Speaker 1: from the UN agency there too.

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Speaker 6: So this was a part of the conversation that there

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Speaker 6: was with Mohammed Benzalman, the Crown Princess Arabia, and Joe

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Speaker 6: Biden overnight. Again, this has been a very tense relationship

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Speaker 6: through the tenure of Biden's administration. One of the things

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Speaker 6: that they talked about was ad and it seemed yesterday

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Speaker 6: that the number of trucks really fell significantly. Already they

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Speaker 6: wasn't getting to the numbers that the UN said that

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Speaker 6: they needed to get to make a meaningful dent in

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Speaker 6: the humanitarian situation in Gaza. But really yesterday was was

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Speaker 6: really not good in that regard, and Biden himself has

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Speaker 6: said that the aid is moving to slowly. Blincoln has

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Speaker 6: said that he's in favor of humanitarian pauses to get

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Speaker 6: more aid in. But again, one of the sticking points

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Speaker 6: here is fuel. Is the question of fuel. The Israelis

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Speaker 6: are opposed to getting fuel in there. Obviously, fuel is

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Speaker 6: required for the running of most things, including military operations

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Speaker 6: by Hamas, which is why you know, there is a

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Speaker 6: sticking point on that the UN agency within Gaza is

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Speaker 6: saying that they're going to run out of fuel today

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Speaker 6: and will not be able to disperse those goods if

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Speaker 6: they do not get more.

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Speaker 1: On the diplomatic front, Oliver, we had Emmanuel Macro and

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Speaker 1: the French President in Israel yesterday and in the West

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Speaker 1: Bank meeting Mahmoudabas as well. What more should we be

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Speaker 1: expecting in terms of those meetings. You mentioned the conversation

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Speaker 1: also between Joe Biden and Mohammed Ben Salmon.

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Speaker 6: Yeah, so again, these conversations are focusing on a great

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Speaker 6: many issues. I you know, hostages is going to be

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Speaker 6: another one. I mean. Macln's message was similar to many

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Speaker 6: of the other Western leaders, which is solidarity with Israel.

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Speaker 6: He said that Israel has the right to fight terrorism

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Speaker 6: without mercy, but not without rules, and again this speaks

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Speaker 6: of the fine line that many of these leaders are walking.

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Speaker 6: He called for a coalition to fight against Hamas and

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Speaker 6: you know, organizations like it, which he calls you know,

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Speaker 6: Islamic States among those. But again trying to work to

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Speaker 6: free hostages. And he's also saying when he went to

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Speaker 6: Romola afterwards he met with Mahmuda Bass, who presides over

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Speaker 6: the Western the West Bank, that nothing can justify the

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Speaker 6: suffering of the civilians in Gaza. So again there's a

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Speaker 6: lot of discussion over this, and this is evolving. And

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Speaker 6: I think what was interesting about Macon. I mean a

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Speaker 6: number of people evoke this, but my colon, perhaps a

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Speaker 6: bit more prominently than some of the other Western leaders,

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Speaker 6: was talking about longer term solutions, saying that the Palatines

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Speaker 6: have a right to a state, and again invoking that

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Speaker 6: the two state solution. Words that are more easily spoken

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Speaker 6: than obviously achieved.

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Speaker 1: Okay, Oliver Krook in Tel Aviv, thank you so much

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Speaker 1: for joining us with the latest on that story. Let's

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Speaker 1: turn to some of the latest bank earnings now and

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Speaker 1: the Spanish lender Santander reporting three point one billion dollars

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Speaker 1: a profit in the third quarter, above forecast. The CFO

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Speaker 1: Jose Garcia Cantera has been speaking to Bloomberg's Cretique Act.

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Speaker 5: We have delivered another very strong set of results, adding

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Speaker 5: nine million customers in the first nine months of the year,

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Speaker 5: growing revenue double digits and improving efficiency as a result

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Speaker 5: of our transformation program. We have earned two point nine

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Speaker 5: billion in the quarter eight point one in the first

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Speaker 5: nine months of the year, both our record figures for Santander.

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Speaker 5: This is equivalent to a written on Tangibo equity of

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Speaker 5: fourteen point eight percent. We've grown Tina plus dividend per

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Speaker 5: share twelve percent in the first nine months of the year,

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Speaker 5: while we have strengthen our capital to twelve point three percent,

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Speaker 5: so very good set of results. Basically, the key variable

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Speaker 5: that explains these results is our diversification. We have very

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Speaker 5: good performance in Europe, improving profitability in all countries, and

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Speaker 5: we are starting to see the benefits of lower rates

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Speaker 5: in Latin America.

