Speaker 1: This is Bloomberg day Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world, and straight ahead on the program,
Speaker 1: Investors await another batch of earnings, and we'll tell you
Speaker 1: what to expect from Disney. I'm Tom Busby in New York.
Speaker 2: I'm Kaylie Lines in Washington, where we're looking forward to
Speaker 2: the third Republican presidential primary debate.
Speaker 3: I'm kallen Hecker here in London, where we're looking ahead
Speaker 3: to earnings from the Swiss banky Giant Ubs.
Speaker 4: I'm Brian Curtis in Hong Kong. We look at possible
Speaker 4: deliverables on the Australian Prime Minister Anthony Albanisi's trip to China.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend, the business
Speaker 5: news you need to wrap up your week in just
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Speaker 1: Good day to you. I'm Tom Busby. We begin today's
Speaker 1: program with earnings. They continue with more than fifty companies
Speaker 1: in the S and P five hundred reporting this week
Speaker 1: and heading that list Disney, and for a preview, we
Speaker 1: welcome Bloomberg Intelligence US media analyst Getha Raganathan. Well, now,
Speaker 1: before we dive into Disney's upcoming earnings, let's talk about
Speaker 1: some big moves that the world's biggest media company just
Speaker 1: made this past week, announcing ESPN Bet, its official sports
Speaker 1: betting platform. That's a partnership with Penn Entertainment. It'll begin
Speaker 1: taking bets in seventeenth States November fourteenth. What does this
Speaker 1: mean for Disney?
Speaker 6: Yeah, it's It was a really important move by ESPN, Tom.
Speaker 6: I mean, they had kind of been putting this off
Speaker 6: for years. They'd been exploring deals with different sports betting partners,
Speaker 6: including you know, DraftKings. They finally did this deal with
Speaker 6: Pen Entertainment in August, and of course now Penn is
Speaker 6: rebranding its Barstool sportsbook as ESPN Bet. I think what
Speaker 6: it really tells us is the power of the ESPN brand.
Speaker 6: I mean this move comes just as Disney actually disclosed
Speaker 6: standalone financials for ESPN for the very first time in
Speaker 6: its history. And what we get to know about ESPN is,
Speaker 6: you know, it is of course, you know, the top
Speaker 6: line is under pressure, but it is still a very,
Speaker 6: very profitable business. This is This is a business that
Speaker 6: is generating roughly about sixteen seventeen billion dollars in revenue,
Speaker 6: but more importantly around three billion dollars than EBITDA, So
Speaker 6: it is definitely a cash cow. It is the biggest,
Speaker 6: one of the biggest linear TV properties for ESPN, and
Speaker 6: I think, you know, with when ESPN bet kind of
Speaker 6: goes out, you'll again get to see, you know, the
Speaker 6: power of that ESPN brand and it's going to be
Speaker 6: interesting to see how it kind of plays out for Disney. Remember,
Speaker 6: Disney is getting about two billion dollars over ten years
Speaker 6: for the use of that ESPN name. So again, I
Speaker 6: think it really plays into, you know, kind of what
Speaker 6: the strategic direction could be for ESPN in the future.
Speaker 1: Yeah, and another direction Disney's taking is a bigger bet
Speaker 1: into streaming by obtaining the one third stake in Hulu
Speaker 1: that it didn't already own. And what's what's the strategy there?
Speaker 6: Yea, I think it's really important for Disney to kind
Speaker 6: of consolidate its streaming properties. Obviously it has a huge
Speaker 6: powerhouse in Disney Plus, but with Hulu it's kind of
Speaker 6: been a little bit of a head scratcher because of
Speaker 6: the sixty six percent ownership that Disney owns, but the
Speaker 6: thirty three percent that it doesn't own, which you know,
Speaker 6: which is still kind of owned by Comcast. And so
Speaker 6: I think it's essential for Disney to kind of go
Speaker 6: ahead and acquire that remaining thirty three percent because then
Speaker 6: they kind of get to have, you know, a singular
Speaker 6: streaming strategy with all of their different products, whether it's
Speaker 6: Disney Plus, whether it's ESPN Plus, and then Hulu. And
Speaker 6: then of course the more important thing is you not
Speaker 6: only get to sell you know, an integrated product, an
Speaker 6: integrated bundle, but also you get to realize some really
Speaker 6: huge cost and revenue savings. I mean, we're estimating about
Speaker 6: anywhere from about one to one and a half billion
Speaker 6: dollars in cost savings once they're able to kind of
Speaker 6: bring Hulu under complete control and.
Speaker 1: Fifty million subscribers is nothing to sneeze that either.
Speaker 6: Absolutely. Plus, remember Hulu has a very very robust advertising business.
Speaker 6: I mean, this is a business that all regenerates about
Speaker 6: three and a half billion dollars in advertising. It is
Speaker 6: the most successful streaming ad product out there. Just as
Speaker 6: everybody else is kind of trying to get into that
Speaker 6: ad based tear, whether it's Netflix, whether it's Amazon Prime,
Speaker 6: and even Disney Plus. I mean, none of them have
Speaker 6: had the success that Hulu has had, so it's kind
Speaker 6: of really critical for Disney to build on that success
Speaker 6: that Hulu already has in the marketplace.
