:00:09. > :00:18.This is Business Live from BBC News with Ben Thompson and Sally Bundock.
:00:19. > :00:21.HSBC blames "extreme levels of volatility" for a 14% slump
:00:22. > :00:44.That is our top story on Tuesday, May three.
:00:45. > :00:46.Alongside HSBC's slump in profits, UBS also reports a sharp downturn.
:00:47. > :00:48.We'll assess what it tells us about the state
:00:49. > :00:52.Also in the programme, Australia slashes
:00:53. > :00:54.interest rates for the first time in a year, as it battles
:00:55. > :00:59.Asian stock markets opened higher on Tuesday
:01:00. > :01:09.following positive trading sessions in the US and Europe.
:01:10. > :01:10.And how do you listen to music?
:01:11. > :01:59.This is Business Live from BBC News with Ben Thompson and Sally Bundock.
:02:00. > :02:00.Technology has changed the way we listen,
:02:01. > :02:04.The boss of the world's biggest music platform, SoundCloud -
:02:05. > :02:07.And as new figures show parents are collectively paying billions
:02:08. > :02:10.every year to help children buy their first house,
:02:11. > :02:13.we want to know, do you rely on Bank of Mum and Dad
:02:14. > :02:16.Let us know, use the hashtag, BBC BizLive.
:02:17. > :02:19.We've had an update in the last couple of hours from
:02:20. > :02:25.It says profits were down 14% in the quarter, to
:02:26. > :02:32.It seems that Tata are about to enter a deal with liberty house.
:02:33. > :02:39.This is the first concrete bid for the group since the Indian
:02:40. > :02:42.conglomerate Tata put up the UK operations for sale. We want to do
:02:43. > :02:50.to make you aware of that news in the last few minutes. Returning to
:02:51. > :03:05.the top story. Banking giant HSBC says that profits were down 14% in
:03:06. > :03:08.the last quarter, down to $6.1 billion.
:03:09. > :03:11.Rival UBS also reported its results today with a 65% drop in first
:03:12. > :03:14.quarter profits while French banking giant BNP Paribas managed to provide
:03:15. > :03:16.a little cheer for the troubled banking sector, posting
:03:17. > :03:19.It's been a bad time for big banks recently.
:03:20. > :03:23.In the UK, the five largest have all seen their profits and share
:03:24. > :03:26.Let's have a look at some of the reasons why,
:03:27. > :03:29.the turmoil on global stock markets and slump in commodity prices
:03:30. > :03:32.like oil and steel, have made it even harder for investment
:03:33. > :03:35.The banks have been hit by the cost of mis-selling payment
:03:36. > :03:40.protection insurance as well as fines for market rigging.
:03:41. > :03:45.Remember the bank rate that was rigged by a lot of big banks.
:03:46. > :03:50.Central Banks have been trying to boost borrowing
:03:51. > :03:52.by using record low, and even negative, interest rates.
:03:53. > :03:55.But this has, in many cases, simple led to a weakening
:03:56. > :04:07.the Institute of Financial Services joins me now.
:04:08. > :04:17.Several banks have reported today that being Europe's biggest, it was
:04:18. > :04:21.not as grim as some were predicting. It was not, HSBC is mostly an Asian
:04:22. > :04:27.bank, it is headquartered in London but it is Asian, it is the largest
:04:28. > :04:32.bank in Europe but it is very much an Asian bank. In what way does that
:04:33. > :04:37.change its numbers, because many are doing the fact that it is so exposed
:04:38. > :04:43.to China in particular, it is not necessarily a good thing. HSBC has
:04:44. > :04:47.made it very clear, they see a substantial amount of their future
:04:48. > :04:51.being Asia, Asia is still a growing market. I think what we need to
:04:52. > :04:59.think about is that many markets in Asia, we used to call them
:05:00. > :05:02.developing markets, but now I call them markets that are roughly
:05:03. > :05:07.developing economies, development is not that smooth, but the return
:05:08. > :05:12.tends to be where the risk is. They have gone to where the potential
:05:13. > :05:16.returns are. Talking about some of the issues that then highlighted
:05:17. > :05:20.what all banks around the world have been facing this year, terrible
:05:21. > :05:24.profits when it comes to investment banking because of market volatility
:05:25. > :05:28.and the really low commodity prices, and adds to that very low interest
:05:29. > :05:31.rates, meaning the other side of the business is not doing so well, talk
:05:32. > :05:38.us through some of the headwinds, that the likes of HSBC and others
:05:39. > :05:42.have been facing. Investment banking has been hit by a slowdown in the
:05:43. > :05:48.volume of business, thinking about the number of trades going on,
:05:49. > :05:53.HSBC's investment bank is not the largest, Goldman Sachs, some of the
:05:54. > :05:59.US banks have much larger Trajan operations. -- trading operations.