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Speaker 7: Well, they certainly are very crucial numbers. And before I

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Speaker 7: want to kind of move on to the different pieces

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Speaker 7: of your business, I want to ask you first about

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Speaker 7: your loan loss provisions, because to me, those are actually

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Speaker 7: a little bit higher than the market was expecting an

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Speaker 7: estimate about three point one billion, we'll call it. Where

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Speaker 7: you actually report about three point three billion loan loss provisions.

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Speaker 7: How much of that is a result of the macroeconomic

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Speaker 7: take out of Centender.

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Speaker 5: We expect that we have guided the market for a

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Speaker 5: cost of risk to be low one point two percent.

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Speaker 5: We are at one point thirteen in September, so we

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Speaker 5: are very much in line, actually better than our estimates

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Speaker 5: for the year. We think we will end better than

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Speaker 5: this one point two percent by December. Obviously, we have

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Speaker 5: some normalization of the cost of risk in some economies

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Speaker 5: as intro rates go up, but we are standing to

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Speaker 5: see actually much better performance and the outlookkeep is improving

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Speaker 5: in countries where intro race are coming down, like in Brazil.

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Speaker 5: So overall, I think we are very pleased with our

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Speaker 5: AS equality evolution. The key variable to estimate future AS

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Speaker 5: equality is the strength of the labor markets, and labor

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Speaker 5: markets are very very strong in all the economies that

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Speaker 5: we operate, so we don't see the devioration in AS

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Speaker 5: equality in the coming quarters.

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Speaker 7: It all sounds great on the surface, and I want

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Speaker 7: to dive into the Brazil conversation in just a moment,

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Speaker 7: But those provisions are up by about a fifth. Tell

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Speaker 7: me where those spots of distress might actually be well.

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Speaker 5: The increase is coming in the US as the economy,

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Speaker 5: as our business in the US is normalizing. Our provisions

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Speaker 5: for a lot of business in the US are very seasonal,

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Speaker 5: so they usually are low in the first half of

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Speaker 5: the year. They tend to go up in the second

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Speaker 5: half of the year, and they are gradually normalizing. We

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Speaker 5: believe though, that the change in our business makes will

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Speaker 5: lead to significant lower provisions than what we have on

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Speaker 5: a pre pandemic levels in Europe. We are seeing a

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Speaker 5: bit higher provisions in the UK, coming from very very

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Speaker 5: low levels, actually a reversal of provisions last year. But

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Speaker 5: as equality and provisions are improving in Spain, are improving

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Speaker 5: in Brazil, very much flat in Mexico. So overall, as

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Speaker 5: I said, very very much in line with our expectations.

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Speaker 7: We let's go then to the Brazilian story as well.

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Speaker 7: Of course, we know that that is one of your

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Speaker 7: largest markets for sand ten. There talk to us a

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Speaker 7: little bit about the risks in Brazil at a time

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Speaker 7: when the Brazilian economy specifically is coming under quite a

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Speaker 7: bit of pressure interest rates, commodity pressures, cost of living

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Speaker 7: as well. Where is the read through into your bottom line?

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Speaker 5: When interest racers started to go up, we tightened our

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Speaker 5: credit standards, so we went into this period with significantly

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Speaker 5: more prudent policies. We have seen that in the sense

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Speaker 5: that we've been growing a bit less. This is a

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Speaker 5: country with very low banking penetration and we've been growing

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Speaker 5: our low portfolio at just single digits in the last

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Speaker 5: couple of years. But inter rates have already started to

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Speaker 5: go down. We have go down already one hundred basis

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Speaker 5: points from thirteen seventy five to twelve seventy five, and

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Speaker 5: we would expect them to continue to come down at

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Speaker 5: least one hundred basis points more before the year ran,

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Speaker 5: and maybe two hundred to two hundred and fifty next year.

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Speaker 5: Lower rates actually helped in terms of volumes and we

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Speaker 5: would expect to recover double digit growth next year. And

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Speaker 5: also in terms of US equality, and we had an

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Speaker 5: increase in US equality obviously as Intergrace were in as

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Speaker 5: a quality deteriorage, I'm increasing the constal fruits Sintrograce wind tap,

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Speaker 5: but now they have come down, we have seen an improvement.

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Speaker 5: So we are very confident that our profitability in Brazil

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Speaker 5: will turn around and start improving significantly next year from

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Speaker 5: twenty twenty three.

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