Transcripts For BLOOMBERG On The Move 20160803

2013 bill gross says record low yields are not worth the risk. Socgens net income beats estimates and rises over 8 . The deputy sees tells bloomberg the french bank also receiving the brunt of brexit. Today the risks are still very high. Decision is creating an additional uncertainty. Caroline we are less than half an hour away from the european open. We are going to be digging into what we see in terms of the market futures. Overall keep an eye on where we are trading. Are up. 2 at the moment, perhaps not the risk aversion we saw flow into asia overall. We are starting to see some hope looking forward after the significant selloff we saw yesterday in the Banking Industry could what a slump, down just industry and what a slump, down. 3 . Lets have a look at the workers were news with juliette saly. Juliette caroline, thank you. After taking a pounding, Global Oil Prices is set for a violent reversal upwards. That is the story and a hall is telling investors. Story andy hall is telling investors. Winter is likely to drive up demand and a glut of resistellers could only for so long. Bill gross is it really rating his warning on sovereign debt after yields from the u. S. To australia touched alltime lows in the last month. The danger of the rally is in a reversal will be painful for investors. He says sovereign bonds at record lows are not worth the risk. Planning changes that would loosen curbs on trading in the countrys stock Index Futures market. That is according to people familiar. The new rules would require is yetl but the exchange to make final decisions. A 99 plunge and volume last summer. In volume last summer. Toc says profit fell 45 3. 61 billion missing analyst forecasts. The Company Announced a 2. 5 billion Share Buyback before the end of the year. The bank is contending with slowing Economic Growth in china as a prospect to eliminate thousands of jobs. Global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. This is bloomberg. Manus. Manus juliette, thank you very much. And 8 rise in the Second Quarter profits this morning. Setting low provisions for bad loans. Ceo spoke to bloomberg. Have a listen. The methodology which has been fixed is very severe for markets, for example the attention is 35 shot on the liquidity in the u. S. Our Business Model is very. Xposed on Market Equities the methodology is impacting us a bit more. The point is on the risk, credit risk less impacted. Ning the credit portfolio the Operational Risk is the same than the average. The methodology is underestimating the capacity of the bank to generate Additional Capital in the future. Clearly we will continue to build up Additional Capital. Situation, the. Rexit which is a real stress you so how sufficient we managed this stress. Even this stress is affecting the market, because we have devastated we can manage very securely. Caroline the of the stress is being discussed. Thats plenty of stress is being discussed 20 of stress being discussed. How can this keep thats how can they keep this up guy how can they keep this up . Benefiting from the sale of the stake in visa europe. A good performance in the International Banking division and lower loan provision. If you look at the shares of Societe Generale, the beginning of the year, they have been trailing the french rival b. N. P. Paribas. Markets, the reason you have the deputy ceo saying that under the most advanced stress tests, they had a ct one ratio of only 7. 5 which is lower than Deutsche Bank or b. N. P. Paribas is because Societe Generale is dependent on market. The Investment Bank in the Second Quarter, the profit fell 36 , second biggest risk is the lower Interest Rate environment. 5. 2 in thet fell Second Quarter. The political risks, the deputy ceo told me he saw geopolitics as the biggest risk for this coming year and the next year. Not only brexit but also the elections in the u. S. , germany, france and the referendum in italy, the uncertainty. This is what he said the target of 10 should not be achieved could not be achieved this year. Manus caroline connan, thank you so much. Lets bring in there and rouen darren rouen. Boost. A nice likewise with socgen. These are the banks. This is the performance on the ex ex 70. The italians are the tortured souls. A little bit of greek tragedy. Nobody has got a bid for them. How much the you think we should take in terms of bank equity or should be bonds. Darren im a bond investor, clearly i was a bonds. The are two stories going on. One is about bank capital. I thought it was quite reassuring. I know theres been activity on the back of it. I thought that was a reassuring report. Tier one ratio full. From a bond perspective, that is sufficient capital. It is all about the operating environment. That is very tough. Youve got negative Interest Rate environment, we could demand for loans and Investment Banks in europe are finding it tough. Caroline darren, you talk there about the environment and the record low yields and we are starting to see perhaps a bit of a selloff come up the gleaming sparked in japan. Yields punched up higher. Were seeing that across the board. Could this be the Tipping Point . Will