Speaker 1: Well, let's turn to earnings then. For last quarter, we expect,
Speaker 1: as always, Theme Parks Cruise division having another blockbuster quarter,
Speaker 1: but there's a lot more to the company. And what
Speaker 1: are you expecting to see this coming.
Speaker 6: Weekam, It's really interesting. So it's not really the results
Speaker 6: so much, but it's just this whole barrage of other
Speaker 6: issues that is kind of weighing on the Disney stock
Speaker 6: right now. I mean, whether it is the ESPN strategic
Speaker 6: direction as you just spoke about, or Hulu. They're even
Speaker 6: looking at getting rid of some of their linear TV assets,
Speaker 6: you know, they were looking at the ABC network, the
Speaker 6: ABC stations for instance. They're looking to get out of
Speaker 6: their India business. So there's just so many different things.
Speaker 6: There's so much of different work that needs to be done.
Speaker 6: But I would say arguably the most important thing for
Speaker 6: them to do right now is to kind of really
Speaker 6: rev up their content engine. Right We've seen them kind
Speaker 6: of put out a whole bunch of movies, whether it
Speaker 6: was you know, Indiana Jones or Elemental that didn't really
Speaker 6: perform or live up to expectations at the global box office.
Speaker 6: And so they're really kind of rethinking their content strategy
Speaker 6: right now, looking at how to kind of reinvigorate a
Speaker 6: lot of you know, the existing franchises, a lot of
Speaker 6: the sequels, so you know, there's a lot going on.
Speaker 6: And of course I think, you know, obviously bar Bieger
Speaker 6: has made considerable progress on a lot of the different things,
Speaker 6: whether it's restructuring, whether it's bringing down costs. They're doing
Speaker 6: everything that they can whatever seems fixable. But again a
Speaker 6: lot of questions still remain.
Speaker 1: And they've had talks about shedding some of those media
Speaker 1: assets as not ESPN, but as you mentioned, the Disney Channel,
Speaker 1: National Geographic, A and E Lifetime, a whole bunch of
Speaker 1: linear assets. But have we seen any progress on that.
Speaker 1: I know we've seen Byron Allen saying he made a bid,
Speaker 1: some others in talks, but is there any movement not.
Speaker 6: Since you know, those pieces of news came out, there
Speaker 6: hasn't been any significant movement. The only thing that we've
Speaker 6: heard in the meantime is that they're really kind of
Speaker 6: looking hard at, you know, getting somebody to buy out
Speaker 6: their India business, which which could be worth upwards of
Speaker 6: ten billion dollars. So that would be a huge cash
Speaker 6: in flux in for Disney. But we really haven't seen
Speaker 6: any movement on the rest of the linear TV portfolio.
Speaker 1: Well, let's talk about Disney also playing hardball this past
Speaker 1: quarter with Charter Communications Spectrum cable platform on a carriage deal,
Speaker 1: and Spectrum says they lost one hundred thousand subscribers. That's
Speaker 1: after a ten day blackout of all Disney channel just
Speaker 1: as including ESPN, just as college football was starting up.
Speaker 1: But could this change or maybe accelerate the implementation of
Speaker 1: an alla carte menu from cable providers.
Speaker 6: I definitely think that deal had huge ramifications across the
Speaker 6: PATV landscape. You know, one thing that we definitely got
Speaker 6: to know is I think when we have these carriage
Speaker 6: deals come up in the future between the content owners
Speaker 6: and the PATV distributors, it is going to be a
Speaker 6: hybrid distribution model. I mean, it is going to be
Speaker 6: a combination of both linear TV and streaming. And you
Speaker 6: bring up a very very good point in terms of,
Speaker 6: you know, does that kind of expedite this whole transition
Speaker 6: into ESPN going a la carte And I think to
Speaker 6: a certain extent it does. I mean, they've already kind
Speaker 6: of secured carriage with Charter for when that actually does happen. Now,
Speaker 6: of course, we don't know the date just yet. One
Speaker 6: of the things that is spending is the renewal of
Speaker 6: the NBA deal because they do need to secure digital rights,
Speaker 6: you know, for the NBA game. So that will happen
Speaker 6: only sometime in twenty two, twenty twenty five, but it
Speaker 6: is definitely going to happen, and Disney has said this
Speaker 6: multiple times and yes, so you know they are trying
Speaker 6: to I mean, the PATV bundle is obviously not going
Speaker 6: to go away completely, but it is definitely losing its its,
Speaker 6: you know, relevance in some ways, at least the linear
Speaker 6: TV portion of it, as more and more consumers move
Speaker 6: to streaming.
Speaker 5: Wow.
Speaker 1: Well, let's shift it back then to what you're looking
Speaker 1: forward to this week in Disney earning. So all these
Speaker 1: moving parts, all these different divisions they have, what does
Speaker 1: it mean for investors? What are we expecting to see?
Speaker 6: I think the biggest thing that we're really looking for,
Speaker 6: and I think this could be a huge catalyst for
Speaker 6: the stock if there's any language surrounding streaming profitability and
Speaker 6: how quickly Disney can kind of cut costs. Remember, they
Speaker 6: have made a lot of progress on you know, reducing
Speaker 6: streaming losses, but they still did lose about four billion
Speaker 6: dollars last year on Disney Plus, and they are still
Speaker 6: set to lose about two point seven billion dollars again
Speaker 6: this year. Yes, they're making progress, but if they can
Speaker 6: get there faster, if they can get to a break
Speaker 6: even faster, if they can get to positive profits faster,
Speaker 6: that would bring investors a lot of cheer. We also
Speaker 6: know that they did raise their streaming prices for the
Speaker 6: second time this year. They upped the monthly price of
Speaker 6: the ad free Disney Plus by about twenty twenty five percent.
