Up italys troubled banks . So, welcome to the program. This is the pulse live here in london. First things first. Lets check on the market. Overall, we are seeing a lot of european shares on the downside. We had disappointing news in terms of earnings coming from japan. We also had disappointing figures from a cement company, goes to construction. It is the backbone of the european economy. I want to show you the pound. Later on, it is the last time we hear from mark carney and the r expectations for Interest Rates. The last time we hear from them before the june 23rd referendum. A lot of banks are under pressure. Now lets get straight to the bloomberg first word news. In Mitsubishi Motors have jumped by 16 after confirmation it is in talks with nissan, including for a possible capital tie up amid a fuel economy scandal. Nissan is seeking a 33 stake in Mitsubishi Motors. Credit agricole reported a decline at First Quarter profit. Net income fell to 227 million euros. Therading revenue fell and bank began a reorganization. Shares have fallen in this mornings trade. The bank of england holds his last super thursday before the Eu Referendum today. While all economists in a survey predict no change to the interest rate, bank of America Merrill lynch says one or two of the panel may vote for a rate cut. Company and quarterly Inflation Report and News Conference with governor mark carney will be scrutinized this afternoon by both sides of the Brexit Debate, as concerns about the votes outcome has taken a toll on services, manufacturing and Industrial Production data. T Boone Pickens says he supports donald trump for president and has backed his call for a temporary immigration ban on muslims. Pickens said, cut them off was wasgot plenty coming into the u. S. I do not see that impact to the economy at all. You can more stories on the is debating the impeachment of dilma rousseff. It has been ongoing for 20 hours. We are joined by bloombergs executive editor john fehrar. It has been quite a night. Why is it taking so long . John why take two hours to do something when you can take 20 hours . We had not anticipated the senator was take so long to talk. Each taking 15 minutes to give their preamble, and their opinions. There are eight or nine senators left to speak. In,are looking at all added probably another three hours before get a result. But if you look at what people are saying in the runup to the vote, we already have a majority of people saying they will vote against it. Francine only need is a simple majority. 41 senators to back impeachment for rousseff to have to step down a she awaits results of the trial. John it is looking pretty inevitable what is going to happen today. Reports say she has already cleared her desk. Stingly, she is planning to address the nation. At 10 00 a. M. Local time. Perhaps you might resign. Or perhaps she will dig in and say, i contest this entire process. This has been a whole sequence of snags and glitches through the saga. That could be another important turning point later today. Francine i know it is difficult in terms of timing, but are we expected to be in the next hour that we have the votes and we have to count them for an hour and a half after that. John i would say probably another three hours we get the actual vote. Then there is the whole process where the senate needs to inform rousseff this has happened, and informed her she is being suspended. Francine verbally . It has never happened before. John a document will be handed to her to inform her of this. That will the another two hours. At some point later today, one would expect us to have a new acting president. Then the expectation is he will make one or two major cabinet announcements. So, all going smoothly and again, this is brazil were not everything goes smoothly all the time we should start seeing the beginnings of the formation of a new cabinet by the end of the day. Francine do we have any sense of whether there is a big majority for her impeachment . Whether she will resign or hang onto the small majority . John it is just very difficult to say. Yes, it stands to reason if a huge majority comes out against her in this first round of voting there will be another vote within 180 days, she might well decide to resign. But, you know, passions are running very high. Her supporters say this is a coup. She may well decide to haanng in there. That is one of the really dramatic moments, a human moment. This is a woman who survived imprisonment, who survived cancer, torture. In her previous days as a guerrilla fighter. So its a big moment for her. How do i close the chapter on this . Francine lets say she does not resign today. How long does the trial actually last . John so, the 180 days. If the senate the senate has 180 days to impeach her. After today she will formally go on trial in the senate. 2 3hen the senate votes by majority to impeach her, she is stripped of her mandate. She stops being president ash becomes an ordinary citizen. For 8 years. She can say, she can claim it is a coup, but the law, the supreme ifrt, it would apperar everything fell procedure, you might say this is a coup if everything feliz procedure. Follows procedure. Francine thanks for all the updates. Now, stay with the pulse. Plenty coming our way. Carlos ghosn steps in. Nissan agrees to take a 30 stake in scandal hit Mitsubishi Motors. To rescue italys Banking System. We will bring you our interview with the countrys finance minister. And then we will speak as closely to the ceo of intesa sanpaolo. Around the u. K. In 16 hours. We take a train journey to gauge voters views on the u. K. s european decision. Back. Ne welcome lets get to the Bloomberg Business flash. Nejra Credit Agricole has reported a 71 decline in firstquarter profit. Net income fell to 227 million euros. Dropped, andvenue the bank began a reorganization to streamline its capital structure. Lafarge polson has reported losses. Arter adjusted operating earnings fell 22 in the first three months of the year to 821 million swiss francs. The Company Shares are down today and have plunged by 40 since last julys merger of la holcim which created the largest cement company. Adidas is to get a payoff from chelsea two and a sponsorship deal six years early. Adidas says the move illustrates its strategy of partnering with fewer sports teams. Insurance group has recoded a firstquarter profit that beat analyst expectations. 