be start to see the environment it better for banks potentially . What you think these record low yields are here to stay . Or do you think these record low yields are here to stay . Darren i think they are here to stay. We will go to dispose where bond yields will go down quite quickly. That could reverse ever so often. The midyear was in thoughttime when we that Deutsche Bank would not be able to repay their tier one capital. How much more issue is will there be . Where would you be interested . What level of credit would you accept . Gross yieldsan get on some of the best banks in europe. I dont think you need to go down the Credit Rating spectrum to get some good returns. There are some high returns available from weaker banks but why go there . There is too much downside risk. Manus darren ruane stays with us. Of next, we are going to have a conversation with the cfo of ing. Group, weg business are live cap suydam. Rio tinto new ceo will discuss the numbers for the miner and the first half results. Shipping profits, Deutsche Posts profits that beat estimates. This is bloomberg. Caroline welcome back to on the move. A slightly great start in berlin. A slightly great start in berlin. Lets get over to the Bloomberg Business flash. Heres juliette saly. Juliette caroline, thank you. Rio tinto has reported its worst profit since 2004. Prices eroded earnings. Underlying profits fell 47 in the six months through june matching analyst estimates. Coming up later today at 1 20 pm u. K. Time, we speak to the new ceo of rio tinto jeansebastien jock. Jeansebastien jock. Bank saysirdlargest the income was 1. 1 6 billion euros come up 26 from a year earlier. It got his boost pump a sale. From a sale. Axa profits rose 4 . We will be asked we will speaking exclusively volkswagen has warned that is allowed to last. The german carmaker has been told we spoke to where does the text whether the tax cut will be extended. The worlds secondlargest economy has been a bright spot for vw which has been embroiled in a cheating crisis. That is your Bloomberg Business flash, manus. Manus ing group, the biggest dutch lender, reported profit. That was up from 358 Million Euros just a year ago. ,hat was were joined now patrick flynn, the cfo. Patrick, thank you for joining us. Looking at your numbers, your lending Business Group and provisions drop. Where are you seeing the rise in your lending business . Give us a little more color on the provisions drop. Good morning. Good to be on the show, manus. What you see here is our strategy about the digital innovator, growing our franchise. It is paying off. That is the lever that allows us to grow. The lending growth we have seen is 4 billion in retail and mainly eastern europe. Our big driver is 10 billion in our commercial bank. We have a global footprint in our whole soul bank. That growth is across asia, u. S. But only and to a lesser extent in europe. Fromine we heard earlier Societe Generale talking about the pain being felt by low Interest Rates. How are you managing to keep up these resilient margins you talk about in your Earnings Statement when we have got an era of such debts low sovereign bond yields . Patrick again, not only have we maintained our margins, stable at 150, we have increased 5 . Interest earning is up 5 and a low rate environment. How have we been doing that . It is about the strategy here we focus on our customers. We aim to be the number one rankeds Customer Service number one ranked Customer Service provider. ,hat allows us to grow deposits but we have grown our lending by more than 14 billion growth in customer deposits. In our business, more customer lending, less reduced number of liquid assets, putting more money to work. Margins. A strong that adds strong margins. Mental what is it manus death taxation will give us all. Death, taxation and regulation regulatorsyou start cost at 960. Are you calling the top of regulating costs and the business . Every quarter we get another 100 million from you. We are at nearly a billion. When does this and . Pietro i am not brave when it comes to regulation cost. Patrick i am not brave when it comes to regulation cost. I am very positive on our results. 6 growth and profit 26 growth in profit. We control on we control our own business. Growing primarily relationships is clearly working because strong commercial momentum, we can navigate low rate environments. We are doing so and holding margins of. 426 for 26 growth and profits and delivering 11 are oe our only our all too optimistic for me from a banker. You are saying to me, we are in a unique position and growing the margins of the business. Were living up and growing the margins. That automatically are you taking more risks . If youre able to squeeze that much margin, is the risk profile of the your lending to going lower . Patrick we are holding margins stable. We are not growing margins where not growing margins. We are not growing margins. We are not relaxing risks. Some geographies, notably the netherlands, art lending down our lending down. Our lending down. We have a global wholesale banking franchise which we are able to tap into growth in asia and u. S. Possibly not well understood about your