Speaker 6: So again it would be interesting to see if there's
Speaker 6: been some increasing cancelations because of that, you know, how
Speaker 6: that has been trending, and if that really had made
Speaker 6: you know, some significant dent in terms of their you know,
Speaker 6: revenue numbers as well.
Speaker 1: Now, one more thing I want to talk about, and
Speaker 1: that is Bob Iger, the former and president CEO. Any
Speaker 1: idea on how long he's going to stay there succession plans?
Speaker 1: Are we going to see another big drama unfold if
Speaker 1: it doesn't work out the first time?
Speaker 6: Yeah, this has just been such a constant pain point
Speaker 6: for Disney. So we know that Bob Iger has another
Speaker 6: two years. He definitely needs those extra two years. We
Speaker 6: know Disney definitely needs the two years to kind of
Speaker 6: get there this whole turnaround in motion. The immediate thing
Speaker 6: that they do need as a permanent CFO because we
Speaker 6: know the current CFO is just temporary, So they definitely
Speaker 6: need that. You know, about the succession drama, I mean, Tom,
Speaker 6: it's any anybody's guess is as good as mine. I mean,
Speaker 6: you know, they do have a little bit of time,
Speaker 6: you know, but we'll have to really see how it
Speaker 6: kind of plays out. I know it is top of
Speaker 6: mind for Bob Bieger, and I'm sure he has a
Speaker 6: lot of candidates that he's lined up.
Speaker 1: Oh yeah, he's retired before, so I'm sure he's already
Speaker 1: thinking about it again. Well, our thanks to Bloomberg Intelligence
Speaker 1: US media analyst Githa Raganathin and coming up bom Bloomberg
Speaker 1: day Break Weekend Republicans get set for their third presidential debate,
Speaker 1: Will Donald Trump participate? I'm Tom Busby and this is Bloomberg.
Speaker 1: This is Bloomberg Daybreak weekend, our global look ahead at
Speaker 1: the top stories for investors in the coming week. I'm
Speaker 1: Tom Busby in New York. Up later in our program
Speaker 1: we take you to Europe and preview earnings from ubs.
Speaker 1: But first, the third Republican presidential debate taking place this
Speaker 1: Wednesday in Miami. For more, let's add to our Bloomberg
Speaker 1: ninety nine to one newsroom in Washington and Bloomberg Sound On.
Speaker 1: Co host Kaylee Lines.
Speaker 2: That's right, Tom, We're gearing up for round three, the
Speaker 2: third primary debate between the Republican presidential hopefuls. It takes
Speaker 2: place in Miami this coming Wednesday, and despite it being
Speaker 2: in his adoptive home state, No, the former president and
Speaker 2: front runner Donald Trump will not be in attendance again,
Speaker 2: and a few others who had been on the stage
Speaker 2: in the prior debates will not be on this one,
Speaker 2: partially because the threshold to qualify was raised. A candidate
Speaker 2: needs to have multiple polls that show them at four
Speaker 2: percent or higher and need to have at least seventy
Speaker 2: thousand unique donors, so that might be a bummer for some. Plus,
Speaker 2: former Vice President Pence won't be there because well, he
Speaker 2: dropped out of the race entirely last weekend.
Speaker 7: The Bible tells us that there's a time for every
Speaker 7: purpose under heaven. Traveling across the country over the past
Speaker 7: six months, I came here to say, it's become clear
Speaker 7: to me this is not my time.
Speaker 2: So with that, it's going to be a much smaller
Speaker 2: group on the third stage here with a preview before
Speaker 2: she makes the trip to Florida, herself as Nancy Cook,
Speaker 2: who covers national politics for US here at Bloomberg and
Speaker 2: All Things twenty twenty four. So Nancy first question of
Speaker 2: the five were expecting to be on the stage, that
Speaker 2: would be DeSantis, Haley, Ramaswami, Christi and Senator Tim Scott.
Speaker 2: Who has the most to gain and who has the
Speaker 2: most to lose?
Speaker 8: Well, I would say Nikki Haley probably has the most
Speaker 8: to gain. She has had two really good prior debates.
Speaker 8: We've seen her poll numbers rising. A lot of donors
Speaker 8: who have become disenchanted with a DeSantis's campaign have been
Speaker 8: flocking towards her, and I do think that she has
Speaker 8: as a real chance to emerge as the alternative to
Speaker 8: Donald Trump. She's also been spending a ton of time
Speaker 8: in New Hampshire over the past six months, and we've
Speaker 8: seen her poll numbers go up in Iowa, and so
Speaker 8: she is definitely on the rise. And if she can
Speaker 8: have a good debate, and she has shown that she
Speaker 8: is a good debater, she really could capitalize on that momentum,
Speaker 8: impress more donors, and sort of continue to reintroduce herself
Speaker 8: to the American public.
