Transcripts For CNBC Street Signs 20240712

Posted 70 decline in operating profit the ecb urges banks to maintain the band on dividend payouts until the start of next year adding remuneration should also be mod rated speaking to the chair later on cnbc a trillion new stimulus plan puts republicans on a collision course over cuts to Unemployment Benefits saying america has 1 foot in the pandemic and 1 foot in the recovery the senate have been consulting to come up with a realistic proposal with what we think is an appropriate amount of Additional Debt to be added to the economy at this time. A warm welcome to street signs, everybody. One of the biggest movers this morning is in the auto space the psa group has fallen to 84 . The french carmaker said it will maintain 4. 5 operating target predicts a large rebound nor the second half of the year. Lets get to charlotte with more psa shares reacting very well to this set of results. What is so encouraging that we heard this morning good morning. You said it is all about the margins and confirming the profit of the operating margins 4. 5 for the period 2019 and 2021 thats the information i confirmed from this morning. A part of that revenue was better than expected for 25 billion for the first half that psa is very much focused on the first half a lot of countries were in lockdown especially for the Second Quarter we saw the income at 570 million down 84 the market hear the target they confirmed their forecast for sales for 2020 with the sales down 25 in europe, which is again their main market they have confirmed that number. Slightly down from russia and then again for china they saw very strong rebound in sales in june and july they said that they are happy to see that they are confident that they can see the rebound in the second half. Something i mentioned when i said the sales doubled in june and then in may. With the focus in europe and france as well new car sales in june was the only positive market there we see a bit of the seam story here developing at psa they also commented on the tie up with the psa and said the list of information on the potential objections to the tie up we know they open and in depth investigation on the small bans and the segment. They worry that tie up would have too big of the market group. They are listening and have a flexible mindset it is interesting what they said that they are still confident they can close the tie up of the two groups in the First Quarter of 2021. Confirming this calendar we know the information will be slightly delayed it was meant to be closed by september 13 they are confident they can close by the First Quarter of 2021 here psa being sent higher on the back of these results with the shares 3. 5 on the French Market thank you for breaking it down well get back out to you later in the show. I want to bring you numbers out of nissan. Sticking with the auto space, the group has reported a net loss of 285 billion yen versus a profit of 6. 4 billion yen last year reporting a loss of 230 billion yen. In terms of the outlook, they have seen a net loss and operating loss of 470 billion yen. Given insight for the regions. For north america, they see sales of 1. 4 million vehicles versus 1. 6 last year lie light versus last year in asia, 1. 9 million versus 1. 8 from last year for europe for the full year 2020 to 2021, they see 400,000 vehicle heals versus 521,000 thats the look for nissan in terms of the year ahead in Current Quarter group of net loss of 285 billion yen has been recorded this is as the pandemic turn around, theyve been looking to re12r5 restructure the business they see a 4. 5 billion annual operating loss lets look at european markets. Just over an hour into trade this morning weve got a little bit of a mixed picture in the green the stoxx 600 is up 2300 basis points the ftse 100 and the dax the cac making a hit this morning. Lvmh in particular well be focusing on banks this week a big week for earnings. We also heard from the ecb this morning. Weve heard from them to refrain from dividends also allowing lenders to continue using more of their capital or liquidity buffers adding it expects banks to be able to withstand earnings and the stress and warns capital should be depleted should the situation worsen there is a look at the bank Index Trading higher at 0. 6 the bulk trading higher. The credit bucking the trend of select banks there down 1 overall trading higher coming up soon, we speak exclusively to supervisory chair to take and in depth look at the trading sector that is at 10 15 cet european banks could face credit losses over 8 billion in the case of a second lockdown. Also warning europes Banking Sector faces earnings of banking power. Global head of wealth and asset now. Thank you for being with us this morning. A big week for banks also into the broader eurozone economy. What does that mean for that provisioning at this point do you expect european banks to provision for the size of credit losses now good morning, when we look at the provisioning at the moment i think it truly reflects the uncertainty we see in the market i think it will get to more clarity of the furlough schemes provided for the amount of the 400 billion, which is the base case we expect to happen over the next three years that is 2. 