references about being a dutch bank. Ur franchise is a global when you get strong commercial momentum, when you can grow your customer base, you can grow your lending. That is what we are doing and where not relaxing one iota. Caroline what about your reaction to brexit . . Ow has that impacted things your presence in the United Kingdom or looking to evolve your presence in the u. K. . And the ramification its having on the rest of your businesses . Patrick brexit, very limited impact so far. For ing, our business in the , six of the people in commercial banking and financial markets, it is a part of a dutch branch. We are not faced with the same licensing issues may the u. K. Based subsidiaries would have. The issue is more about uncertainty. Manus patrick flynn, unceremoniously cut off. I like a banker who says he is never brave enough to call 7 51 in london. It is a bright day. It stopped raining. That is the breaking news. We are going to be keeping and i on. Potential corporate movers. Banks, bags, banks. Hsbc has a 45 drop in profits. Socgen, ing doing good business. Stocks to watch, coming up on the move. Caroline welcome back to on the move. Six minutes until your market open. Lets have a look at some of your top stocks. The worst hit industry yesterday. Today we could see some gainers. Societe generale one of them called up 4 as it beats analyst expectations. The second and third biggest players in france look like they could gain as profits rise. Also keep an eye on ing. We just spoke to the cfo. Also betting it out of the park, it just be want to keep a close eye on. Manus 2. 5 billion dollar buyback. 2. 5 billion buyback. Pretax profit missed on the headline. 3. 61 billion. Go to top go because you can pick up what the editors are saying and what everybody thinks in terms of hsbc. Along with the ceo revenue environment which continues to be difficult. It is a bright and cheery day. We will go through this market opening very shortly. This is bloomberg. [hip hop beat] olympics 2016, let me get you on my level. So you never miss a moment, miss a minute, miss a medal. Why settle when you can have it all . Soccer to wrestling. Track and field to basketball. Fencing to cycling. Diving to balance beam. All you have to sa is, show me, and boom its on the screen from the bottom of the mat, to the couch where you at . Show me the latest medal count xfinitys where its at. Welcome to it all. Comcast nbcuniversal is proud to bring you coverage of the rio olympic games. Manus good morning and welcome to on the move. Im manus cranny. And alongside me is my partner, caroline hyde. Caroline, the morning brief. Caroline hsbcs totally profits plummet 45 , missing estimates. Liz, as the bank contends with this as the bank contends with slowing growth in china. New management, old problems. Rio tinto reports its worst earnings since 2004 and the new ceo vows discipline and growth. And Societe Generale beats estimates and rises 8 . The ceo tells bloomberg the french bank is also feeling the brunt of the brexit. The uncertainty is very high. The brexit decision from the British Population has created an additional uncertainty in the environment. Caroline the market is up and running. We are called a little bit higher, some reprieve from yesterdays selloff. The banks are the worst performing industry, hit pretty hard. The euro stoxx 50 up. 2 . The cac 40, up. 4 . Credit agricole and Societe Generale are called up on the back of their earnings. Nejra caroline, i am looking at the imap on the bloomberg, so i can see how these various Industry Groups are performing. It is green across the board, as you can see, a very different picture from asia, where it was red across the board. In asia,they really were the laggard. That is followed by utilities come up. 5 . And then, health care and energy, trailing along the bottom, though still in the green. Pretty much flat after we have seen crude oil halt its losses. That is how the Industry Groups are shaping up. Lets take a look at the u. K. 10 year yield as the gilt markets open up. This is a two day chart. They are up eight basis points on the 10 year yield. We are at 80 basis points on that 10 year yield. Lets take a look at the restocks i am watching. I am starting with rio tinto an d the mining sector. The underlying profit was in line with estimates, but was still a drop of 47 in the six months through june, the west profit since 2004 for rio tinto. The dividend also fell 58 to 45 cents a share. It looks like we could be moving higher come up. 4 on rio tinto. Then, keeping a french focus here, starting with axa, frances biggest insurer. This helped offset higher claims from natural catastrophes. So, that stock is moving higher. And then, socgen moving higher as Second Quarter profit rose 8 on the sale of its stake in europe. Manus thank you very much. Hsbcs profit has fallen by 45 . It is shaping up to be a difficult quarter for the banks. Bloomberg intelligence banks analyst joins me. I want to bring one piece of news to our viewers, jonathan. Hsbc says there could be another buyback from u. S. Shares. That is interesting because we have a 2. 