875 income fell 28 to 7 million. As cethe ceo continues the overhaul of its biggest unit. And thats the Bloomberg Business flash. Francine nissan has agreed to buy a 30 stake in Mitsubishi Motors. 2. 2 billion dollars worth of shares will be sold. Sharesion at the end saw surge just before the close. Saysnss Ceo Carlos Ghosn the deal is a winwin for both company. Carlos we believe in the potential of Mitsubishi Motors as a company. Be more the company can profitable, and we think the company can grow faster with our support. Thats number one. So, when we become the main shareholder of mitsubishi, supporting mitsubishi is supporting nissan. Mitsubishi and making mitsubishi more profitable, obviously there is a direct benefit for nissan. So, we are in a winwin transaction. Francine lets cross to tokyo. Carlos ghosn, dave, led renaults rescue of nissan. He will now be expected to do the same thing with mitsubishi. Dave there has been a lot of confidence shown in carlos ghosn. He has a great track record of combining traditional Japanese Companies which nissan really was when renault bailed them out. To turn that company around and a matter of years and bring them to where they are today. So, there is a lot of confidence he can work the same kind of deal with Mitsubishi Motors here. Francine what does nissan see in Mitsubishi Motors that it actually likes . Firstly, they have a tie up to supply nissan with many vehicles that sell well in japan. Thats an important segment for them. By tying up with them here in this kind of deal, theyre able to keep their relationship together and expand it. So, mitsubishi cars under the nissan nameplate, that is a big help for both of their brands, actually. At the same time, Mitsubishi Motors has great sales in thailand and indonesia. 4 eir outlander suv had a 5 increase in sales last month in thailand alone. They are doing quite well in that region. That gives me to beachy a good purchase there. Lastly, there is some good electric Vehicle Technology that Mitsubishi Motors has pioneered, and thats been an area of emphasis for carlos ghosn. Globally, he is wanted to expand and the electric car business. This will help them do that. Francine what are the biggest risks for nissan, then . Dave the scandal is not over yet. We have not gone to the bottom of it. The attention has all shift it to this deal, but there are still questions that are on how far the scandal goes. The big one is will this affect owners of vehicles around the world . Was the mileage exaggerated when they sold cars in indonesia, in talent, in the u. S. In thailand . Will there have to be compensation payments . That could push the cost of this up a great deal. Mitsubishi motors has admitted it has a problem with Corporate Governance and oversight for these kinds of issues. A huge scandal that almost ended the company having to do with safety faults that were covered up and son of the companys truck axles. That require them to be bailed out. It was very serious. They said they put in procedures to prevent that, but it didnt. The question is, what else has not been prevented . What other possible scandals could emerge once investigators get in and look at what exact process are they using for quality control, for safety checks, for meeting all of the regulatory requirements . Francine thank you so much for the update. In tokyo with one of our biggest corporate stories of the day. We will be speaking to carlos ghosn on bloomberg later this morning. Up next, with exactly six weeks until the u. K. Decides whether to remain in the eu, Central Bank Governors mark carney gives his assessment of the countrys economic health. You look ahead to the boes super thursday. The u. K. So, chancellor has once again set how his case for britain remaining within the european union. George osborne was speaking before that treasury select committee. Claims onorne the the impact on the economy have been supported by the bank of england, the oecd, the director of the imf and every major credible institution in the world. And everyone one of our allies in the world has supported the arguments we have made about our security. Francine well, osborne also weighed in on the possible applications of a brexit for the bank of england. George osborne there is this term, they would face quite a difficult tradeoff between rising inflation and output. What their decision would be would be for them, but what we do know, or what we can assume is that Credit Conditions in the markets would be tighter financial conditions. Comeine those comments ahead of the bank of england super thursday. We get the rate announcement and hear from mark carney. Of course, the Brexit Debate has loomed large in over markets. And the outlook of the Central Banks rate joining us with the latest is the lead u. K. Economist from unicredit. Thank you so much for coming and. This is extremely complicated for mark carney because he cannot be seen to get a political message, and yet he may have to change his forecast. Thank you so much for coming in. I think he will focus on the shortterm impact of brexit, which would be huge uncertainty. The bank has always said it will not give projections of the impact of the u. K. Economy. But he could Say Something about the shortterm. We would expect him to say that. Huge uncertainty and the impact the answer and he would have on the u. K. Economy which is negative. Francine what exactly are you expecting from the boe today . Are you expecting a unanimous vote . Other economists are respected one person to vote for a rate cut. I you expecting them to down. To downgrade their forecasts . There are few doubts there that would probably look to ease policy there are a few doves. On the balance, they will wait and keep the powder dry until after the referendum which is only a monthly. In terms of the forecast, i expect the bank, they will have to downgrade their forecast in the short term for the current year 2. 