Speaker 2: So is Nikki Hayley's gain than kind of on the
Speaker 2: other side of the coin, Ron DeSantis's loss, because you
Speaker 2: mentioned how she's been gaining in say polls in Iowa
Speaker 2: won this past week showed them tied exactly.
Speaker 8: And the other interesting data points from that Iowa poll
Speaker 8: was that she know she's doing really well with suburban
Speaker 8: voters and she's also appealing to independence. So one hundred
Speaker 8: percent her gain is DeSantis's loss. And speaking of him,
Speaker 8: I do think that he is the one that has
Speaker 8: the most to lose. He has not managed to land
Speaker 8: a breakout performance or even really a breakout moment in
Speaker 8: the last two debates, although he has tried, and I
Speaker 8: just think his debates have been performances have been sort
Speaker 8: of meh. And I think that if he has sort
Speaker 8: of registered a third one and Haley sort of is
Speaker 8: taking off again, donors are just going to keep going
Speaker 8: towards her. And I think the challenge for him is,
Speaker 8: you know, the donor space. The donors are sort of
Speaker 8: souring on him. They already have soured on him a bit.
Speaker 8: And at some point you have to have enough money
Speaker 8: to stay in the race for a while.
Speaker 2: And we know he's had a bit of a money
Speaker 2: management problem over the course of his campaign as well.
Speaker 8: Right, Like, he has taken a lot of money in
Speaker 8: and his super pack has money. But part of the
Speaker 8: problem is is that they spend a lot of money.
Speaker 8: You know, he flies private everywhere. You know, he has
Speaker 8: to charter planes to go wherever he goes. And so
Speaker 8: that really which is his own choice. I should say
Speaker 8: it's a choice, but it's definitely they they you know,
Speaker 8: go through money more so than other folks, and so
Speaker 8: you're really trying to see, well, can he lasts not
Speaker 8: just through Iowa, but like could he last through Super
Speaker 8: Tuesday in March? And so that that's really what I'll
Speaker 8: be looking.
Speaker 2: For So we talk about lasting through Iowa. And it's
Speaker 2: interesting that South Carolina Senator Tim Scott qualified for this
Speaker 2: debate this past week after he really has shifted his
Speaker 2: campaign strategy to essentially focus only on Iowa. I believe
Speaker 2: he's been recently quoted as saying it's Iowa or bust.
Speaker 2: Is there really any oxygen for him in this race,
Speaker 2: on this debate stage when so much of the focus
Speaker 2: is on Nikki Haley and Rond DeSantis.
Speaker 8: Not really, he hasn't a Senator, Scott has not distinguished
Speaker 8: himself on the debate stage at all so far. I
Speaker 8: do think that he could, you know, pick up some
Speaker 8: Penns voters in Iowa. You know, Tim Scott really has
Speaker 8: made a play for evangelical voters. He really plays up
Speaker 8: his faith on the campaign trail. So Penns dropping out,
Speaker 8: particularly in Iowa where there are so many evangelical voters,
Speaker 8: could help Scott, But I don't think enough so at
Speaker 8: this point to earn the nomination.
Speaker 2: Well, you say that Scott hasn't really been able to
Speaker 2: distinguish himself in one of these candidates who was able
Speaker 2: to at least suck up a lot of oxygen in
Speaker 2: the prior debates we've seen as viviak Ramaswami. Where is
Speaker 2: his campaign right now? I feel like we heard so
Speaker 2: much about him after the first debate because he really
Speaker 2: did kind of make a mark. He took a lot
Speaker 2: of attacks from the other candidates as well, and then
Speaker 2: I feel like it kind of faded.
Speaker 8: Yeah, he's been out and about lately. He was up
Speaker 8: in New Hampshire. You know, for some appearances, he has
Speaker 8: spent a lot of time in New Hampshire. So he's
Speaker 8: still definitely out there campaigning. I will it will be
Speaker 8: interesting to see what he does in the debate, because
Speaker 8: you know, he did suck up so much oxygen in
Speaker 8: the first debate and people were sort of impressed by that.
Speaker 8: But then also he annoyed people because people felt like
Speaker 8: he was sort of the kid brother, you know, harassing
Speaker 8: people and taking attention by the end of it, and
Speaker 8: so I felt like it was sort of a double
Speaker 8: edged sword there. You know, he is a very skilled debater.
Speaker 8: He was a college debater. You know, he is articulate.
Speaker 8: The interesting thing about him is that he loves Trump,
Speaker 8: and so he sort of refuses to break from Trump,
Speaker 8: whereas the other candidates on the stage are really trying
Speaker 8: to distinguish themselves from the former president, and that's a
Speaker 8: sort of difference between them.
Speaker 2: Or just go after them intentionally, like Governor Chris Christy
Speaker 2: has done in the past couple debates. Remember in the
Speaker 2: second debate, he looked directly at the camera and said, Trump,
Speaker 2: I know you're watching, So I'll be interested to see
Speaker 2: if we get some kind of reiteration of that in
Speaker 2: the third go around. But on the subject of the
Speaker 2: former president, how heavily is he going to feature? He
Speaker 2: still very much as the front runner, perhaps even cemented
Speaker 2: even more so in the lead up to this, So
Speaker 2: once again unavoidable topic.
Speaker 8: I think, an unvotable topic. I felt like in the
Speaker 8: last debate, you know, they covered so much ground. I
Speaker 8: was just reading some coverage of it to remind myself yesterday.