5 billion by back on the table buyback on the table. Profits have dropped by 45 . Tell me this. Is this a balancing act . The dividend promising more. I think it is actually a positive. I think it also delineates between the haves and the have nots. The ratio is nearly 13 post the brazil sale. They have internal cash flows to pay this dividend and that is a positive. On the off side of that, they have stepped away from the progressive dividend policy. So, they are now looking to pay a sustained dividend. We have questioned whether or not progressive is the way forward in this environment. 50 pace might pay 5 billion in dividends. The fact that it is a small miss on a one quarter basis when we have this huge restructuring, the market are happy to look through that. And drawing a line on the valuations of new shares is a positive and it is a shame we do not see this elsewhere. Caroline speaking of positive, and the haves and have nots, it is hsbc. On bloomberg, i am showing you the different stories the share prices are telling us, in terms of the u. K. Exposure. In the white, that is how hsbc has performed since brexit. And down goes barclays, and the rest of the players exposed. They are too domestically focused. The asia view is paying dividends when looking at the share price increase. I want to take it back to you jonathan tyce. Is this doing well for hsbc at the moment . Yes, barclays, rbs, and lloyds are still restructuring, but unfortunately, their u. K. Focus rates lower for longer. They have got issues to face and they do not have more compelling stories. With cac dividends and share buy backs, that is one of the most interesting restructuring stories in a sector. Manus so, lets bring out guest into the conversation from investec. Listening to that, there is a very clear reason why you would want to hold hsbc with the standard chartered. There is less brexit exposure and a better restructuring story. Do you buy that in terms of the dividend play . I know you like the Interest Rate side of the equation. So, take us to the u. K. Equation in that respect. I think one of the reasons why stocks have done so well is because they are dollar earners. Overseas investors have been looking at dollar runs in the u. K. I have been really well post brexit. Future, what about the in terms of the bank of england rate cuts to come. This is going to be more pain in terms of load yields when it comes to the United Kingdom. Is this more reason to get out of barclays and ubs, the companies that remain really focused on the United Kingdom as the domestic market . I think you are quite light, caroline. The Interest Rate environment is going to be quite weaker. There is a possibility of quantitative easing on thursday, which could drive bond yields lower and create a flatter yield curve, which affects the banks. So, i think some of those things will be under pressure. Very cheap on a price to book basis. We have seen this story out there for a long period of time. Manus and cameras could tell the basic reaction of a bloomberg analysis, it would say it all. Give me your interpretation. You got the sustainable returns and they are so much lower. We are talking midsingle digits. Manus this is on net interest income. Know, this is on return equity. If you are banking in a 5 return, you are applying no growth at the moment. We note these banks we know these things are shrinking. You can certainly explain why these banks are where they are. Tests allow people to sell this off in the absence of better data. Manus you said you were quite happy with the stress test in terms of hsbcs performance and standard chartereds performance. By the way, hsbc is now up 3. 9 , hitting levels we have not seen cents april 13. We have not seen since april 13. Do you feel more comfortable, jonathan, post stress test . I think if you look at the problems wihth the stress tests, they are still not addressing the relative levels of provisioning, the Different Levels of bad debt, and also, the different assumptions about the revenues of the banks. The Interest Rate assumptions are covertly wrong. Rbs, which is going to make 15 million of a cumulative loss, versus georgia bank, where theutsche losses were not as bad as what people expected. Risk is going of up. These guys are in different cycles. There are many different ways in different cycles to invest in with financials. I would like to touch on jonathans point. On the stress test, the u. K. Is a special case. We will have results in the fourth quarter. So, i think u. K. Investors will be very focused on that. Caroline it looks as though the Investor Base today is focused on banks in general, the bestperforming Industry Group today. We have real come performance coming from the likes of ing right now, rising about 4 . Yesterday, the beate most beatep Industry Group and today, the best performers. Jonathan tyce and darren ruane will be staying with us to discuss much more, particularly the mining sector. We talk rio tintos earnings and the outlook for the sector. We will be speaking with the ceo Deutsche Post. And later on in the show, bit coin. We are live in hong kong with the latest. This is bloomberg. Manus this is on the move. We are 13 minutes into your trading day. We have had banks and miners. 