Manus a warm welcome to daybreak europe. The numbers have dropped on hsbc. Job cuts. Share buybacks have been abandoned. A hugest impression is restructuring with a kitchen over 7 billion. That is a reality check on growth. Cost cuts are aggressive. And the reaction in hong kong not great, dropping as much as 3. 2 . The buyback and the plan to suspend those could be part of that. You talked about the 7. 3 billion charge and the bank still looking for a permanent ceo. That was Something Else we were looking out for. There were some changes in personnel but not at the very top. And cost cuts. Says it has hsbc yet to factor in the impact of that virus. Manus the fact that they have ripped the heart out of the Share Buyback which is one of the reasons why you believe that quinn can turn the business around. He has not been anointed or appointed. They are prevaricating. The goodwill impairment comes down to 4 billion in the investment essentially, they want to reallocate some of the freed up resources that we are talking about. It is aspiring to be one of the top three in asia serving wealthy clients. They did beat analyst estimates. In revenue and profit. And the impact from the hong kong protests was less than anticipated. Manus one man has the answers and he will join nejra and myself, ewen stevenson. He joins us in just under 10 minutes. To the market now. Look at the aussie dollar. It is the personification of a dovish hold versus a hawkish hold. Down she goes, the aussie dollar. Language is the they have left the door open. And you have the apple warning in terms of profitability. That was the first knock. Thethe language that australians are using in terms of leaving rates lower. And you also have nymex down. Dillydally and that is what you get. It is the headline from apple that has hit sentiment and it sums up the concern around the coronavirus both on the supply and the demand side. They talk about the supply chain issue as well as lower foot. Alls in stores they are a tech company that is more expected than some of the others. Asian stocks taking a hit on that. U. S. Futures on the back foot though they were gaining yesterday. And the yield has dipped back below 2 and is hovering around that level now. Top story the coronavirus has hit apple. Apple says it will not be able to meet the Revenue Target for the upcoming quarter. It says it is experiencing a slower than anticipated return to normal conditions. For more on this, we have bloombergs china correspondent, selena wong. Is this a challenge that apple will be able to offset in one quarter . Or will it be more longlasting . It is difficult to say. It is another example of the coronavirus hitting multinationals in china. Even though all of apples iphone manufacturing partners and are reopening, they have been slow while the demand for iphones has been reduced. Largest apples third market by revenue and it has 42 stores there. We have been closed for most of this month. This is not surprising given our reporting on the supply chain disruption. Month, another company said how challenging it would be to secure workers. The challenges of quarantining thousands of employees. These travel restrictions and quarantine really make it difficult for millions of factory workers across china to make it back to their place of work. , 80 ofg to a survey u. S. Manufacturers around shangha says they do not have say they do not have enough staff to get back up to speed. Manus our guest host this atning is alan higgins, cio coutts company. Manus back to business. We are trying to grapple with the apple affect. For me, the news in itself is not the shock. It is more about the inability to sell and the language. We are still able to do well outside of china. What does the warning on the numbers mean for you in tech . Alan it is a bit of a wakeup call for the markets. You have to look at the impact of the virus market by market. The equity market has priced in the normal recovery and apple is the poster child, darling stock of the market as we know and it is no longer 12 or 13 times earnings. Any kind of impact could be quite damaging. For us, people have looked at and they knowook they get a vshaped market recovery. Oil, markets have priced in the recovery already. Is it also a wakeup call in the sense that a lot of the equity market is the expectation that you will have the backstop of central banks. This shows the supply chain disruptions which are much more difficult to factor into future earnings. Alan they are but markets will know that this is a, most likely, 12 quarter impact so they can focus on the vshaped recovery. The point is that markets are already there. Including equity markets. They have largely priced this in. Alan higgins staying with us for the hour. Hsbc and barks on its most ambitious Restructuring Plan after the lender says they could cut as many as 37,000 jobs. The cfo joins us exclusively next. This is bloomberg. This is bloomberg daybreak europe, i am nejra cehic. Manus let us get to the hsbc numbers. Proposing one of the most ambitious Restructuring Plans since the Global Economic crisis. Taking seven point 3 billion in charges and it is targeting cost cuts of 4. 