Speaker 8: You know, they talked about inflation and housing and China
Speaker 8: and you know, the flow of LYSID drugs over the border.
Speaker 8: They did talk about Trump, and some people went after Trump,
Speaker 8: but you know, it wasn't like everybody wanted to take
Speaker 8: down the former president, even though he's really the front
Speaker 8: runner and loomed over the debate. His absence loomed over it.
Speaker 8: What will be interesting Wednesday night is that he is
Speaker 8: holding a counter program made event also in Florida, like
Speaker 8: not that far away from the debate.
Speaker 2: Yeah, the two Florida men in Florida, in their home
Speaker 2: state essentially, So this will be an interesting dynamic. You
Speaker 2: mentioned there, Nancy, how a lot of ground was covered
Speaker 2: in the second debate topic wise, from inflation, to schools,
Speaker 2: to other aspects of it. One thing that hadn't happened
Speaker 2: yet though, was October seventh and the conflict erupting between
Speaker 2: Israel and Hamas. So I would imagine they're going to
Speaker 2: face some questions about that this time around. Do we
Speaker 2: have a sense of where the different candidates are on
Speaker 2: that issue.
Speaker 8: Well, that's a great point. And the candidates really have
Speaker 8: tried to appear all over this conflict, particularly DeSantis and
Speaker 8: Nikki Haley. So DeSantis made this big show of you know,
Speaker 8: trying like sending a plane from Florida to try to
Speaker 8: get you know, Americans, or really is bring them back
Speaker 8: to Florida and try to appear on top of it.
Speaker 8: You know, Haley has really you know, she was the
Speaker 8: UN ambassador and the Trump administration, she does have some
Speaker 8: concrete foreign policy experience. She has really tried to appear
Speaker 8: very out front of that. So I do feel like
Speaker 8: foreign policy not just the Israeli Hamas war, but also
Speaker 8: the Ukraine war. Do you whatny mean, what this means
Speaker 8: for Iran? I feel like this will be potentially a
Speaker 8: very foreign policy heavy debate.
Speaker 2: One of the most memorable moments of the first debate
Speaker 2: for me was Nikki Haley telling Vive Grumswami that he
Speaker 2: had no foreign policy experience, and it showed. So I
Speaker 2: wonder how he might address that this time around, because
Speaker 2: he has been in the prior debates pretty vocal about
Speaker 2: not wanting to provide further support for Ukraine, and a
Speaker 2: lot of people see these issues as tied together.
Speaker 8: They do, and I mean that's sort of a divide
Speaker 8: in the Republican Party at this point about who wants
Speaker 8: to support Israel financially. I would say that there's more
Speaker 8: broad support for that, and who wants to keep giving
Speaker 8: aid to Ukraine. And there's a ton of Republicans who
Speaker 8: feel like the A to Ukraine shoul should stop. Ramaswami
Speaker 8: is one of them. DeSantis has sort of gone back
Speaker 8: and forth on that and then there's a bunch of
Speaker 8: House Republicans, including the new Speaker, who are much more
Speaker 8: skeptical of ongoing a to Ukraine.
Speaker 2: Yep, it's a hot topic on Capitol Hill, and I
Speaker 2: would imagine it'll be a hot topic on the stage
Speaker 2: this coming week as well. Safe travels to Florida. Nancy,
Speaker 2: Thank you so much. That's Nancy Cook, who helps cover
Speaker 2: national politics for us here at Bloomberg and Tom, make
Speaker 2: sure to turn the TV on on Wednesday night.
Speaker 1: Thank you, Kaylee. That was Bloomberg sound On co host
Speaker 1: Kaylee Lines, reporting from our Bloomberg ninety nine one newsroom
Speaker 1: in Washington, and you can hear sound on weekdays one
Speaker 1: to three pm on Bloomberg Radio and coming up on
Speaker 1: Bloomberg day Break weekend. We get you ready for earnings
Speaker 1: from UBS. I'm Tom Busby and this is Bloomberg. I'm
Speaker 1: Tom Busby in New York with your global ahead at
Speaker 1: the top stories for investors in the coming week. We
Speaker 1: heard from all the big US banks and now Switzerland's
Speaker 1: UBS reports earnings this week. UBS the second quarter includes
Speaker 1: one month of credit SWIEE numbers and for more, let's
Speaker 1: head to London and bring in Bloomberg Daybreak, europe banker
Speaker 1: Caroline Hepger.
Speaker 3: Tom Bloomberg Intelligence expects US banks to outperform European peers.
Speaker 3: There is particular focus though on UBS, given the integration
Speaker 3: of credit swite. UBS is skewed to equities trading, which
Speaker 3: has exceeded expectations. In the aggregate. Overall shares in European
Speaker 3: financials are up about eight percent year to date, with
Speaker 3: the ECB sticking to its higher for longer view. So
Speaker 3: Bloomberg's Critty g Gooptur and I have been speaking to
Speaker 3: our Swiss banking and wealth reporter Marin health Dema to
Speaker 3: get a preview of what to expect from UBS and
Speaker 3: on the overall banking picture. Our Bloomberg opinion columnist Paul J.
Speaker 3: Davies I began by asking Paul about why banks seem
Speaker 3: to be benefiting from higher interest rates and yet still
Speaker 3: not actually feeling a hit from higher default rates and
Speaker 3: other issues that might affect them. We asked him why not, Well, I.