1. 25 . Xx 600 is down london, paris, and frankfurt have all turned it around. Up. 3 in london. Mrr within the stoxx 600. The bank of monte paschi leading the pace at the top. Ing, weve just spoken with the cfo, patrick flynn. Socgen, 4. 42 . We were warned that the week after brexit people went shopping. If you are wondering what happened in this country after they made one of the biggest decisions in their lives, they went shopping. It was guided a little bit lower in terms of the four year expectations. They have raised the low end of their profit yield this year. Lets get to first word news. Manus, after taking a pounding for two months, Global Oil Prices are set for a violent reversal upwards. That is what andy hall is telling his investors. In a letter obtained by bloomberg news, he says oil the price of beginning to shrink. Take liberator is likely to dry ist demand a dry winter likely to drive that demand. Bill gross has reiterated is warning on sovereign debt. The danger of the unprecedented rsely is that any reve will be painful for investors. He says sovereign bonds at record lows arent worth the risk. The countrys stock Index Futures market. They say any new rules would require approval and the exchange is yet to make final decisions on the changes. In restrictions follow a 99 volumes last summer and heightened concern over the governments intervention in markets. Global news 24 hours a day, powered by 2600 journalists in more than 120 countries around the world. This is bloomberg. Caroline thank you very much indeed. Now, lets talk mining. Lets talk rio tinto, reporting its wortst profit since 2004. Lets bring in now for more jesse. Jesse, take us through the numbers. Because this is the worst set of numbers since 2004. What drove this lower . Low Commodity Prices across the board. In particular iron ore, copper and alley minimum where the main drivers and aluminum where the main drivers there. An expectations were underlying profit of 1. 65 billion, which master the bloomberg estimate. That was in line with expectations, but we did reflect this change of dividend policy that rio had adopted. The Mining Industry no longer supported these dividends. So, that has been changed to a ratio of underlying earnings. Hence, the significant drop. Manus we have had this rally in iron ore. Weve got a new ceo. He wants to put his stamp on the business. It is the lack ar iggard in the family, so to speak. What do you expect in terms of Strategy Change . Unfortunately, i hate to be boring, manus. But it seems like he is just adopting a steady as she goes approach. He was very successful in running this business through the downturn. Almost 7 million in costs, albeit in a deflationary environment. They have been selling less desirable assets. But there is some expectation that he will be in this role for some period of time and will potentially, see rio through a more Aggressive Growth phase. There could be some more mma on the table, but when asked about that today, he cautioned they would take a very conservative approach. They are continuing to watch mma, was his line. Caroline i want to bring you down here because we are looking on the screen at the reprieve that we have started to see in the metals market. Sure, this time last year it still looked pretty dismal. I wanted to show you this. Our producer show this to us earlier, shining a light on iron ore prices. We love the coining of the phrase, rio going for gold with ore. We are sitting perhaps, a turnaround in metals. Are we expecting to hold onto these sorts of gains . Is it all about china . Has a lot tois do with the price of the dollar. When the dollar is weak, we have thing Commodity Prices go up and vice versa. From a credit point of view, many of these countries have engaged in selfhelp policies. So, they have the leverag for deleveraged, to some extent. So, there are still worries, but certainly not as bad as they were. Manus jesse, before we let you go, does the market really believe this rally in irone or . Is there a production slated to come off next year . From the people i speak to, the market is not believe the rally. Rio tinto themselves for quite cautious on the outlook. I want to pull one line. Chinaave said growth in has stabilized, but we are on a longterm transition path with less commodityintensive growth. Manus there you go. All a little bit lower today. , jesse. U so much darren ruane stays with us. Coming up at 1 20 today, it is a conversation you dont want to miss. The ceo of rio tinto will be. Bloomberg caroline welcome back to on the move. We are talking bank of japan now. Is it about to hit a wall of selloffs . Bill gross, who built the worlds biggest fund at pimco, has echoed this sentiment, saying bonds have gotten too risky. Darren, we talked earlier about the selloff we have seen in Government Bonds. You think overall the yield is set to remain lower. What did you take back from, particularly from the bank of japans moves this week and last week in terms of Monetary Policy and fiscal policy . Do you think banks are stepping away from the Monetary Policy gains . They could be. Monetary policy in this world right now needs to be very loose, which will be very