2 for 2016. I would expect them to, at leat ost one or two Percentage Points off of that. Given what we know, which is a sharper slowdown than they expected. Francine give me a sense. The problem with the boe sis t to give aneed indication of where the rates will be, but then the referendum changes everything. You do not have the same Monetary Policy paht if you did not path if you did not have brexit. This is our chart of the hours. Is this either way . Are you expecting a cut even if brexit doesnt happen . Far from it. We think if brexit does not happen, it should see the economy pick up a bit towards average growth rates 0. 4 a quarter. We expected the first hike at the end of this year in november. Francine so, a rate hike that would take markets by surprise . Certainly. Its taking into account those very polar events there. You stay in the eu or if we live. If we leave we expect the bank to cut them very quickly towards zero. Francine how much softness are we seeing in the u. K. Economy at the moment . We had some pmi figures. We had a great chart made up for you. , if youook at pmis look at services, it is that little bit softer. How do you model brexit . In the shortterm the way we look at it is a big rise in uncertainty. We can correlate uncertainty with gdp growth. There is a clear correlation that is how we look at the shortterm impact. In the event of brexit, the u. K. Is more likely not to enter a session within two years. In the longer term or look at things like trade and migration and flows. In the longterm we expect by the year 2030 that the u. K. Gdp smaller what it would be if the u. K. Has stayed in the eu. Very similar to what the treasury has published. Francine then give me a sense of again, what are the implications of brexit it seems that for the moment all of this uncertainty has been played out on pounds. Will it also play out on gilts . I think less of it, yes. Before we see a risk premium in that. Short term. Longerterm, if there is a big rise in the long end of the gilt curve, the bank will step in and increase it asset purchases. We will wait and see before the intervene with further asset purchases. Francine you are thinking this will be unanimous out of solidarity . No quite sure everyone is on the same page. It is clearly a differencein views there. Some of the more dovish members of the committee. Francine but it is important politically to have unanimous view . I think so. Given the referendum, it would be that close. It would be using some of your powder before the event there, and think they want to keep that dry. A lot of data has been affected by the referendum, uncertainty. They about he said they would put less weight on that. They will want to see what happens. Of course, if we get brexit, i expect fairly quickly the banquet cut rates. Francine thank you so much for coming on today. A leading you take economist for unicredit. Coming up, we speak exclusively eo. The intesa c we have a lot of things to discuss with italys most valuable bank. We will talk about the new government orchestrated fund called atlanta. We will also be talking negative Interest Rates and the impact that has on londoners. On lenders. [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Francine welcome to the pulse. I am francine lacqua. To an exclusive interview, its talk about the future of italian banking. Me henance minister told will restore confidence in the system. Italys most valuable bank created this year to help the country passed troubled lenders the countrys troubled lenders always a pleasure to have you in studio. , theyou look at atlante original fairy dust is now gone and people are asking whether the fund is big enough, whether it can sustain all of the troubled banks. Banking shares are down. What happens next . Carlo it is all europe, not just italy. Is a clear that atlante solution. Investors are not considering this like a real game changer but in reality and emily, we have three big issues in italy, we have three big issues. At atlante, we will solve the problem so no more banks below the ecb level. Second point is the stock of net bad loans have significant collateral but mainly a problem of pricing. The instrument is set to create a market taking instrument in order to have Market Making instrument in order to have prices that are close to the book value of the banks. Concern, butt of if you solve the problem of nonperforming loans you solve the problem, so this is really a game changer. Dimension, will it change if people are talking , ist and lente atlante the markets trying to get ahead of themselves . Do you think we will need more . Carlo i participated in the askingn of this fund and for the conclusion of the nonperforming loans of these instruments. Will be thete possibility of setting the special Purpose Vehicle designed to buy nonperforming loans so we do not need other funds. Trenches, have equity ranches. Hes t leverage also mezzanine instruments. Mezzanine can be a solution that can be in the interest of the Institutional Investors because you have investors that are , so you can have between 5 to 10 in mezzanine trash, but underlying italian real estate could be better than just the structure credit product. Months, yous, 12 will see that thisll be the real solution