5 times what weve seen the last three years and about half of what weve seen. In light of what the ecb has outlined it is important to keep in mind over the next decade, banks really replenish the capital it is a severe shock but they are able to absorb it. What do you think of banks lending to these zombie comes . What are the longer term effects going to be for lending to some of these companies that perhaps shouldnt be kept afloat i think there is still an uncertainty over who cover what type of losses and also depends on what country have been set up importantly things like collection standards it is now the time for the grant bargain as we call it where people will need to get together for the policymakers and delivery groups to deliver on the Banking Sector need where they put the Customer First speaking to the bank ce os one topic comes up time and time again weve seen a unification on the recovery fund, does that increase chances we have seen more unity on the Banking Union front. They have to work on costs but that is difficult. It was basically flat despite the cost so that will be part of the answer those positions will support that when you look at the ecb and the support on the perspective. Cross border transactions will follow some countries were intercountry consolidation that includes italy and germany. Others are not concentrated like france and germany as well over time, we believe across board that will have to happen in order to get a Banking System in that space. The question now is who moves first and we have seen transactions succeed well probably see a domino chain and others will follow urging lenders to freeze Dividend Payments until january 2021 what is the point for investment banks. For the market coming in to the pandemic they force their Share Holders on the return in the form of dividend and buy backs the outlook we have in our record is that returns will be further depressed. So only in 2022 where anywhere near 2019. Those figures werent great. Sort of 6 return on equity on european banking industry. That what really means what the ecb wants them to do is reserve capital. They want them to act on costs as well. To give you one idea of how severe that challenge is we put the banks into various categories and those will earn 4 to 8 . We call those limbo banks. They will not have sufficient returns. What we think in 0ered to achieve in a buffett is on average 15 of cost takeout and reducing Balance Sheet by another 10 to 15 . That against the backdrop of flat structures across the decade where do uk banks look here are uk banks actually a better investment than the continental european banks the return on equity in the low 60s. That is not great but very different from what we see in germany situation is the opposite given the economy you asked with the brexit and what it means for corporate and the Consumer Sentiment and what that means on Bank Spending and it puts a huge amount on the uk banks. There are reports the uk is in talks with banks about an industrywide plan to help with the pounds of bad loans about to come their way what can the uk government do to help weather this storm . With the uk economy getting the variety of chief loans out how can they support particularly when the furl owe schemes come off and how will the losses be shared. Thank you for being with us global head of wedalth of Asset Management shares in ubi banca are higher the group owns about 19 and had previously prejekted the 4. 1 billion offer. The profit plunged 76 in the spekd quarter after the spanish lender set aside 125 Million Euros in preparation for loan losses bankia reported a net profit Net Interest Income fell 10 to 464 Million Euros due to low Interest Rates and a drop in highmargin consumer loans more banks to report later this Week Barclays and thursday, well see more and pnb paribas will issue their latest earnings on friday. Stay with us, well be right ck welcome back to street signs. Lets get a check on european markets and how the trading session is shaping up. Logged three negative sessions yesterday, the main benchmark dropped about a third a percent. This morning, we have recouped all of those losses. Stoxx 600 trading 0. 3 higher. We have a bit of a mixed picture. Spanish margin bouncing back up about 0. 8 in germany, the dax holding up well ftse 100 up 0. 4 in france, the cac 40 underperforming. Movers in the luxury space just before the break at lvmh and montclair. Those shares trading lower the market was some what disappointed a big week for earnings in europe and state side. Well get big tech earnings with a number of those reporting on apple, amazon and facebook the Federal Reserve kicking off today, a twoday policy meeting. A little bit of optimism coming through european markets around the Senate Republicans proposing this 1 trillion coronavirus aid package. We were discussing banks just before the break well get to annette who joins us from frankfurt where im pleased to say she is joining us with the chair of the ecb. We are talking about the key findings of the analysis but also about the perspective of the european banking im glad to be joined by the chair of the Supervisory Board of the ecb let us look at vulnerability analysis your key findings, how would you summarize them i would summarize them by saying the european Banking Sector is in a very strong position to withstand an unpr s unprecedented shock. It is something we never saw before with the scenario considered most likely, banks would have a 1. 