supportive of Government Bond prices. Having said that, we might have gotten up to the wall in terms of what Monetary Policy can do. I think Monetary Policy, not just in japan probably in europe as well has come to the point of doing no more. That is where fiscal policy needs to come in and take the strain. The problem is, we have been disappointed by the bank of japan and abe in the past four or five days because what we have been given is not what we hoped for. It is much less. Manus it is much less for now. There will be a review in terms of what the bank of japan does. But also, volatility. This is a chart on 60 day volatility for jgb. This is the Balance Sheet for the bank of japan. This is a backlash that people are saying looks like 2003, which is what we saw with the bund last year. Is this the beginning of a backlash in jgbs . With jgbs, potentially. With the reassessment you are talking about in september, that has been taken two ways. Way of looking at it is they have realized they have done as much as they possibly can. There are not that many more jgbs that they can buy. Remember, with yields so low, that increases the duration of these bonds, making them more volatile. Is this the beginning of the end . I dont think so. Going back to what bill gross was saying, is this a good medium to longterm investment . I dont think so. Caroline what is a good medium to longterm investment been, thern darren, in this environment . They had been pushed up the risk scale into Investment Grade credit and highyield credit. We talked about bank credit earlier. I think we said we could get yields from 7 to 9 with good quality banks. That seems reasonable over the medium to longterm. Albeit, they will be volatility there will be volatility on the way. Rren. thank you, daurre up next, profits rise for frances secondlargest bank. We break down the numbers from socgen. 9 26 ine in london and paris. Up 2. 75 . Come u, this is bloomberg. Hohes woiithongestc . Estc. Thlais hotas hke hyson at ey llg ca hke cwistomin biness rn fid , p cth bou e. Juais hotas hke hyson at ey ddstus azetomimeag y wiourofiay llg ca hke heesev. Or upde. Eesev itrestn i, w c ue e dry. Yoding uc pwiwiro fii caroline welcome back to on the move. 30 minutes into your trading day and we are turning around. The stoxx 600 turning back from the green into red territory. We will see what the la miners s index down. The dax is down. 2 . The cac 40, our underperformer. All the reason to keep an eye on the one performer today, the Banking Industry, up 1. 4 . Nejra, i know you will be digging into the individual movers for us. Any banks in there . Nejra there are, but first i want to talk about one of the u. K. s most reliable retailers. It has been seven consecutive years of profit growth. That has come under some threat in 2016. The ceo did say today that they expect the consumer environment to remain tough for the rest of the year. And quarter three will be particularly challenging, as it was the best quarter last year. But the company said sales accelerated on new store openings. It also said it has not seen any onreciable f oeffects Consumer Behavior in the wake of the decision to leave the eu. Next is up 3. 5 , one of the best performers on the stoxx 600. Next on the list, hsbc. A push back the timeline on its return on equity targets. So, basically, it said the dividend is to be capped at the current is to be cappe at the pt at the current level for the foreseeable future. You have analysts at citigroup shouldthe buyback reassure investors of its ability to maintain the current 51 cent dividend. We have hsbc gaining. We have also got Credit Agricole gaining. 2. 06 . Rose the Second Quarter profit number was a beat. You have more on banks, manus. Manus i dont know how much more value i can add on banks, nera. We had the cfo from ing. You can find the interview on bloomberg. Com. The potential rescue plan. Nejra was taking you through their, profit drops by 45 . Nejra was, as taking you through there, profit drops by 45 . And more, buy backs, buy backs. s caught up with the Socgen Deputy ceo. There are two types of banks. The first is a macroeconomic bank. We are revisiting our economic an assumption. And probably, the impact on the economy could be higher than for europe, for example. The longterm impact will very much event on the outcome of the negotiations between europe and the u. K. It will be very lengthy. We dont know when it will stop because of article 50. It has not been issued yet. Additional instability on the markets. We have a very operational system between paris and london. Reporter you are mentioning that your ratio is 5050. Could this ratio change after brexit . It could. It depends very much on the outcome of a negotiation. But if i could share with you a what would be the ruling on the passport existence . I am convinced london will remain a very Important International place for the market. There is a very big number of staff in london, clearly. Through that, we will have a new new rental dd a contract. Reporter you are a very big advocate of making this beneficial for paris as a financial center. As i said, the situation for us is quite specific. Bigus, it will not mean a transfer, no matter the outcome. Reporter so, you dont agree with the sewag situation there is a brexit, yes. That we are not influential on the negotiations. Of course, a brexit is a brexit. So, yes, there could be an advantage and we will contribute to that as well. Caroline ing also reported Second Quarter profits beating estimates after loan provisions dropped and the lending business grew. The stock has been trading higher on the intraday basis. Every up, up 5. 