03/08/2016 BBC Business Live

This is Business Live from BBC News with Aaron Heslehurst

Banking on a small profit as HSBC chalks up a 29% fall in profits.

We look at why an industry that was once seen as a cash cow

Live from London, that's our top story on Wednesday, 3rd August.

HSBC saw it's profits fall by an eye watering $3.9 billion in the last

six months as a toxic cocktail of issues hit the bottom line.

Low rates, fines and economic uncertainty are all part

of the problem, but what's the solution?

We'll hear from our business editor in just a moment.

Also in the programme, cutting the red tape in India -

and making it easier to do business across the country.

It's the biggest economic change in over 60 years.

There is a rebound happening after softening in Asia overnight.

You know almost 10% of the world's total economic output is spent

on health - that's more than $7 trillion according to the WHO.

So as new therapies and drugs push up the price of global healthcare,

We'll be talking to one of the world's biggest

The Financial Times one boss says, "I have been given a 22-year-old to

manage who has a first class degree from Cambridge and he is a first

class pain in the butt." The question is, how do you deal with

managing an arrogant graduate?" That's the question!

Shares in the bank HSBC rise in early trade

after announcing it will spend up to $2.5 billion to buy back shares.

This follows the sale of its Brazil business in July.

This is a bank deep into restructuring territory.

The banking world just isn't nearly as profitable as it once was.

Let us take a look at some of the issues facing the banks.

Top of the list, billions of dollars in fines for everything from rigging

the rates to doing business with blacklisted countries,

laundering money and charging consumers for services

Low and negative interest rates across Europe have also

Low rates make it much harder for banks to make money

because they decrease the margin that can be charged on a loan.

Since the financial crisis banks have also had to hold much more cash

So if they are storing it they can't lend it

Finally, investors and businesses have been spooked by the UK's

decision to leave the EU and the Chinese economic slowdown.

Companies are much more likely to hold off borrowing for a big

project if they believe the economy is in poor health.

Our business editor Simon Jack is with me.

Simon great to have you with us as always. Is this the new norm now? It

is not a great time to be a banker, but is it the new norm? It is a

pretty toxic environment for banks. You have got low or negative

interest rates and that's where the banks really make their money.

Banking is a simple business. You pay interest on deposits and those

deposits you lend out at a higher margin. When you have lower rates

the margin gets squeezed and it makes it hard for the banks to make

money. Looking at HSBC, a 29% fall in first-half profits and a 49% fall

if you look at the second quarter. If you look around the world, they

are holding up well considering. This a better performance and you

are seeing the shares rise. We are talking the comparison to other

European Banks. Does this highlight, we had the stress test and we talked

about that on Monday, the results came out on Friday evening. Quite a

few failed. But I'm trying to work out what the difference is between

the European banks and the American banks. The American banks seem to be

doing better? Well, they cleaned their act up much earlier. For

example, they took bad loan port pole yos and took them off the

balance sheet and you had the troubled asset relief programme in

the US. Italy for example which is the black spot if you like, you've

got banks, you've got 360 billion euros worth of loans, they never

took those off the balance sheets. They never did the good bank, bad

bank thing and that's why they are suffering. People said if we apply

this model to all the other banks, it looks like they will have to

raise capitalment what's wrong with that? Well, it is fine. It means

your slice of the pie, if the pie gets bigger because you need more

capital, you own a smaller part of the bank. Shareholders don't like

raising capital because it dilutes their share holding in it. Looking

at Asia. Rio Tinto announcing results. China

is stabilising, the fact that we are seeing a lower growth environment

across the world, but actually, there are real opportunities and it

is places like HSBC and Standard Chartered that are more

Asian-focussed, so they are going to be able to profit from that? If you

look at the share prices of the banks, look at German banks which

are down over 70% over the last year-and-a-half, HSBC is down and

its Asia focus protected it. Interesting about Rio Tinto because

one of the big worries for the banks is the Chinese going to slow down?