9 depletion of the capital. That is manageable and allow banks to continue with the economic support if they thinks it closeable. That would be quite material 5. 7 with some banks facing the faculties maintaining their requirements looking at the regional spread, banks are in these positions do you have special concerns or is that not the case this is not an exercise which has been focused on individual banks or countries the thing of this crisis is the concentration of exposure for certain seker tos for instance is more important than other di mentions you can have banks that look very healthy today one question is you are recommending not to pay dividends and not to buy back shares what are you doing if the bank doesnt obey or doesnt do it . Is it just a recommendation . I wouldnt define it as just a recommendation it is a recommendation from the supervisor that has a very strong banking composed of all of the governors and Central Banks across the union it is a very strong recommendation exceptional and temporary by the extraordinary circumstances. It would be wide in the view at the moment of the uncertainty of the trajectory is so high. Lets look at the valuation of banks if you compare european banks to u. S. Banks the valuation is so much lower why is that in your view and do you think that will change in the future this is something that will not be generated by the covid19 crisis we have the problem of the profitability of the Banking Sector lack of cost efficiency. Well push to do more. The longterm viability there. We mention the consolidation could be start of this strategy and we think banks should continue focusing on improving their Business Model making themselves more profit in the current environment. It looks like the crisis is speeding up recovery with a couple of banks in the eurozone. Do we think the corona crisis can speed up consolidation or lower that process it is difficult for me to say but in general, we think banks should be focused on making the Business Model sustainable or viability. Whatever the external conditions good profitability shown in our exercise today banks which are more profitable and able to withstand external shocks restoring that condition is most important for market valuations and from a point of view you say on your blog that authorities must be ready to take additional action before that further deteriorates. What do you have in mind when you say that at the moment i dont have any action in mind we are showing in our publication today for instance, the extension of measures like guarantees on bank loans could indeed provide significant relief to the Banking Sector if the situation deteriorates tharks is one type of measure that could be considered otherwise, those could be part of the picture if need be. Lets talk about the outlook you have for loan losses we have seen banks have a lot of provision for loan losses in various magnitude. How badly do you think loan losses will develop this year and also next year . If you go to the scenario, you have a huge amount of losses as you say, banks have been taking quite different attitudes the future scenarios and trajectory which is what i had mentioned before we hope the sken farrios we gave and the more clarity into future developments would make future banks give a second look as a Balance Sheet in the amounts for year to come in the event of a severe second wave and the economic slump worsens in a way you might extend your recommendation to not pay dividends well into next year i dont think it is really an issue of how deep the recession is the important is how uncertain we are into the capital trajectory of the bank you find a back in and there is a way forward to reestimate the Capital Position in the coming months and years, we would be in a position to differentiate between good banks and maybe banks that need to be more interest at. So maybe uncertainty of the future markets in germany, with a case of fraud and fintech doing services with wirecard. What do you think needs to be changed in order to prevent such a thing from happening a number of things that might not remake the accounting and i know my colleagues at the authority are doing a review exactly of those from my perspective, i think the most interesting question is about the parameter of the new regulation we are seeing more and more of the new companies and providers of services not exactly of the recession. Not saying that we should extend to everything. We should make sure we are on a level playing field. Wish you so much and good luck for like the summer space with that, ill send it back to you. Wool be discussing the regulation and supervisor vision of the banks Going Forward thank you for bringing us that interview well take a quick break coming up, lvmh slumps while the pandemic hits sales and the flagship says a turnaround is under way. Welcome back to street signs. Im Julianna Tatelbaum these are your headlines the ecb says banks must mod rate as the Supervisory Board chair said it would be wrong for banks to do buy backs. It is an exceptional and temporary situation. We recommend banks in these extraordinary circumstances. It would be wise in the system a trillion new stimulus plan puts republicans on a collision course with democrats over cuts to unemployment. Senate Republican Administration have been consulting to come up with a realistic proposal with what we think is an appropriate amount of Additional Debt to be added to the economy at this time. Sales slide but margins are maintained at psa as the french automaker hopes for a rebound. Sending shares higher in paris red is the new black for montclair and lvmh shares fall after posting the first ever first half loss while the Worlds Largest luxury group post a 70 decline in operating profit shaping up to be a relatively positive session thus far. The stoxx 600 recovering and now trading. 