5 billion. It is also searching for a permanent ceo. Mayinterim ceo says they cut as many as 15 of the workforce over the next few years. This is ewen stevenson. Friend of the show. Great to have you. Let us get to the cost cuts. 2022. Illion by where are those cost cuts going to come from . thank you. Costyou look at the program we announced today, we are announcing a fairly significant restructuring. We said we are going to take 25 of the cost structure out of that business in the u. S. And we are repositioning our Branch Network over there. There shutting about 30 of branches and taking out about 10 15 of the costs. We are simplifying our structure. And i think we come along with every bank is subject to the ofact of the digitization our business. Nejra great to speak to you. The cutting back in u. S. And europe and reallocating freed up resources to asia and the middle east, when it comes to asia, are you concerned about concentrating resources there given the trade tensions and the hong kong process protests and the coronavirus which we will talk about more in a moment . not at all. We think asia continues to be an excellent Growth Opportunity for us. Uniquely positioned there and we continue to show excellent financial results. Have thery happy to franchise that we have in asia and we would like to continue to invest there. Manus you said a target a return at 22 . A vshapeduming recovery from coronavirus and a return to normalcy in hong kong . And what are the risks associated with that target . Ewen when you look at the target, it is based on very modest growth assumptions. Of some revenue growth, a decent amount of Cost Reduction. On the coronavirus, it is obviously evolving. There is a big call on how long it takes the virus to be contained. In our fourthquarter results, we had a very resilient performance in hong kong with profits up by 3 from the year prior. Going to haveare to take some additional provisions this order. The result of that this quarter. Nejra on that coming you just said you might have to take additional provisions this quarter for that. You said longerterm it is also sible that the hsbc makes i understand youre still monitoring the situation but if that scenario plays out longerterm, what contingency plans will you be putting into place . You need to keep this in context. Pretaxusiness made profits of just over 12 billion. We are doing the Contingency Planning that we need to do at the moment focused on our colleagues being well looked after and our customers are supported through this period. We have all of the Contingency Planning that we should have. Manus can you give us any indication of the slow down in lending, the reaction in china and hong kong in this first months of 2020 . In termsnavirus, live of the actual reality for the business in the market. Out acrossyou loo our businesses, we have had to put a lot of Contingency Planning around our operational planning. You look if the actual january numbers, they continue to be robust but i think we are seeing some customers obviously struggling at the moment particularly those dependent on the Retail Sector and some of the real estate sectors. Anything dependent on tourism in hong kong. But the credit matrix continues to be pretty robust. Nejra can we circle back to the. Ob losses that we talked about cutting as many as 35,000 jobs in the next three years. What guidance can you give to investors as well as your staff . Could the numbers go far below 200,000 once the restructuring is complete . Ewen it is not a target for us. But we do want to be honest and transparent with our employees. We do think around 200,000 is likely to be the headcount number where the bank will be and about three years time. On the individual programs and impacts on our employees, we will talk to our employees first before we go public with those. Fors the other big issue the market to grapple with this morning is stepping back from the share i back. Can you explain and justify the logic for that . Ewen we do think as we go through this period of restructuring in the next three years, given some of the Economic Uncertainty we have been talking about on the call today, given the impact and reform, it isout appropriate for us to have high Capital Buffers during this period. We have announced that we are suspending our Buyback Program for two years. What you see with our financials is by the time we get to 2022, we are targeting a return of tangible equity. That is substantially higher than where it was last year at a. 4 . 