Speaker 9: Think the I mean, the interesting thing is that the
Speaker 9: economy is still, you know, much stronger than perhaps many
Speaker 9: people you know expected it to be. All well, much
Speaker 9: stronger is maybe a bit of an exaggeration. It's not
Speaker 9: you know, turning down or slowing down quite as rapidly
Speaker 9: as we might have expected. I mean, in the US,
Speaker 9: you know, the economy is going great and banks are
Speaker 9: doing really really well. Over there, in Europe it's a
Speaker 9: bit different. It's a lot slower. You know, Germany has
Speaker 9: started to shrink and is dragging down you know, some
Speaker 9: of the other economies. But so long as employment isn't rising,
Speaker 9: so long as people aren't losing their jobs, so long
Speaker 9: as you know, companies aren't yet you know, going bust
Speaker 9: or really struggling, then you know that then that's why
Speaker 9: sort of banks aren't feeling the pain yet. But I mean,
Speaker 9: I think in Europe it's sort of it's starting to
Speaker 9: feel a lot more likely that we're going to see
Speaker 9: a bit more of that going into next year.
Speaker 10: And when we do, when we do inevitably hit that
Speaker 10: potential peak RaSE, whether it's next year or the year after,
Speaker 10: whenever that is eventually hit, the burden on some of
Speaker 10: these banks to kind of find alternative revenue that isn't
Speaker 10: coming from interest income seems all the more important. What
Speaker 10: might that actually look like?
Speaker 9: Well, I mean, you know, interest income has been it
Speaker 9: has been the thing that banks have, especially in Europe,
Speaker 9: have been forced to live without for like, you know,
Speaker 9: well over a decade already. I mean the last year
Speaker 9: or so, we've seen net interesting income rise very very rapidly,
Speaker 9: obviously with rising interest rates. I mean in the UK especially,
Speaker 9: it's already peaked. I think you know one of the
Speaker 9: banks last week that reported that had a bit of
Speaker 9: a rough time, as Barclays, and that's because they kind
Speaker 9: of somewhat surprisingly adjusted their expected net interest margins for
Speaker 9: the full year down already, So you know, interest income
Speaker 9: maybe as interest margins at least may well have peaked already.
Speaker 9: Loan demand isn't isn't particularly strong, and in some areas
Speaker 9: it's going to start to come down. So I mean,
Speaker 9: what they're going to replace it with is you know
Speaker 9: what they've been trying to replace it with for a
Speaker 9: decade already. And in some banks that's about what more
Speaker 9: wealth management. Others it's going to be about you desperately
Speaker 9: hoping for a pickup in investment banking, and you know,
Speaker 9: a continuation of some slightly better trends in kind of
Speaker 9: trading and markets as well.
Speaker 3: Marian half Tamar, let me bring you in our Swiss
Speaker 3: Banking and Wealth Reporter to look, I suppose that the
Speaker 3: specifics around UBS and it's earnings, I mean, do you
Speaker 3: think that the bank is going to see the benefits
Speaker 3: from the integration of Credit Suite. I mean, this is
Speaker 3: a specific example. Some people even see UBS as a
Speaker 3: potential kind of European banking champion. Do you think we
Speaker 3: can go as far as to say that.
Speaker 11: I think time will tell on that Brant. They still
Speaker 11: have a lot to go through with the integration, but
Speaker 11: we're are going to be seeing their earnings next this week,
Speaker 11: hopefully we'll have a bit more clarity on just how
Speaker 11: much Credit Suite is still losing in terms of profitability.
Speaker 11: They had kind of guided that they were going to
Speaker 11: be losing two billion dollars worth of profit already this quarter,
Speaker 11: So we'll see how UBS absorbs. That key will be
Speaker 11: to see that come down over the next couple of
Speaker 11: quarters and not eat into UBS's business because in two
Speaker 11: Q for example, Credit Sweeze is loss completely wiped out
Speaker 11: UBS profit. So we need to see that calibration happen,
Speaker 11: and then you know, eventually, once they've able to they've
Speaker 11: been able to sort of fully integrate and capitalize on
Speaker 11: Credit Squee's business. You know, that's the goal is can
Speaker 11: they be, you know, a champion in the way that
Speaker 11: a Goldman Sachs is or JP Morgan is for investment banking,
Speaker 11: but instead for wealth management.
Speaker 10: Where does the next leg of growth actually come from? Though,
Speaker 10: I mean, Caroline just mentioned being kind of a European champion,
Speaker 10: but in terms of the international push, You've done some
Speaker 10: reporting on the Middle East.
Speaker 11: Yeah, so UBS doesn't see it self as a European champion.
Speaker 11: It does see itself as a global champion. One of
Speaker 11: the big areas you mentioned the Middle East. They gained
Speaker 11: a lot of foothold there with the Credit Suite acquisition
Speaker 11: because Credit speech is probably one of the biggest banks there,
Speaker 11: particularly for wealth management and how that ties into doing
Speaker 11: big deals with the sovereigns and royals and large business
Speaker 11: entrepreneurs there. So that's definitely putting them ahead of the game.