It has been going bang busters and it is on course to get 8% growth.

They have decided to put the accelerator on growth there and

that's going to help commodity producers and push prices up which

means we won't have a deflationary spiral which may mean we can put

interest rates up elsewhere. The issue with China, it is credit

fuelled and that potentially will be a problem? Yes, the expansion in

credit and the rate of expansion in credit in China has got a lot of

economists extremely worried. The Chinese thought about this, and they

think we will calm things down a bit. When growth began to slow, they

went back to Plan A again. That's a big worry. If you were to ask a room

of 50 economists what's the most worrying thing, some would say the

European Banking system. Others would say, the rapid expansion of

credit in China. So these are things, no doubt, it is good news

today, whether we are storing up a big problem for later. Those issues

for HSBC? They are trying to restrict ture, if you have been to

an airport anywhere, they call themselves the world's local bank,

but they have decided they are too local so they are shrinking just a

little bit! Their two big focuses are Asia and the UK and they have

said, they are going to keep their head quarters in the UK for now. We

are watching them for comments on Brexit. Great stuff. We've covered

it all. From the commodities in Asia.

A leading economic forecaster says the UK has a 50/50 chance of falling

into recession within the next 18 months following the Brexit vote.

The National Institute of Economic and Social Research says the country

will go through a "marked economic slowdown" as businesses

The US insurance giant, American International Group,

has revealed plans to buy back $3 billion in shares as it fights

The insurance firm reported a better-than-expected

income for the second quarter, up from $1.8 billion for the same

period last year and ending three consecutive quarters of losses.

AIG has been under pressure to break up to improve profitability.

A lawsuit has been filed against the makers of Pokemon Go

after a man in New Jersey said an augmented reality Pokemon

in his backyard was attracting strangers to his home.

This is the first case brought against the three companies

Now to India, where one of the biggest financial reforms

since India's independence from Britain -nearly 70 years ago,

The goods and services tax aims to simplify the way the country does

business and to cut the red tape between the states within India.

The tax will turn India into a single national

market and could boost economic growth by up to 2%.

For the audience around the world and in Britain here, this many will

say this is much needed especially when you talk about a country where

exporters in India will say, it is cheaper for us to ship goods to the

United States than it is to ship from north to south in that country?

Absolutely. I mean, recently we found an exporter close to here near

Delhi and he wanted to his his articles to Europe and he had to

cross six different States. The deal is and the high tax they pay in the

process adds a lot to the cost of business. In fact, one estimate says

5% to 10% business loss is because of the highways. This will hopefully

repair this fractured chain and make it easier for everyone to take their

goods and services across the country. The building behind you,

the Government doesn't have a majority, it is the Upper House who

doesn't have a majority in the Upper House, but they have been working

with the Opposition to get everybody on side. Will it be passed? Well,

that's the big question. Back room negotiations have been going on for

a long time, but the previous Government tried to pass this Bill

and failed. Hopefully, this is it because everyone seems confident. It

has taken ten years for this Bill to go from the draft stage to a debate

here in the Parliament. Hopefully today is the day when we will see it

happen. Thanks. In Asia, stocks have been slipping a

little bit. Another effort to boost growth in

Japan. Markets have been open a little

over 30 minutes. Worryingly for energy shares,

the general decline in the dollar is still not enough to prevent oil

prices from slipping under $40 a barrel for the first

time since April. Adding to the jittery mood, yet

another sell-off in the bank stocks following those stress tests

in Europe on Friday. Futures are pointing

towards a softer Speaking of which, lets hear

from Samira Hussein about what's Investors will have questions about

at thes la's rernt announcement to take over Solar City when the

electric car maker reports earnings on Wednesday. Investors will want to

see if elon mus k is still planning to make at thes lard profitable by

the end of the year. Time Warner. The company is facing stiff

competition from streaming services such as Netflix as young viewers are

shifting to online media for entertainment, a trend that people

have been calling cord cutting. The company's HBO unit is seeing a surge

in revenue, helped by its popular shows such as Game of Thrones.

