That is all we do. Rishaad and Christine Lagarde has advice for the u. K. And the European Union. It is worth being together, and it is the future. Rishaad plus, how turmoil in turkey is taking its toll on the market. It is all straight ahead on bloomberg best. Rishaad hello. Welcome. This is bloomberg best, your weekly review of the most important business news, analysis, and interviews. Lets kick things off with a day by day look at the top headlines, in a week that saw three of the worlds most prominent banks report quarterly earnings. Bank of america was out with this Earnings Report earlier this morning, and they beat analyst estimates. But, Second Quarter profits fell by 21 yearoveryear. What really stuck out for you . Well, what stuck out for me across the banks is really the fact that interest margins coming in worse than expected, credit is solid. No one is talking about the fact that Energy Credit is stabilizing. That has really been the focus, this year to date. What analysts are focusing on is the consumer side. The trends are good. We are seeing reserve increases. There is a lot of talk about underwriting. I think really the bottom line worry is we know that rates will be lower for longer, we know pressure is going to continue there is the credit cycle going to turn . What about the growth side . The net interest margins look like they will stay solid. Where is growth going to come from . They are arguing that they can keep Net Interest Income stable, despite pressure on margins through loan growth. We saw very good loan growth at j. P. Morgan. We saw growth at wells fargo, perhaps not as much as some people had thought. That is the hope for analysts and investors, that they can offset some of the pressure through the loan growth. Now to goldman sachs, the bank posting secondquarter results that beat on both the top and bottom lines. A 74 increase in profits. Analysts focus on costcutting. As they have been, for the previous banks that reported. It is not really that big of a deal, how many Percentage Points they cut their expenses by . I think it is. When you have net income in the world with low Interest Rates, you have to look at expenses, as they do become much more important than they would otherwise. If we had rising revenues, then we would not be as concerned with the expense cutting. And we have not had rising revenues. Goldman sachs says the u. S. Bank is most reliant on trading. With the bond trading gains that really helped to boost the profit, investors seeing this as a positive, presumably . Yes, very much so. The fixed income was very nice compared to estimates. But i do want to point out that compared to some of the banks, the rise was not as good at goldman as some of the others. Bank of america included. So we kind of are watching that in terms of thinking about goldmans market share. Morgan stanley posting a profit that beat analysts estimates. Management from up estimate and bond trading exceeding estimates. Net income came in at . 75 per share, down from . 79 last year, but it beat forecasts of . 60 per share. Everything seemed great. Fixed trading was really great, and they have been paring back that business. What was the biggest negative in the report . The biggest negative would be compensation costs. Analysts were expecting about 3. 8 billion. They came in at a little over 4 billion. As we know, at the end of december, Morgan Stanley announced plans to cut 1200 workers, including 25 of the trading staff. Analysts thought that we would see that compensation cost come down a little. And it just did not quite as much as they thought. We have now heard from all six major u. S. Banks. What were the common themes . Things were not as bad as expected. Estimates have been ratcheted down dramatically, for a lot of these banks. In most cases, they beat the estimates, and people are happy with that. But i would say overall, it wasnt a good quarter. In most cases, profit revenue was down, just not down as much as expected. Fixed income was good for a lot of firms. Trading was strong. The question is whether that is sustainable. The ecb leaves all three main Interest Rates unchanged. And the Asset Purchase Program also unchanged at 80 billion euros every month. We continue to expect them to remain at present or lower levels for an extended time. And well past the horizon of our net asset purchases. Mario draghi says the central bank is ready, willing, and able to act if needed in the aftermath of the brexit vote, and what signal would it send to markets if mario draghi had announced changes . If mr. Draghi had announced something more meaningful, that would suggest the impact of the u. K. Decision to leave the eu was already being felt. Clearly, that is not the case yet. What little data we have, in the u. K. And the eurozone, it is pointing at things turning out relatively ok, at least in the shortterm. That is consistent with the ecb. The Telecom Giant verizon is said to be nearing a deal to buy yahoo for 5 billion. What is the price tag signifying . Is verizon going to buy everything yahoo has, or only portions . We do not know the real estate. Verizon will not buy the ip. There is no deal formally done. That will probably happen over the course of the day and maybe the weekend. From where things are now, we hear the price tag is closer to 5 billion than 4 billion. Somewhere in the upper 4 billion range, most likely, depending where things shake out. But the ip is not involved. The ip will be acquired by another party. Verizon previously offered only between 3. 