8. 4 . E get back at when we get there, we can comfortably look at risk during the Buyback Program. Nejra how much of a priority is it for you to definitely restore that Share Buyback in 2022 . Personally it is very important. Our investors care about how we manage our capital. We pay out a significant portion of our dividend every year. Around 25 . It is important to investors that we are committing to neutralize that. So as we can, we will. Manus why has mr. Quinn not been appointed fulltime ceo . Telling us that you need another 612 months before you can make a decision . T is the preverification what is the hesitation . Ewen we have been very clear that there is action that we need to take a head of that and what you see ahead of that and what you see today is us restructuring and cutting costs and simplifying the organization. We are getting back to a place in three years time where we think the bank should be in terms of returns. Those actions need to be done independently of the ceo process. Nejra you were taking those actions now and you say they are happening independently of the ceo process. Does that mean that investors can rest assured that the strategy will remain the same . Ewen everything we announce today is no regrets. Everyone looking at this will see that these are sensible actions and necessary actions given the Economic Outlook we are facing. Manus one of the most interesting comments i read from andof your shareholders capitulum. Om the pitc hsbc should stop being so prudence. Take risks. Expand. Otherwise shrink and shrink fast. Ewen we are doing that in this plan. We are shrinking in areas where we think we have clear underperformance and a lack of longterm competitive advantage. Equally in todays plan you see investment in the parts of the business where we think we have competitive advantage and we can grow. We are doing both of those things. Was an interesting comment from one of the shareholders. Fairlyout the options as binary. You say you are balancing both sides of the coin. Are you happy that you are getting the balance right . Ewen we think this is the right thing for the bank to do. The right plan for now. We are looking to invest 100 inlion of risk wedded assets the next three years and parts of the business that are performing well, particularly asia. We do think this is the right allens. A substantialwith Cost Reduction plan. We think it is a great plan. Manus picking up on their riskweighted assets you are at that moment of leaning into a hunger for yields. The riskweighted assets. Unsurprisingly, it is in parts of the business the markets business. I think we are exiting a lot of domestically focused customers. And we will also exit International Customers that are acceptable returns today. We will be ruthless in terms of targeting those parts of the business where we are not generating acceptable returns. We will reinvest those assets and parts of the business where we can see much better returns. Business, on the u. S. Characterize for us what that will look like. We know the numbers but what are you trying to achieve . Ewen two things. On the retail side, we are getting back to where we think we have core competitive advantages. What you see is a 30 reduction where we are predominately focused on the east coast. And secondly, on the Global Market side, reducing our presence in the u. S. Quite materially and looking to concentrate that business into london. Thank you so much for joining us coming ewen stevenson. Go ahead. Ewen thank you. Thank you for the time today. Nejra thank you so much for joining us. Ewen stevenson, cfo from hsbc. Coutts ins from company is still with us. A dividendpay yield of 7 . 2 more shares every year. Low, iterest rates so know we are not talking about a corporation here but a bank with ulatory ratios manus is it a mistake . Alan i am just an investor. Ewen is a financial director. , over five years of shares with consistent buybacks. Hsbc, the shares have gone nowhere in five years. Has a very strong u. S. Domestic market. Nevertheless, the european and other global bank struggled to compete with jp morgan. Reaction in the Hong Kong Market today, is that a result of the buyback or is the market unconvinced by the strategy that has been outlined, the costcutting . Alan to be a Global Investment bank, you have to ask yourself why arent the european banks troubling field is notaying level. Alan that is a fair point. Hes one it around from 8 to positive 8 in terms of equity he swung it around to positive a percent in terms of equity. There is plenty of yields on offer in europe. Manus we will get to brazilian bonds before it is all said and done. Hosthiggins is our guest with us this morning. Jeff bezos has committed to paying a 10 billion Climate Change fund. This is bloomberg. Nejra good morning from the city of london. At ourwe