4 higher the french and italian markets higher looking to lvmh and montclair. In the uk, trading higher to the tune of half a percent similar gains in that index. The spanish index out performing nearly 1 following the losses we got the kickoff to the fed in the meeting for today. One of the most interesting parts of trade has been the strength in the euro and the weakness of the dollar we are seeing a little bit of a reversal given up about a third a percent. Still Holding Steady above the 117 mark the euro slipping from a near twoyear high. Reclaiming its footing after it has logged 17 sessions in a row. The pound also trading a little weaker down about 15 basis points investors bracing for big tech the dow higher, the nasdaq higher 1. 7 . Yesterday, a positive session and today, it looks as though investors are pausing for breath back here in europe, the company will secure its proposal of the rail unit the french train maker has made several sessions in a bid to secure rail. With a factory and regional train unit delivering its verdict by july 31st french airport operator adp has suffered a net loss after revenues fell 47 the group said it could take up to seven years to return to precrisis levels. Montclair losses hit by lockdowns. They refused to offer a forecast for the rest of the year but said they did not expect immediate respite. First quarter profit at lvmh has fallen adopting drastic cost cutting measures getting out to charolette for more looking at revenues the profit came in a lot worse than expected. What more can you tell us . Revenue slightly better than expected for the quarter the forecast is something closer to 40 and 42 down 38 . You are right there are expectations way better and operating margins at 9 looking at the details and leather goods. The money making saw the remarkable resilience. A very strong recovery in revenue from china that is something theyll be interested in to see that china is also picking up encouraging signs in june. They did post a loss in travel people are not traveling on that part of the business this side of the business will be hit for several quarters to come they also saw sharp decline in watches and jewelry. This is not changing the thinking behind. Tiffanys is committed to that deal they were hoping to get a green light over the summer. This had all been delayed. They did not give a closing date but are committed. Interesting to see here, Morgan Stanley this morning cutting the target price of lvmh from 450 to 470 a share. So down on the market almost 5 . Well be watching the other luxury giant kering reporting tonight. Well see if they are giving a similar picture. Thank you for wrapping it up and the preview. I want to bring you the latest weve heard out of germany. This is around what is going on in spain weve been covering and eyeing over the weekend yesterday, the german forum has weighed in for people not to make unnecessary trips to spain including specific areas in lockdown they specifically highlighted three regions in spain ill repeat once more for you. The Foreign Ministry urging people not to make unnecessary trips to aragon, catalonia and navarre. Stating the coronavirus is under control in the country but other European Countries are taking a different stance let me remind you where things stand in terms of the Airline Industry Budget Airline jet2 has canceled all flights from spain after the government reinstated a quarantine for all travelers to spain. Tui has also canceled all flights to spain including the Spanish Island you whiching the balearic and canary some hotel have offered to pay for tourists to take coronavirus tests amid the backlash. The Prime Minister has urged the British Government to reconsider adding that the move was not justified. Translator it is true this quarantine measure is not only applying to spain but also to portugal and sweden. The error in my judgement is to contemplate the whole instance as if they were a country as a whole. 64. 5 of new cases of the newly infected are focused in two territories. The great majority of spanish territory, it is low lower than in the uk pfizer moved higher after they said they began late stage human trials for a vaccine more than 30,000 people between 1885 will take part in the trial that will take place at 120 sites around the world if successful, the first doses could arrive by the end of the year shares of moderna also rose after the Company Secured another 472 million the additional funding of the late stage as well as the human trial. The Company Plans to test the vaccine on 30,000 people saying results from the late stage trial could be released in the fall october is possible it could be november at this stage, it is impossible for us to know precisely it depends on the rate of infection. President