8 at the moment. We caught up with the cfo this morning, sounding pretty buoyant about the strategy. The only have we maintained our margins stable at 150, we have upped our interest by five 8 . How do we do that . We aim to be the number one ranked customer provider in the markets we are in. Caroline the banking interviews will be coming fast. We will be speaking with carlo mesina at 10 40. Deutsche post the earnings. Up next, Deutsche Post beat earnings. That is coming up after the break. This is bloomberg. Manus welcome back. This is Bloomberg Markets middle east welcome back. This is on the move. These are the stock markets as they stand of the moment. European stocks, i can tell you, there is only one Industry Group excuse me, there are two, banks and utilities. Socgen and ing lead the gains. Construction is down by 1. 5 . We have had the rio numbers. We have had hsbc saying they are going to do more buy backs in t erms of stocks. Lets get the Bloomberg Business flash. Reporter manus, thank you. Rio tinto has reported its worst profits since 2004. Depressed prices for iron ore, aluminum, and copper eroded earnings. Coming up later today at 1 20 p. M. , we speak to the new ceo of rio tinto. Aedit agricole haspost posted higher secondquarter profit. Frances thirdlargest banks income was up 26 from a year earlier. That got a boost from the sale of its stake in europe. Axa has said its First Quarter profit rose. This helped offset claims from natural catastrophes. Frances biggest insurer saw a net income rise of 3. 6 billion euros. Volkswagen has borne the industrywide demand in china will plunge if a tax cut due to expire at the end of the year is a lot tallowed to last. Worlds secondlargest economy has seen a bright spot for vw, which has been embroiled in an emissions cheating crisis around the world. That is a Bloomberg Business flash. Caroline . Caroline think you very much. Oil analysts from citigroup to bank of america to their lunch ar Merrill Lynch are confident. We are now joined by the chart of the hour. Do you think oil could back off of this 40 area . We have talked a lot about the issues facing oversupply from u. S. Over producers to the prospect of a resolution in libya. But this chart shows you how analysts are feeling from bank of america to Merrill Lynch, all the way to citigroup. This is that going how they feel about this is echoing how they feel about the situation. They have been paying a small premium to protect them from oil falling from now to the end of the year. This is even after oil step into bear market territory. What you are looking at here is the skew, and that has narrowed some 30 since july. Citigroup says that the oil has gone wild. At 40 a barrel, there is plenty of potential for investors, commercial, and physical demand as well. That sentiment is echoed, saying, this could be as low as that goes, in terms of the 25 potential. That is what the Options Market is telling us. Caroline oil turning back into the red. Thank you very much, a great chart as ever. Now, lets return to our corporate news. Thische post the estimates morning, confirming it is well on track to achieve the targets for the rest of the year. The German Postal Service was considering adjusting prices in the u. K. We are very glad to have you on this show. Give us a sense of particularly, beenrexit hit we have talking about. The fact that you have been hedging could be changing prices in the future. To what extent . Good morning. Yeah, brexit is something we have to manage in the shortterm, but especially in the medium to longterm. This depends on the agreement that will eventually be reached between the u. K. And the eu in terms of trade restrictions or not. We are anxiously awaiting to find out more about that to see what kind of middle and longterm impact that might have on our business, and how we need to react to that. In the shortterm, in terms of the business level, it is all in terms of trade levels between the u. K. And europe, we have not seen any changes. That really leaves the weaker pound as that we have to manage at the moment. We regularly are hedging currencies, including the pound. So, not just because of the brexit. We are well hedged in adva ance of the brexit vote. That was a good decision. We continue to manage this day by day. And i think, if we have the view that the pound is going to be persistently weaker, then, we have to look at what kind of operating measures we can take to manage the weaker stream of earnings. The costs match up pretty well, in terms of local pound costs and local pound revenues. So, it is really the profit and the volatility we have because of currency strength or weakness that we manage. To look at, isve it really going to