Richard Hunter, Head of Research at Wilson King Investment Management.

Congratulations on the new job. Touching on Japan, the Prime

Minister is pumping $270 billion into that economy and today the

markets go, don't like that. This has been going on for decades. There

is a level of sin is a nism about what Japan can and can't do. It is

seen as a haven currency, the yen has been strong which probably

hasn't helped. In terms of the latest round of funding which is

going to take nine months to a year to filter through, if it works, it

is trying to boost infrastructure spending and boost low wage earners

in order for them to spend and get the economy moving. We shall see.

OK. We go from third biggest to the US Friday, jobs numbers. Last

Friday, we had growth numbers which were really disappointing, weren't

they? What are we expecting on the jobs and will this be a decider will

they, won't they raise interest rates? Two months ago we had a

terrible jobs number. This month, it is likely to be around where it

should be, around 170,000, but there is no Fed meeting in August so we

have to wait until September to see if they will move in term of

interest rates, but the current betting is that there will be some

sort of hike before the year is out. OK.

We will see you later when we talk about the papers.

And as new therapies and drugs push up the price of global healthcare,

We'll be talking to one of the world's biggest insurance firms.

You're with Business Live from BBC News.

Samsung have unveiled its latest fablet and it is trying to build

momentum before competitors bring out their new gadgets. What can the

latest Galaxy do? It is Samira again.

Tech sure. Drummer, definitely. Cinematic unveilings have become

standard for new products. Samsung released its Galaxy Note 7. Its pen

is more precise and you can charge the device wirelessly.

This is the newest edition in Samsung's line of products. Samsung

has just had one of its best quarters in more than two years.

Helped, of course, by smartphone sales. It is predicting that the

rest of the year is going to see even more sales of these kinds of

phones. In stark contrast to one of the

biggest competitors, Apple has seen iPhone sales dropped by 15% in the

last quarter, and the outlook for the next three months is no better.

When you look at those consumers, they are the most loyal to Samsung,

and the most satisfied of any smartphone on the market. Really, we

want to be true to our consumers, in addition to bringing in new people

and really letting them try the Samsung experience. Samsung believe

that they can but the trend of slowing smartphone sales, by

improving upon one of its greatest hits. STUDIO: Another big story in

the UK, of Jem has approved plans to reduce energy bills, announcing an

interim price cap for households on pre-pavement meters, save and ?75

every year. -- prepayment. This is in response to the Competition and

Markets Authority report into the industry that came out in June, the

morning of the referendum result, nobody was really paying much

attention when it was published. It said that customers should be in

courage to switch to better tariffs, but here on the today programme, UK

managing director, first utility says that they do not go far enough.

Top story: HSBC says profits in the first half, first six months of the

year, came in at ?7.2 billion, $9.5 billion. Almost 30% lower in the

same period in 2015, there has been exceptional volatility, concerns

about China's economy and Brexit, Britain's decision to leave the

European Union. Shares seem to be up 3.5% at the moment, not another to

really... I say that, and then... The FTSE is up by one measly little

point. Live television! The rest of Europe looking pretty downbeat at

the moment. As new medical therapies and drugs live longer and healthier

lives, they bring higher costs. And a big challenge, how can affordable

health care be delivered? Almost 10% of the world's total economic output

is spent on health, more than $7 trillion, according to the WHO.

While governments pay for a big proportion of global health care

costs - more than 18-per cent of spending is made directly by

patients to providers. -- 18%. And of course another way to fund health

care is through insurance. One of the world's biggest firms is Allianz

and it's international health and life insurance division has more

than 75-million customers across dozens of countries.

Joining this is the chief executive of Alianza worldwide care. --

Allianz. We will talk about the cost in a moment, you'd part of the

business, first I will let you do a promo. -- huge part of the business.