trump also highlighted the progress visiting production sites in North Carolina and florida saying any potential vaccine will go to the American Public first. We are mass producing so that on the day one that it is approved, it will be available to the American People immediately and will probably have a lot for a lot of other people throughout the world. The world is suffering from this virus. For more, well be speaking to microsoft cofounder bill gates. That interview coming up at 13 00 cet. Coming up, republicans unveil a new relief package setting up a tense showdown with democrats. Well unveil the plan after the break. Businesses are starting to bounce back. But what if you could do better than that . Like adapt. Discover. Deliver. In new ways. To new customers. What if you could come back stronger . Faster. Better. At comcast business, we want to help you not just bounce back. But bounce forward. Thats why were helping you stay ahead and adapt with a network you can count on, 24 7 support and Flexible Solutions that work wherever you are. Call or go online today. Welcome back the number of coronavirus cases and hot spots in the u. S. Has stated to ease for the first time, florida reported a drop in numbers both arizona and california saw lower infections in about a week the republicans unveil a new 1 trillion relief package in a bid to provide support a decrease of Unemployment Benefits and 16 billion for Virus Testing and a fresh round of payments to americans and loans for hard hit Small Businesses Senate Majority leader says it helps the country while it has 1 foot in the pandemic and 1 foot in the country. He added it may change with negotiations with democrats. This is a starting place. We have had a lot of members involved to start. We cant pass a bill in the Senate Without democrats nor can it pass the house. Every bill has to start somewhere. The republicans are in the majority in the senate this is the starting place youll have plenty of stories to cover along the way as we have these discussions back and forth across party lines and with the administration democrats say it does not do enough to help Americans Senate minority leaders said it allows for party infighting. We had hoped that there would be a bill. Instead in the senate, theyve put together little pieces here and there and everywhere it is clear they dont have 51 votes among the senate it is frustrating. Theyve dithered for three months and now there are very serious cliffs that hurt a lot of people. Unemployment, rental, state and local. They are trying to get their act together, which is frustrating because of the needs of people tracie potts joins us live. Weve got this proposal now. Democrats proposing parts of it. How far apart are republicans from democrats on this package there are 2 trillion apart when it comes to the money they are apart by hundreds by how much americans should get in an unemployment bonus every week thats one of the cliffs you heard. Those federal benefits run out at the end of this week. So the whole package aside, theyve got to figure out something to do to agree on or millions of americans are going to lose 600 a week by the end of this week republicans want to drop it to 200, democrats think thats not enough they argue people are making more at home than they would at work they want to boost jobs so they can go back to work. Now we have numbers on it and a deadline the other thing not in a republican package is eviction a more to a mortoreum on ee veviction ran outlast friday thank you for breaking it down for us. We appreciate it americans paid tribute to former congressman john lewis in washington following the death of the civil rides leader earlier this month we have more reporter rare but fitting honors for the Late Congress mon john lewis pausing to pay respect to the civil rights giant his funeral procession pausing at at Martin Luther king jr. Memorial dr. King inspired him. And the Lincoln Memorial where lewis was the youngest speaker on the march on washington were tired of seeing our people locked up in jail how long can we be patient also driving down the newly minted black lives plaza where last month, he made his final public appearance in support what does legacy mean to you . As a southerner, as the wife of a black man in america and the mom of by raceal kids, it is important to be here i value sacrifices and struggle he values to the greatest extent making his final trip to the u. S. Capitol he represented georgia more than three decades. Carried up the steps and in where he became the first black lawmaker to lie in state as former colleagues said farewell. We new he always worked on the side of the angels now we know he is with them. Joe biden and vice press mike pence scheduled to honor lewis during todays invite only, gospel singer delivering rendition in song with a powerful rendition of amazing grace. Jeff bennett with that report well leave you with a look at u. S. Futures. Posed to open on wall street muted gains. That is it for todays show. Im Julianna Tatelbaum it is 5 00 on cnbc from cares to heals. Senate republicans unveil the latest relieve package but at 1 trillion, is it too small . Signs of a slowdown in hard hit states like california and texas. Hours after moderna kicked off the final trials announcing the start of its own stage three trials call it the wild, w