Speaker 11: But there are other large players as well, so they'll
Speaker 11: have to keep an eye on that. And then there's
Speaker 11: a geopolitical angle with that region right now, where you
Speaker 11: know they've recently had to cancel a big wealth conference
Speaker 11: in Qatar because of the conflict so whether the short
Speaker 11: term conflict will affect the long term plans is sup
Speaker 11: remains to be seen. But that's certainly putting a bit
Speaker 11: of a delay in potentially their ability to put the
Speaker 11: pieces together with this acquisition. And then of course, you
Speaker 11: know you're looking at the US as a big wealth
Speaker 11: pool and Asia as well. It's a bit more on
Speaker 11: the back burner because of the geopolitical tensions, Paul.
Speaker 3: That's interesting, isn't it about the regional push of the
Speaker 3: different banks. Do you see more job cuts coming for
Speaker 3: big European banks certainly as some of them try to
Speaker 3: refocus on different parts of the globe, perhaps, you know,
Speaker 3: push away from China into the Middle East or in
Speaker 3: other places. You know how it does feel like a
Speaker 3: moment where banks are repositioning somewhat globally.
Speaker 9: Yeah, so, I mean in terms of job cuts, I mean,
Speaker 9: I guess we've had a few already, probably more from
Speaker 9: the US banks in Europe and elsewhere. I mean, I think,
Speaker 9: you know, one of the things in investment banking and
Speaker 9: trading and such like among the Europeans is that they
Speaker 9: didn't really hire quite so rapidly and quite so extensively
Speaker 9: during sort of you know, twenty twenty one and into
Speaker 9: twenty two when we had that real sort of boom
Speaker 9: in market. So they've kind of, you know, they've got
Speaker 9: less people, fewer sort of you know, excess resources.
Speaker 11: Now.
Speaker 9: I mean, I think you know, Barkley's is certainly talking
Speaker 9: about finding lots of efficiencies and making a few cut
Speaker 9: We don't really know exactly where they're going to do
Speaker 9: that yet. They've been quite sort of coy about what
Speaker 9: their plans are. But I mean, for the most part,
Speaker 9: and again especially in investment banking, one of the things
Speaker 9: that we've been seeing recently is it's actually quite a
Speaker 9: lot of hiring going on among kind of you know
Speaker 9: deal makers, really good deal makers as you know, smaller
Speaker 9: banks and you know, unexpected banks, banks like Santander for example,
Speaker 9: you know, really stuck up on sort of talent that's
Speaker 9: available that they can get their hands on now during
Speaker 9: this sort of relatively quiet period in the hope that
Speaker 9: that means that they'll get a head start and see
Speaker 9: a lot more be able to generate a lot more
Speaker 9: revenue when markets and deal making and so on picks
Speaker 9: up once you know, interest rates have settled down or
Speaker 9: whatever is the driver that brings back that confidence to
Speaker 9: get markets going again.
Speaker 10: I love that you mentioned Santander because of course we
Speaker 10: know they're trying to expand their their Wall Street presence
Speaker 10: as well over over in the state. Paul, very quickly,
Speaker 10: if you can talk to us about what other banks
Speaker 10: are in the rat race to kind of take up
Speaker 10: some of the market share that perhaps Credit Suite has
Speaker 10: left behind.
Speaker 9: I guess it kind of depends on the sorts of
Speaker 9: areas that you're talking about. I mean, you know, the
Speaker 9: kind of the boutiques have been doing a lot of hiring,
Speaker 9: mainly in the US, but in Europe too. That's the
Speaker 9: kind of you know, the ever cause pg T's you know,
Speaker 9: these they are quite large boutiques nowadays. Jeffries too like
Speaker 9: kind of you know, the real sort of tear expanding
Speaker 9: in the last couple of years. So and I think,
Speaker 9: you know, that's where some of the market share has
Speaker 9: been going in sort of you know, classic investment banking
Speaker 9: and in terms of trading. I mean, you know, it's
Speaker 9: still a long ongoing story of just you know, everything
Speaker 9: gravitating to the biggest, you know, most efficient shops. So
Speaker 9: it's just it's still just the JP Morgan's Goldman Saxes,
Speaker 9: you know, sort of taking slowly more and more share
Speaker 9: from pretty much everybody everywhere else anywhere in the world.
Speaker 3: That was Pritty Group Tour and I speaking to Blueberg
Speaker 3: Swiss King and Wealth reportermar and Healthtamara and our Bloomberg
Speaker 3: opinion columnist Paul J. Davies. I'm Caroline Hepge here in London.
Speaker 3: You can catch us every weekday morning for Bloomberg Daybreak Europe,
Speaker 3: beginning at six am in London. That's one am on
Speaker 3: Wall Street.
Speaker 1: Tom Our thanks to Bloomberg day Break Europe. Banker Caroline
Speaker 1: Hepgar and coming up here on Bloomberg day Break weekend,
Speaker 1: the Prime Minister of Australia heads to China and we
Speaker 1: head to Asia next. I'm Tom Busby and this is Bloomberg.
Speaker 1: This is Bloomberg day Break Weekend, our global look ahead
Speaker 1: at the top stories for investors in the coming week,
Speaker 1: Diplomacy and trade in focus. As a top government official
Speaker 1: heads to Asia for more, Let's go to Hong Kong
Speaker 1: and Bloomberg Daybreak Asia host Brian Curtis.