for the problem. Took the vincenza markets by surprise. Is it going to be another vincenza . Carlo we will start with the marketing process in the next days so our expectation is it is impossible to find a positive from the market. It is clear that it is difficult to say that you can place 100 of the bank on the market so if this is the case, it would be better to have an equivalent solution because if atlante takes control of a bank it is possible to have restructuring francine . Francine at this moment you are not sure carlo we are not sure. There are components that are ready to subscribe shares but it is too early to say what could be the final solution. My expectation is that there is a degree of probability that atlante fund will not enter into the transaction. End, if the solution will not be the one of having 100 place in the matter, we will not maintain any shares. Francine what happens to the unsold shares . They willis likely take control of the bank. It is also better for atlante because in the end there will be the possibility of making a real restructuring of the bank and working for an aggregation. The bank needs to be aggregated within the italian landscape. Onncine last time you were you were saying that you are putting on hold expansion plans the kids basically you want to to grow by yourself and focus on organic growth. When you look at the share prices tumbling quite significantly, is this now a time for m a . , and actuallylear our share prices like other important players, but we remain at a value that is close to our tangible, so we are at an advantage in comparison with other peers. Today is not the right time to make a move in terms of acquisition because we are delivering on a Business Plan and my expectation is that we will deliver 2016 and 2017 , solts in the Business Plan i am really focused on 2017 delivery because i need to grow in terms of volume. That is what im doing on the deposits side. I am working to reduce the cost having delivered in 2017, i think my share price could be much higher and it is possible to have some view on the market. Clearly not easy to create in , aggregation different from Wealth Management in private banking. Francine overall it is a tough environment for all of the banks. Because of negative rights, volatility on the market. The macro environment is a little bit more difficult. You are confident you can stick with your Dividend Payment plan. Carlo yes. Francine 100 . Carlo in reality, if you are a bank with 50 and this is declining it is not so difficult to reach your targets. The real point is the combination, the mix of revenues, that is the real point because we have set a very strong delivery machine in order to convert our assets in our administration. This machine is also depending on Market Conditions because of your client does not want to enter into Asset Administration because the situation is not easy, it is difficult to deliver. The support is not so good in ms of production, good in and has been two very good months so i am confident we can deliver revenues. In the case of nondelivery, we will reduce costs but im sure we can deliver the plan. Francine what is the biggest risk out there . Thente has not convinced International Community the troubles are over. Does that ring a discount to your share price . 27 . Down 20 carlo i would prefer not to have a reduction. I am attracted by the italian Banking System situation because considered the savior of the bank. That is not true. This kind of instrument of will be demonstrating that this is one of the solutions of the Banking System. Is to go of the market to zero in terms of bad loans in six months, and there is no counsel in europe with zero bad thes so with we reduce 25 amount of bad loans in one year , the italian Banking System will be much better. Also because the collateral, Residential Real Estate in italy is recovering. The fundamentals are strong. It is clear that position of the you tend to have a negative approach. Thes to try to demonstrate situation is completely different. Francine carlo messina, thank you very much for coming on. Coming up, we have plenty more coming on italian banks. I spoke with the italian finance minister about that bank rescue fund. Funds seemedhe how toly to small but one defended it. Thats consider a World Without atlante. We would be and not such a nice situation. Number two, its given time and remember that it is a private sector. The private sector might decide to speed it up and to enlarge the size of the resources available. , part ofnt on atlante its mission will take time. Francine there has been a lot of investors thinking that this big news effect has gone. Would you tell them to give you more time or were you disappointed by the effect that we have seen . There is no new information with respect to what is available at the time it was established, so why are the markets disappointed today and not a week ago . As i said, its imagine a World Without it and we would be in a worse situation. Francine well atlante be sufficient . I think it will be needed much less in the case of vincenza. I do not see any other Critical Situations in the banking sector. Francine where do you see vincenza six months or one year from now . To have the potential to demonstrate a small a strong business. Looking is atlante for private equity backing to run vincenza . I think it is developing longerterm strategies. It is a medium to longterm instrument which needs a medium to longterm strategy, which they are developing now. Francine a nice italian banking chunk to help us better understand how these troubled banks will get out of what we have seen the last six months. We will take you through all of the action. Francine welcome back. Markets a little bit lower this morning. Lets head to mark barton with your asset check. Mark trading revenue falling. The bank began a reorganization to streamline its capital structure. These are the three big french lenders in 2016. 