75 billion and 4 billion, we had reported. This is quite a dramatic escalation from their previous bid. Assuming it goes ahead and verizon gets yahoo assets, what will an aolyahoo combination be able to do better than yahoo was able to do on its own . It has been failing, losing market shares. What will aol add . Aol will add very good Ad Technology that can be partnered with yahoo s Ad Technology. It is about taking the cost out of yahoo , as it is pairing it with aol and coming up with some sort of strategic benefit. There are a lot of operational synergies, job cuts, and you can expect verizon will go through yahoo and cut the fat in essence. That is part of what this transaction is all about. Rishaad coming up, the earnings drumbeat continues with the reports from some Major Technology companies. Plus, we will be taking a look back at a turbulent week for the turkish economy. Up next, more business headlines from mergers, acquisitions, lawsuits, and investigations. This is bloomberg. This is bloomberg best. Im rishaad salamat. Lets continue our global tour of the week. The recordsetting purchase of a british chip designer by a Japanese Telecommunications company. Softbank is buying chipmaker arm in a record 32 billion deal. Was it brexit bargainhunting . They surprised everyone. Arm does not fit inside softbank in any way, shape, or form. It is not something that softbank had, and it is a complementary acquisition. That being said, arm is a very solid and good investment. They are going to let it run independently. The decisions will stay in the u. K. Like i said, a steady cash flow, cash generation business. Given their biggest deal was sprint, they need a steady cashgeneration business, and they hope arm will be that. Manus pimco turns to the Hedge Fund World to get a new ceo. Who is the man, and why go to the Hedge Fund World if you are pimco . He has had a long and successful career in the hedge fund industry. He came in as the ceo of man group. He was previously coo. He started as ceo in 2013. After that, you saw assets increased by 1 3 through acquisitions. The share price doubled in about two years. It was a company under pressure, and he did a great job taking it to the next level. Pimco is a different beast from man group. I think he will now be tasked with replicating that, and really taking this company, restoring it to some of its former glory. Do you see things changing at pimco in a big way with this Talent Acquisition . That is a big question. Manny roman has expertise in a wide range of hedge fund strategies. He has got expertise in bonds, which is what pimco specializes in, but he has more than that. One question is whether this will see pimco move into new things. In particular, he is a proponent of computerdriven trading. Emily unilever is scooping up dollar shave club, getting a bigger piece of the fastgrowing Mens Grooming business. The terms of the deal were not disclosed, but according to bloomberg sources, it is worth a billion dollars. Dollar shave club is a direct consumer model for an established razor brand and is on track to post 2 billion in sales this year. It is a wonderful addition to the unilever family. Theres a 30 billion male grooming market out there. Unilever, if you exclude shaving, is by far number one in that market. This is a subscription model which is interesting anyway, when more and more shopping goes through different channels that is based on male grooming and shaving. We think this acquisition is very strategic. Roger ailes is out as head of Fox News Channel following Sexual Harassment accusations, which he denies. He will be succeeded by rupert murdoch. Analysts seem generally sanguine about this. Even though fox news is 20 to 25 of 21st century foxs profits. Is that because it is rupert murdoch, the guy who runs the whole company, and not a lot is expected to change . Most investors do not think there will be much of a hit. Fox news is about 25 of total cash flow, it is important. They are dominant player. Near term, not much of an issue, particularly going into an Election Year where audiences will be big. Is ailes leaving at a good moment . The demographic average age is 65. Is this the high watermark . It very well may be. Their core is extremely profitable, but any new leader has to develop new business. Rishaad it has also been a week of disconcerting business. A slew of headlines involving lawsuits, investigations, and that rounds up our coverage on bloomberg television. Truck makers paying eu regulators a record 3. 2 billion fine for fixing truck prices over 14 years. It is a big fine. But were talking about a very damaging cartel. It lasted for 14 years. It affected all of the European Economic areas. These are very important vehicles for the entire european economy. And these are the elements that go into our fining guidelines in order to calculate the fine. I think it was justified with this high amount. Rishaad takata shares under severe pressure after the airbag makers say they routinely manipulated testing data. What prompted this . Lawsuits prompted it. These faulty parts have led to fatalities. There have been a wide range of lawsuits against the company. Part of the response was to hire a professional to do an audit of the company. What the audit discovered was that takata has manipulated the data, partly by adjusting it to make the performance of their parts look more consistent. They basically reduced the variability of the responses to testing. The word the auditor used was to make it look prettier. Of course, this is basically manipulating the data, and something that will definitely come back to haunt the company. Another key Corporate Movement that we want to keep an eye on is volkswagen. It has been down, facing fresh allegations from the u. S. State officials. The claims include emissions cheating went on longer than the company acknowledged. And the incumbent ceo has been aware of it for a decade. These latest allegations, what do they mean . They are coming in late. They are. That is why it is a blow to volkswagen. They thought they were through the worst of it. They got the u. S. Settlement out of the way. So what happens . They get blindsided by