are here european headquarters. Top stories this morning, apple says it is unlikely to hit quarterly Revenue Target as the coronavirus ways on production. Global stocks and the 10 year yields fall. Hsbc stockholm shares drop as it announces its restructuring charge. Suspend buybacks. The ceo gave his take on the impact of coronavirus. I think we are going to have to take additional provisions this quarter. On,result of that is a call how long does the virus continue . Manus sterling tips as boris top envoy says britain must be able to set its own laws postbrexit. Nejra china, apples third biggest terms of revenue. It will not meet its Revenue Target two to coronavirus, talking about supply chain issues, but also the demandside. That is reverberating across markets. Futures in the u. S. And europe lower and read on the screen in asia. All the market covers from around the globe. Going toere are we all be in 30 years time . In debt. We have a dovish tilt from the rba. Juliette saly is in singapore. Neeraj shaw is in mumbai. Lets kick things off with you, juliette saly. There is a human impact to the coronavirus, but it lifts dozens of stocks in hong kong. We have been seeing these panicked scenes of people trying to hoard in the wake have to be quarantined for longer. Enters three one industry has been falling. Little change in the hang seng index. In chinas market is expected to accelerate. Also a pain on the Company Offering online doctor consultations. Line up by 13 . Interesting to see when people start to have fear about being stuck in their homes for longer, they are on a lot of these items, like toilet paper. Nejra it is amazing how much we have talked about toilet paper. What has been the Market Reaction today . Good morning to all of you. It has been an interesting reaction. This was announced in earlier policy. The 10 year bond yield has come off from 6. 5050 to 6. 40 as we speak. A bit muted, but i must say, strong response. That should help banks and financials get money at a lower cost. The 10 year yield 10 basis points lower. Back to you. Despite the warnings about the impact of the coronavirus, you are looking at the complacency some would say is present in the markets. Where are you finding the complacency . In thes abundantly clear u. S. Market just a short absolutely disappeared. This is the tonic to coronavirus fears. At least it is not toilet paper this time, but this is the s p 500 etf, interest has fallen to its lowest since 2007, complacency alive and well. Anys not going to reflect of the apple drama, the more recent corporate outlooks, but u. S. Stocks continue to hit a new high and part of that is just the positive earnings beat seeing the positive growth we are expecting. Yes, apple, that story hurts. Stocks down, futures down half a percent, thats nothing when we continue to see stocks trading at the levels we currently are. Anyone who has tried to fight the markets upward momentum has continued to get punished. We see Short Interest fleeing from the market. Everything carries on. Nejra juliette saly, niraj shah, and dani burger. Carrying on every day with markets coverage. An u. K. Has launched unprecedented attack on the eu over terms for a postbrexit trade deal. Eu demands britain being the message by Boris Johnsons envoy to brussels drove the pound to its weakest level of the day against the dollar. How much further does the market have to wake up to the reality of the trade negotiations between the u. K. And eu . We have certainty now. Sterling has been weak against the dollar, but sterlingeuros has been strong. Euro,erling or sterling 120, hovering around the 120 level. Certainty we are going to have brexit. Whatever your views may have been beforehand. We dont know whether it is going to be no deal or its going to be some kind of a deal. Managing of the u. S. China trade youand trade deal, we told game theory told you there was going to be a deal. Guess what. The u. K. Needs a deal. The eurozone needs a deal. I think there will be some kind of deal. Some kind of limited deal. Therefore, we think u. K. Assets will do better. We are seeing that with pmis and confidence prices, more confidence in the u. K. Because of the decisive election victory, which means we have clarity. Business now has clarity on whats going to happen. Deal, ship it, no in sterling. You are worried about the gilt market. Why . What we all know, this itinistration is going to is going to be substantial. How do you position . We have a preference for treasuries. For treasuries it is clearer. We play the spread. Treasuries is a clear rationale. In contrast, in the u. K. , your starting point is deep negative real yields. A really expensive market. Very low cash rates. Any improvement in the u. K. Could see tightening. What not be surprised on some kind of trade deal toward the end of the year. I will