:06:00. > :06:06.HSBC has not been hit in the same way, its investment arm is client
:06:07. > :06:10.focused, it is not focused as much, that is a positive side. We had
:06:11. > :06:19.expectations of a much worse set of numbers from HSBC, they were not as
:06:20. > :06:22.bad as had been imagined. Overall, investment banking, and thinking
:06:23. > :06:25.about some of the other banks that have announced earnings this
:06:26. > :06:31.morning, those that had businesses that were much more market focused,
:06:32. > :06:35.investment banking in a niche, big market players have suffered more.
:06:36. > :06:42.We have seen results from Europe, outside of southern Europe, Italy,
:06:43. > :06:51.they have been favourable. Europe not as bad. HSBC, coming back,
:06:52. > :06:56.China, HSBC is more focused on the private sector in China, the state
:06:57. > :07:01.owned enterprises, where there is more difficulty, as they shift from
:07:02. > :07:06.heavy industry to a service economy. We see different things from
:07:07. > :07:10.different banks. UBS reported results, their investment banking
:07:11. > :07:16.results, down dramatically, as they were supposedly reducing their
:07:17. > :07:19.investment banking footprint, the size of that business, does not look
:07:20. > :07:27.like they have reduced volatility in earnings. They are also suffering on
:07:28. > :07:30.the private banking. So there is a lot to consider as we look towards
:07:31. > :07:35.the rest of the year, thank you very much for coming in. Then two more
:07:36. > :07:40.detail on HSBC, BNP Paribas, and UBS, online. -- there is much more
:07:41. > :07:44.detail. Puerto Rico's debt
:07:45. > :07:50.crisis has prompted it to default on a $422 million debt
:07:51. > :07:53.payment that was due yesterday. The governor of the US territory had
:07:54. > :07:56.already warned that the the island's financial position was
:07:57. > :07:58.perilous and would not meet Creditors have agreed to hold talks
:07:59. > :08:02.for 30 days and will not pursue legal action until those
:08:03. > :08:03.talks are completed. Ferrari says it's on course
:08:04. > :08:06.for a record year and sales for the first
:08:07. > :08:09.three months of the year. The Italian sportscar maker
:08:10. > :08:11.sold nearly 1,900 cars that's up 15% on the same
:08:12. > :08:15.period last year. Profits rose 19% to $90m,
:08:16. > :08:17.with sales in Europe, China, and the Middle East
:08:18. > :08:19.rising by double-digits. German airline Lufthansa has
:08:20. > :08:23.reported a small loss down from a profit of $490 million
:08:24. > :08:30.over the same period last year. It made a first-quarter pre-tax loss
:08:31. > :08:33.of $61 million but missed forecasts. The group has cut its capacity plans
:08:34. > :08:36.amid fierce competition Last week, one of Lufthansa's
:08:37. > :08:40.rivals, made a similar cut
:08:41. > :08:56.to its growth plans. Iterating the breaking news, as
:08:57. > :09:02.mentioned at the beginning of the programme, it is on the website, in
:09:03. > :09:05.fact it is Ben's tweet on the business live page, bionic Ben,
:09:06. > :09:10.getting a tweet before we walked onto the set, talk us through this
:09:11. > :09:14.letter of intent. Clearly waiting for combination from both sides,
:09:15. > :09:17.this story, liberty house, it was involved in some of the early
:09:18. > :09:24.discussions about the future of the British assets of Tata, this is the
:09:25. > :09:27.first concrete bid since the business was put up the sale, it
:09:28. > :09:32.simply cannot compete with cheap imports, notably from China, and the
:09:33. > :09:36.European industry has been suffering as well, news that this is a letter
:09:37. > :09:40.that they have an intent to buy the British assets of Tata, could be
:09:41. > :09:47.good news for the thousands of jobs that are at risk. Another story on
:09:48. > :09:53.the business live page, BMW says that it is seeing record sales in
:09:54. > :09:58.the first quarter, it has seen an appetite for luxury cars, certainly,
:09:59. > :10:05.BMW, also high end, first-quarter record for car sales, sales volume,
:10:06. > :10:07.up 6%, totalling 567,605 cars, they sold all of those in the first three
:10:08. > :10:10.months of the year. the central bank there has cut
:10:11. > :10:14.interest rates just hours before the Government is due
:10:15. > :10:16.to deliver it's budget. It comes after new figures showed
:10:17. > :10:18.inflation had turned negative from our Asia Business
:10:19. > :10:35.Hub in Singapore. Central bank action getting
:10:36. > :10:38.everyone's attention once again. It is indeed, I should say that the key
:10:39. > :10:45.cash rate, which is the benchmark cash rate, cut to 1.75, that is a
:10:46. > :10:51.fresh record low for Australia, really an attempt to counter
:10:52. > :10:55.deflation, also an attempt to level the strength of this trailing
:10:56. > :11:00.dollar, at a time when it is feeling the pinch from a slowdown in their
:11:01. > :11:04.largest trading partner, China, prompted by a decision data last