u. S. Attorneys general, which are leveling serious allegations. What is the tactic vw has to play . That will be the hard thing. What the attorneys general are after is not necessarily compensation for fixing environmental damage and the legal damage the cars did they are actually after retribution. That is a different scenario than volkswagen faced before. Manus two people familiar with the matter say a senior manager at hsbc was arrested in new york for his role in a conspiracy to rig currency benchmarks. Lets start from the top. What have we learned . We know mark johnson, the head of global fx at hsbc, was flying into jfk. He was apprehended and arrested. We are expecting charges. We understand it will be wire fraud. And it is related to the forex currency investigation. The department of justice has been working on it for at least three years. What will happen, we are not really sure. That is still up in the air. Rishaad the malaysian government has been pledging to cooperate with lawful investigations as u. S. Prosecutors seek to seize 1 billion in assets linked to the embattled state fund. The fund has denied having assets in the u. S. What is new . What do we know . What we know is what we had from the malaysian government. They say they will fully cooperate. That if any wrongdoing is proven, the law will be enforced. One minister also pointed out that any claim must be treated with caution. It must follow due legal process. All of the reaction, after u. S. Prosecutors said they will take action to seize assets worth 1 billion. Civil lawsuits have been filed. Prosecutors say that billions misappropriated from 2009 to 2015. The u. S. Government is moving to stop two big takeovers in the health care industry. The Justice Department has filed antitrust lawsuits against anthems acquisition of cigna and the takeover of humana. If the deals do go ahead, they would consolidate the nations five biggest insurers into just three. They say both would harm innovation and competition. The aetnahumana deal would affect the Medicare Advantage market in particular. Anthemcigna is the market sold to employers as well as other regional markets. Scarlet this could tie things up in the court for months or years . Humana and cigna both came out and said this deal is not going to get done this year, we are looking at 2017. Cigna is questioning whether the deals can get done at all. You are watching bloomberg best. Earnings season is in full swing. Companies rolling out quarterly results. Tech firms catching the lions share of investor attention. Emily netflix plunging 15 on disappointing earnings. Subscriber growth dropped, adding just 1. 7 million subscribers, most of them abroad. Ceo Reed Hastings says it is due to price increases, not market saturation. Is that the reason . Cory we know that they lowered the cost of marketing, at the same time as they raised prices last quarter. We can see the u. S. Subscriber growth fell to 0. 3 sequentially. My model goes to 2012. I think that is the lowest ever reported. They are spending so much, being forced to raise prices because content costs are getting out of control. Theyve got over 12 billion in off balancing content cost, that is raising prices, and that is causing new subscriber growth to slow. Emily ibm beating estimates despite its 17th straight quarter of revenue decline. It seems the companys big bet on watson may finally be paying off. Revenue, including the Artificial Intelligence platform, rose 3. 5 , the first growth since the revamp. This was a meh quarter for ibm. The Strategic Imperatives group that includes watson and the cloud business, the Cyber Security elements of ibm, all posted growth. One of the interesting parts, although it is 38 now, the Revenue Growth of this group has been declining year on year. Something to watch over the last four quarters and into the future. The other segments continued to post some weak numbers on a cost currency basis and as reported basis. The hardware segment continues to be a thorn in ibms back, if you may. Bloomberg intelligences view is that it is a meh quarter. Lets go to scandinavia. Numbers out of erickson, the Wireless Network company competing with nokia. They are saying the negative trends from the First Quarter intensified. They are taking further actions, initiating costcutting and targeting. Why is the ericsson ceo so pressured by ambassadors . It is a changing world. He is trying to rebalance ericsson. Net sales, 54. 1. That missed what the markets actually expected. He is going to be under more pressure today, wont he . Yes, i think he is. He has been with the company as ceo for 6. 5 years now. During that time, he has not delivered much of a share price gain at all. It is basically flat during his tenure. There have been rumblings over the last year. Essentially, he is under pressure to deliver better and more cost cuts to the company. It is a very competitive market. Are you set to remain at ericsson . Are you fearful that Institution Shareholders could harry you from your position . We are doing lots of transformation. Changing the corporate structure. We are on the forefront of 5g. We are going into new areas. Will you stay to see it through . I think my job is to continue. That is what im focused on. Emily microsoft flying high on the cloud. The Company Reported fourthquarter profits topping analysts estimates. Fourth quarter coming in up 2 from the same quarter last year. The ceos aggressive push is booming revenue. The companys corporate Cloud Platform doubled revenue this quarter. Break it down for us. Where do you see the bright spots, and where do you see challenges . Microsoft is doing well in making the shift from paid onpremises software to using cloud services. It is a big shift to go from that sort of private stuff to using shared stuff that gives you better value and a different experience. The challen