be back here in november. I see you timestamp that. Markets toexpect the reprice around a bank of england rate cut . We had Credit Agricole on yesterday who thinks the market mike price in more. Might price in more. U. K. Rates are structurally low. U. S. Rates are one step higher. The u. S. Is already there. We are following the u. K. We are not following all the way up to 3 and down again. Whether we are looking to follow the u. S. , you are just talking about 125 basis points, nothing more than that. You have to look forward, right . I am looking forward manus that was hard to say. I know. We are all there together. Mind, isof that in there a consequence for the inflation market . You want to play treasuries versus guilt as a spread. What does that mean for our inflation story . That is the other mandate of the bank of england. Ignored. Completely ignored. That is rates are deep negative in real terms. They are ignoring that rates are above Interest Rates. That is not an issue. Central banks respond not to inflation. They respond to the global and domestic economy. If the Global Economy comes through this manufacturing slowdown and the u. K. Economy is better, u. K. Rates will go higher. Manus thank you. Succinct answer there. Lets get you up to speed with your first word news. The coronavirus outbreak is heading one of the worlds most valuable companies. Manufacturing in china is ramping up more slowly than expected after the Lunar New Year holiday and demand is also lower. Closedin china are being or operating on reduced hours. Nejra worldwide coronavirus cases have risen as japan plans to remove all passengers from the diamond princess. The ship remains docked at the port of yokohama. Casinos in macau have been cleared to open following an unprecedented 15 day closure for the worlds biggest gambling hub. Manus Australias Central Bank reviewed the case for further Interest Rate cuts, but decided against it in order to avoid encouraging extra borrowing as prices climb. This according to the minutes of the february 4 meeting. The reserve bank is maintaining its easing bias. Saying rates are likely to stay low for an extended period. Nejra facebook needs new regulations to win back user trust. Not according to its critics, but mark zuckerberg. He is pushing for lawmakers to develop tools around harmful content. He also wants a new type of regulator. He says well regulation may hurt facebook in the nearterm, in the longterm it will be better for everyone. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Coming up, joining the fight. Jeff bezos creates a 10 billion Climate Change fund. This is bloomberg. Manus this is bloomberg daybreak europe. Nejra jeff bezos has created a climate fund and is putting 10 billion toward countering the effect of Climate Change. For more, dani burger is with us. The worlds richest person has announced his biggest philanthropic investment. 8 of his total net worth. It is called the bezos earth fund. Its aim is to save the earth. For years, the amazon founder has been under a lot of pressure to act. He has not pursued any big charitable project. And then there has been the companys Environmental Impact as it rushes to deliver goods cheaply and quickly. The company committed to an 88 renewable 88 Renewable Energy target by 2024. But will that target combined with the earth fund be enough to squash criticism . We heard from a worker group that says it applauds the move, but amazon is still propping up the fossil fuel industry with its daily operations. Nejra as a busy earnings season continues, Analysts Expect glencore to report results close to consensus after the Company Provided a reassuring production update february 4. The focus will be on headwinds from the coronavirus outbreak, dividends, buybacks, as well as ongoing corruption and bribery investigations in the u. S. , brazil, and u. K. Manus bhp first half earnings surged 29 on higher iron ore prices. The companys new ceo extended returns to investors. Coronavirus outbreak could hit commodity prices. The ceo spoke to bloomberg. We are shipping all of our products. Prices have held up in part because of supplyside disruptions and we have not seen issues with receiving payments. We think they will hold up the remainder of the financial year. We will have to revise our forecast, but so far, we remain reasonably confident about the outlook for the remainder of the half calendar year. Mike, i want to get to iron ore. The collapse in chinese iron ore imports, a record low, or at least as far back as 2016, where this data set began, given we are almost 50 of your revenue in the first alf was iron ore, is there concern for deterioration in cing as well as oref we look at iron inventories in china, they are not that unreasonable or unhealthy. There is more capacity there. At the same time, as we have seen, a bit of