20 it agricole down down 20 , alle three in the negative. Cementlds Biggest Company reported earnings that missed estimates by lower prices in india and a slowdown in brazil and russia. The share price has plunged 40 . Delays in assets, delays in highprofile executive departures not delays, actual departures have eroded confidence in the tie up. Home this is our current probability for the u. K. This is the december meeting. Right now, the probability of a hike is 1. 2 . A week ago it was 3. 4 . Ou get the just three months ago it was 75 . The probability of a cut is 37 . Six months ago, it was 4 . It is more likely the bank of england will cut rates in december than raise rates. Today will they absolutely fascinating and i have drawn on this chart to show the key metrics of the u. K. Economy ahead of the boe Inflation Report. Inflation is at. 5 . Last year we were pretty much around zero. 5 is the highest since 2014. 2. 2 ,e hourly earnings, we were at 2. 9 in the summer. The month of the first rate hike from morgan stanley, it is 14 months. We were as high as 15 months. At the beginning of the year, we were at eight months. That chart could change a lot between now and june 23. And even thereafter. Francine up next, in gauging Public Perception of the Brexit Debate. A man gathers 13 voices for one crucial vote. Francine this is the latest from brazil, where the senate is still debating that impeachment of the president dilma rousseff. I think we are at 20 hours and counting. Haveajority of senators declared their intent to vote in favor of the impeachment. We also understand that the president rousseff has cleared her desk. If the impeachment process happens and it means she has to stand down today, and then a trial will begin to see whether she is convicted of the corruption allegations, and that will last around 180 days. There will be an interim president and between. We hope to find the results of the vote within the next two hours or so. The u. K. Chancellor has set out his case for britain to remain within the european union. The claims on the impact on the economy have been supported by the bank of england, the oecd, the director of the imf, and every major credible institution in the world. Every of our allies in the world has supported our arguments that we have made. Francine we are exactly six months six weeks away from the Eu Referendum so we decided to travel the gauge travel to gauge public sentiment. Scotlandin northeast and ended in penzance and miles andover 770 numerous views on why britain should stay in or leave the eu. Around themainly european union, the additional factor like Environmental Protection that they give, and they kind of act as a checking mechanism on the country really. They kind of pull back the extremes and i think that is the reason why we need to stay. What i object to is the fact that we elect people in this country to pass laws on our behalf, but those laws effectively are influenced dramatically by europe. Ronnie jefferson joins us from edinburgh. How is the journey, and what else did people say . The journey was very long. Thinga quite interesting to start off on a train with commuters in northeast scotland early in the morning and end up with palm trees in penzance in the middle of the evening. The one thing that marked the journey for me the most was the fact that people were very open to talk about this because there is a lot of amusement out there in terms of, why are we having this vote, when is the vote again, what exactly are the issues here . Although it is only six weeks away, people are still very much waking up to the idea that they are going to have to make such a pivotal decision. Francine it is just such an amazing trip he took for those 13 hours. From what you gather, our people confused or is it too close to call . Rodney i think they are confused as to why there is a referendum. Certainly why we should be making this decision now, why it is happening in 2016 given all the events happening in europe at the moment. I think in terms of being too close to call, it is a truism that the undecided will swing this. The one thing that i gleaned from the journey, and it may because people who take a train on thursday are more toward leaning towards staying in the eu, those who were undecided seem to be more in favor of voting to stay in. It is on the leave side to make the case to End Membership that we have had since 1973. Francine how does this debate compare with covering the Scottish Referendum in 2014 . Rodney the Scottish Referendum was far more emotional. The camps were very much divided early on and the debate was far more ferocious. Like i said earlier, this is almost like a be mused electorate really. It is not, people do not seem to be based on that journey, they are not fired up. They are still trying to figure out what they should do and how important is this where is the Scottish Referendum, that was definitely fired up. Turnout in the Scottish Referendum was at 85 . Im not sure what turnout is going to be with this Eu Referendum that i would doubt if doubt ite that high will be that high. Francine stay with bloomberg, surveillance is up next. We kick off the conversation with alex friedman, and we also hear from the nissan ceo. We will be talking to the chief Financial Officer of rwe, the Utility Company in germany. Plenty of great interviews coming your way. This is the picture in london. After a couple of days, we are sun. G a little bit of francine the majority of Brazils Senate say they will vote to impeach president rousseff. The debate continues ahead of the vote. Willn to the rescue, they buy 34 of mitsubishi. Debate looms large, full coverage of the last super thursday before the referendum. His is bloomberg surveillance with tom keene and new york