Speaker 4: Tom Australian Prime Minister Anthony Albanize. He will be in
Speaker 4: China during the coming week, looking to further stabilize bilateral relations.
Speaker 4: Albanesi's visit will be the first by an Australian leader
Speaker 4: since twenty sixteen. While there have been some advances of late,
Speaker 4: China still has restrictions on Australian lobsters and beef, and
Speaker 4: there's a review on wine duties that is ongoing. One
Speaker 4: other recent positive was China released Australian journalist Chang Lei
Speaker 4: last month. She had been detained in China for almost
Speaker 4: three years under espionage related charges. Joining us for some
Speaker 4: insights here on how to gauge success or failure for
Speaker 4: the Albanesi trip is Ben Westcott, Bloomberg Government reporter in Canberra. So, first, Ben,
Speaker 4: before we get into some of the teeth about overall
Speaker 4: relations in indications of progress in areas like beef and
Speaker 4: lobsters that may have been done behind the scenes that
Speaker 4: hasn't been made public.
Speaker 12: In recent wait. So I'd say is that Australia has
Speaker 12: been highlighting the lobs to issue more which suggests that
Speaker 12: that might be an easy win for both China and Australia.
Speaker 12: A quick announcement, as they say, out of this trip,
Speaker 12: and obviously much less complicated than the wine sanctions which
Speaker 12: are currently under review, more than the release of the
Speaker 12: remaining Australian in China right at Young Hang June, who's
Speaker 12: been in prison there for more than four years. So
Speaker 12: you know, in comparison to that, a win on lobsters
Speaker 12: or a win on beef would be a much more
Speaker 12: more easy thing away with them to sell.
Speaker 4: And you mentioned that they're setting aside for the moment
Speaker 4: the WTO wine dispute and China has this review underway,
Speaker 4: does the Prime Minister does the government generally expect a
Speaker 4: positive outcome on that?
Speaker 12: I mean generally I think there is there is hope
Speaker 12: that that will come out well. But what people have
Speaker 12: been saying is that this isn't as simple as the
Speaker 12: barley tariffs. So the protest we saw for the barley
Speaker 12: tariffs earlier this year was that once the WTO report
Speaker 12: had been handed down, we then saw Chinese and Australians
Speaker 12: review the report, which was then led to a review
Speaker 12: of those tariffs by the Chinese side. They're eventual lifting
Speaker 12: and that took three months with a one month extension.
Speaker 12: Now already even straight off the bat, these wine tariffs
Speaker 12: have been given a five month review, and I've been told,
Speaker 12: you know, off the record, that it's much more complicated
Speaker 12: than the Bali tariffs were. So there's good hope. Treasury
Speaker 12: wine stocks have gone up, but no one's counting any
Speaker 12: chickens at this point.
Speaker 4: Will Prime Minister Albanzi have both the carrot and stick
Speaker 4: in his arsenal on this trip?
Speaker 12: Prim minist abaniniti faces a really tough challenge in this trip.
Speaker 12: He has to step the line between not insulting his
Speaker 12: hosts but not giving any reason for any people watching
Speaker 12: in the US or any sort of conservatives back home
Speaker 12: who are watching, to gain any sort of fears about
Speaker 12: the relationship with China. What he says repeatedly is that
Speaker 12: Australia and China will cooperate where they can, disagree where
Speaker 12: they must. And I think that it's going to be
Speaker 12: the trip, This is going to be the angle he
Speaker 12: follows for his whole trip. I had someone say to me,
Speaker 12: you know, when you're walking down the Great Hall of
Speaker 12: the People towards changing Ping, it can be easy to
Speaker 12: get or so it's going to be very interesting to
Speaker 12: see how he handles this very delicate balancing act exactly.
Speaker 4: Not the easiest time to bring up human rights or
Speaker 4: conditions in Shinjong.
Speaker 12: I mean exactly, and I mean the one thing that
Speaker 12: has characterized Australian diplomacy is since May twenty twenty two,
Speaker 12: when the Central Left Labor government took power, was that
Speaker 12: they've done all that behind closed doors. With a few exceptions,
Speaker 12: they've generally kept criticism of China's human rights abuses behind
Speaker 12: closed doors, hidden meetings with Premier League At Chuang and
Speaker 12: President of Chijing Ping And as a result, I mean,
Speaker 12: or possibly as a results, possibly a result the other
Speaker 12: things they have actually had those meetings which had eluded
Speaker 12: previous governments who've been more vocal. So there has been
Speaker 12: one major difference in Australia's diplomacy in recent years.
Speaker 4: Ben, Thank you so much, Ben Westcott, Bloomberg Government reporter
Speaker 4: in Ken. I'm Brian Curtis along with Doug Krisner. You
Speaker 4: can catch us every weekday here for Bloomberg day Break
Speaker 4: Asia beginning at six am in Hong Kong and six
Speaker 4: pm on Wall Street tom.
Speaker 1: Our thanks to Bloomberg day Break Asia host Brian Curtis.
Speaker 1: And that does it for this edition of Bloomberg day
Speaker 1: Break Weekend. Join us again Monday morning, five am Wall
Speaker 1: Street Time for the latest on markets overseas and the
Speaker 1: news you need to start your day. I'm Tom Busby.
Speaker 1: Stay with US. Top stories and global business headlines are
Speaker 1: coming up right now