weakness in steel demand in china, we have had a supplyside disruption. You have to keep in mind the coronavirus is impacting domestic supplies of iron ore and cold. That has helped to get some strength and resilience for the market through this period of disruption and a bit of uncertainty. You have said bhp needs more copper, more nickel as well. Do you believe you will have support for major multibillion m a in terms of these assets alongside just not smaller exploration or early stage deals . My strong first preference is to be securing options and keeping in mind we have some options, but my first preference is to be securing these options through exploration and earlystage. We have had past success in that regard. It has been very successful for our petroleum business. I would like to see more in copper and nickel as well. That was mike henry, the ceo of bhp. The dividend on this, back to the conversation we have been having this morning, 6. 2 on real. How do you look at this . You could say, hsbc should borrow rather than pay the cash. What is the dividend discussion . It is easy for corporations. A bank has ratios. Corporation and that is what we have seen from apple. Apple has gone from zero debt to substantial debt by issuing a lot of bonds to help with buybacks. Having e of bhp is they are paying out 6 . Manus highest on record. It is a cyclical business. Change is a factor in terms of investment. On esg by the stocks, save hard cash. That is a big number in a low Interest Rate world. I am not an expert on bhp specifically, so i dont know what buyback policy they have. I will investigate when i get back on my bloomberg in the office. Nejra caution over the virus outlook led them to take a more conservative approach. Sayings from citigroup the potential negative impact of the commodities market has barely been priced in by coronavirus. This could get worse. Even comments from bhp, the worst case, limits chinas growth. Init worth staying invested minors right now . Socks like bhp, iron ore itself, have largely priced in the recovery. Nejra you are saying they havent. That is the point. Alan from my perspective i see iron ore looking pretty resilient. Which manus is, all over. And these stocks as resilient. Not a lot of bad news priced in. Hsbc septa 15 of its workforce in its attempt to provide since the financial crisis. It is exiting several business units. It says it is targeting cost cuts of 4. 5 billion. Hsbc is still hunting for a permanent ceo. They areim ceo said not delivery acceptable returns. The coronavirus hits one of the worlds most valuable companies, but analysts say apples slowdown will be shortlived. This is bloomberg. We are continuing to actively monitor the impact of the coronavirus. We are going to have to take additional provisions this quarter as a result of that. That is a call on how long does this virus continue . The hsbc cfoas speaking to nera and myself earlier on provisions as a result of coronavirus. Apple said it will not meet its revenue guidance for march. The virus has created work slowdowns and lower demand, but strategists are also abandoning their targets, but not fully. Not yet. Here is your morning call with dani burger. No bullish capitulation. On to their hanging overweight targets on the stocks. Morgan saying jp the fiscal result in a 17 shipment drop and the cheaper iphone se model will likely be delayed. See saying we are likely to a kneejerk negative reaction in apple stock because this confirms the streets worst fear, that this is going to hit apple and the supply chain and hit it hard. Wedbush andclear, rbc say this is temporary, an issue of timing. That over the longterm, this does not change their bullish ebit. This is going to push back the likelihood of sales we would see in the third quarter. Nejra alan higgins is a still with us. Are you an apple bowl . . Bull alan we are not in the stock. Look at it from a rating point of view. Could it be rate . Easily. Derate . Easily. Earlier, as about the poster child of a global stock season, it is anticipating a reshape. I would be cautious. ,anus if we look at the chart the lowest since 2010. Alan that was the chart. Manus bring that back. Our u. S. Complacent . A chart in the monitor under the desk. I think we should do with the honor. Nejra 30 seconds. Manus do you think that is misplaced . Pedn expecting the vsha recovery, but be cautious. Manus i am in london, so if you see me out and about, say hello. Nejra that is it for bloomberg daybreak europe. The european open is next. Matt good morning. Welcome to bloomberg markets. This is the european open. The cash trade just under an hour away. Job cuts. Job cuts at hsbc. The bank is set to about 15 of its workforce in another attempt to revive its fortunes. The cfo you and stevenson ewen stevenson
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