This was a greenfield start-up, now you are the leader, that is fair to

say, that is not just giving you a plug, you are the leader in this

sector, have you do that in 15 years? Absolutely! Thank you for

this introduction. Valiant worldwide care is a teenager, if you will, 15

years. -- Alley and is. -- Allianz. Very good timing, global trade has

begun to trigger, 15 years ago, old big corporate companies all went

abroad. I come from Poland, it is where I was born, in 1989, after the

Berlin Wall was torn down, all the businesses went to the eastern

Europe. Look at China and Asia. The whole mobility of the workforce

started, and at that time Allianz had a good strategic fit with what

were the needs of us, of the employees, of the employers, and the

second, we put the focus on the service. The main thing is not the

health insurance, it is that you want to get the right doctor, you

want to have access 24 hours, you want someone who speaks your

language, you want to have access to the health club providers who are

quality or specialised in the problem, that is what we provide,

24-hour, seven day, every day of the year, with seven basic languages and

then we have 45 different languages sitting in the Dublin heart.

Multinational, understanding the countries. That was the success,

that will continue. You talk about the fact you are able to capitalise

on the fact we have more mobility, people moving more, there is big

barriers to that, terrorist related attacks, Zika virus, spreading into

Florida, companies are where, now more than ever, the need to monitor

please help. What are you doing in that space? That is going to be a

tricky area. Very much changing, 15 years ago, the main purpose was

health care, how do I help when I have a health problem, nowadays,

with what you have said, we provide many more services in terms of

security, guiding people in this country, the risks, providing peace

of mind to the employee again, to the HR, or whatever risk manager, we

have corporate assistance, which is providing all of these services.

Again, security, medical, certain pandemic situation, maybe in the

very far away, mining rig, oil rig type of places. I want to talk about

the cost, the cost with the medical therapies and the new drugs that

come through, costs seem to go up, that makes it more expensive for

you, but I am wondering, with costs going up, do you pass that on... Is

insurance more expensive today than it was yesterday, you pass that on?

The health care industry, as you say, it is good news that it is

increasing, we have better therapies and all of these things which are

good for us as consumers. In terms of funding, what we see more and

more, public and private get-together. We have to make sure

that we have private medical insurance is, so for example,

international private medical, but also we must look at how you can

combine and make a dialogue between the public funds, the private

insurers, which is providing better service in terms of stealing people

to the right health care providers, prevention, prevention will be the

word of the future. We have not done enough. The technologies, the

variables, although things bringing us the possibilities. This is

closing the gap in terms of distance, getting better diagnosis,

and then, of course, having less leakage in costs. We really

appreciate you joining us. I wish that we had more time on the

programme. You can always get in touch with us,

this is how you can do so. The business live pages where you can

stay ahead of all the days breaking business news. We will keep you

up-to-date with all of the latest details with insight and analysis

from the BBC's team of editors around the world.

We ask you the question, how do you deal with arrogant graduate, Charlie

Brown says, fire them! Alex said, how should talented graduates deal

with stuck in the mud bosses who are not as good as they think they are!

One viewer turning it around. Depends upon your industry, we get

some pretty sharp feedback but he quickly in the industry I work in.

Promoted, resigned, or they get fired, it is their choice. And we

quickly have a look at another newspaper. In the Independent, we

said we would talk about UK interest rates, interesting, someone is

saying some of those big stress tests we have seen to the banks, it

means actually that the Bank of England has been asleep at the

wheel. I think that if you compare banks now to before the financial

crisis, they are in better shape, they have been reducing risk and

building up capital cushions, there could be a shock, that is the point

of a stress test, its own test which is coming up in the next water is

going to be interesting, 20 bucks a barrel oil, 4% fall in UK GDP. 33%

slide in global growth. That will be the interesting one. Always a

pleasure, thank you for joining us. That is all for business live today,

20 more throughout the day. Unusually windy conditions for

August, gale force winds expected across western parts of the UK,

because of this area of low pressure, quite deep, for this time

in the season. Bringing about pretty heavy rain