be structurally weak for some time . And if so, we will take some torating measures to t ry try mitigate that somewhat. Manus sorry, can i jump in here. Comprehensive response. It is manus in london. That is a very comprehensive response to the brexit situation. We have limited time. The whole world is trying to work out whether brexit is having a global ramification beyond the anglo european border. Talk to us about china. What is going on in terms of Global Growth from your perspective . Has Brexit Impact of the other parts of your business on a global perspective . Actually, we dont think that there has really been a change, really in china or anywhere else, in the underlying levels of Business Activity and trade just because the brexit. That being said, we are seeing a lower than historical Growth Market in terms of overall Economic Growth and trade growth. We have seen some recent softness in china. And you know, whether that is going to be with us for some time, or whether it is going to turn around in the second half is yet to be seen. We can still the overall good growth in china. And the emerging markets generally, certainly higher growth than we have seen in europe and the u. S. Caroline what is the telling you in terms of the trend . It is interesting because the two markets are quite different. Freight is doing pretty well. Sea freight is doing pretty well. The air freight market on the other hand has been really soft. We think q2 growth for the entire industry was at 1 . There has been some structural changes. Some products have been shifted from air freight to sea freight. We just have to wait and see if the trend will be with us for some time, or again, if we will see some strengthening as we head into the second half, which is usually the peak of demand for air and sea freight. Manus i am just thinking of the top line of our bloomberg story. Deutsche profit rises the fastest since 2011. Are these businesses still prepared to tame that premium . What are the models telling us . Our business tell s us is that customers are willing to pay for value that they get in terms of quality, reliability, security, and the. Security, and speed. That is something that is helpful for us. We are the leader in the express business. Also, increasingly in the parcel and ecommerce business. It is really important, giving customers many different ways to get delivery. And being able to offer a time window for the delivery, being able to offer sameday delivery. I think that is the way you can differentiate. If you are able to be innovative, to provide very high quality and Customer Service, you will get well reimbursed for that. Manus larry, thank you for being with caroline and myself we wish you well. Larry rosen, the ceo there at Deutsche Post. Lets give you some breaking news now. At 52rvices, coming in for italy. Lets just have a look at france. Actually, we have had french 50. 5services, rising to from 50. 3. You would hardly call that a roar rto the upside. It is going to be all about the Inflation Numbers that draghi is focusing on. Pmi rises to 50. 5. An. Italy, services, 52 caroline the euro picking up off of session lows. Up next, we are talking another asset. We are talking bit coin bridging the Digital Currency. The app steals 55 million from the hong kong exchange. This is bloomberg. Caroline welcome back to on the move. Lets talk bit coin now, plunging after one of the Largest Exchanges halted training because 65 million worth of the Digital Currency was stolen. Trading withdrawals and deposits were halted after discovering the security breach. Loss today,a 5 adding to the losses from the day before. Talk to us about the seriousness of the situation. Well, it is quite a significant breach. If you look at the amount of value we are talking here, 65 million, that is some of 7 of the coin market. Earlier this week, the coin market cap fell as well. So, the price movements are quite ominous of the earlier hacks. Manus kind of going to jump in here. We are going to continue the conversation in one second. I want to bring our viewers the German July Services pmi number. The number comes in 55. 4. The flash reading, 54. 6. That is the latest on the German Services pmi. When it goes red, we break it. Lets get back to the bit coin story. Tell me this. How to this actually happen . Currently, the company is still trying to track down who actually has the company and where the funds are going. Based on what we know, they said last year they announced a collaboration with californiabased bit go. They moved the bit coins online to enable a faster transaction and withdrawal. Usually, exchanges like ok coin, the Largest Exchange in the world right now, they keep thei rbiir bit coins offline. They are working with forensics experts to see where the funds have been transferred. Bit coin have sent us a statement, saying they have not seen any hack into their system. Caroline thank you, and great work. Stay with Bloomberg Television because up next, it is the pulse with francine lacqua. With later on surveillance, we will hear from carlo messina. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. 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