:11:05. > :11:09.week, which showed quarterly deflation in the consumer price
:11:10. > :11:12.index and the weakest annual gain on record for core inflation. The
:11:13. > :11:17.Australian dollar pretty much falling on the decision, that's what
:11:18. > :11:22.we saw, that dollar has risen 15% since mid-January, making the nation
:11:23. > :11:26.'s key exports like iron ore more expensive, looking to bring down the
:11:27. > :11:29.spreading dollar, there is also the hope that it would boost household
:11:30. > :11:34.spending, but of course, next thing we are watching for is the budget,
:11:35. > :11:37.likely focusing on jobs growth, keeping the budget in check,
:11:38. > :11:45.expectations for small tax cuts, spending, infrastructure ahead, of
:11:46. > :11:46.elections that the Prime Minister, Malcolm Turnbull, will likely call
:11:47. > :11:50.on May 11. So that surprise move
:11:51. > :11:52.by Australia's Central Bank to cut rates off the back of
:11:53. > :11:54.weak inflation data. Prices turned negative
:11:55. > :11:56.in the last quarter. That's largely been driven
:11:57. > :11:59.by the slump in commodity prices, but the big question is how
:12:00. > :12:01.temporary these factors In Europe, here's what the numbers
:12:02. > :12:20.are doing in the first hour. We're seeing some improvement
:12:21. > :12:22.from the lows of February, but nothing to get excited
:12:23. > :12:24.about at all. In the UK later we get the latest
:12:25. > :12:27.manufacturing PMI data from which is expected to show
:12:28. > :12:29.a small improvement, and will be watched as always,
:12:30. > :12:32.for signs that it's not only a story of recovery led by
:12:33. > :12:35.the service sector. We'll talk more about that
:12:36. > :12:38.in a moment, but let's head Stateside for a look ahead
:12:39. > :12:47.to the day on Wall Street. Plenty to watch out for this
:12:48. > :12:52.Tuesday, buckle up, first we turn to the US car industry, most of the
:12:53. > :12:55.world's big eight auto-makers will report how many new cars they have
:12:56. > :13:01.sold in April in America, research firm Kelly blue book estimates 17.5
:13:02. > :13:08.million new rights were purchased. One company to pay attention to,
:13:09. > :13:11.Volkswagen, tainted by an omission scandal, and omissions cheating
:13:12. > :13:15.scandal, will they be able to stop their steady decline in sales. --
:13:16. > :13:20.Kelly Bluebook. Tuesday's report should shed some light. Earnings
:13:21. > :13:24.season continues, both Pfizer and Haliburton, two of the companies
:13:25. > :13:36.reporting their first-quarter results. You heard it from Michelle,
:13:37. > :13:40.buckle up! We are joined by global market strategist at JP Morgan asset
:13:41. > :13:44.management. Tell us what is on your mind, another busy day. Illustrating
:13:45. > :13:49.how much markets are looking at monetary policy, central bank rate
:13:50. > :13:54.cuts, and assets in the open market, even raising rates that you have in
:13:55. > :14:01.the US, the Australian action was a bit of a surprise, 12 out of 27
:14:02. > :14:04.economists predicted this. At a time when banks are simply trying to keep
:14:05. > :14:09.up with expectations, they exceeded expectations and made a big cut.
:14:10. > :14:12.Touching on that notion of what banks tell us about the world
:14:13. > :14:15.economy, we get caught up in individual figures, these are only
:14:16. > :14:18.quarterly figures, we should not read too much into them, but it
:14:19. > :14:22.should give us an indication of which way the economy is heading,
:14:23. > :14:28.they are players in many big markets around the world, they are a big
:14:29. > :14:32.indicator. Eusebius trailing bank or any banks forecast really impacting
:14:33. > :14:37.how we think about global growth for the next one, three, five years.
:14:38. > :14:39.When you have a bank like the bank of Australia which sees inflation
:14:40. > :14:44.figures really low and worried, trying to stimulate that quickly, it
:14:45. > :14:47.does signal they are ready to act but also that maybe we should be
:14:48. > :14:51.looking closely at whether Australian data is performing the
:14:52. > :14:54.way that we want it to be. Where I mention the US, I feel like we
:14:55. > :14:58.haven't spoken about them for quite some time, which is unusual, what
:14:59. > :15:02.are people saying in the market is about when rates will go up again?
:15:03. > :15:05.It is always will they won't they, the April meeting that we had for
:15:06. > :15:09.the Federal reserve was not a surprise that they did not act,
:15:10. > :15:13.interesting shift in language, they are now looking less about concerns
:15:14. > :15:18.about a high US dollar, and growth issues in China, now looking more at
:15:19. > :15:23.the US, is all the growth that we have been expecting airtight, is it
:15:24. > :15:27.as strong as it can be to justify a hike in June. Still on the table, a
:15:28. > :15:33.lot of the data has got to come up. A lot happening in June. We will see
:15:34. > :15:41.you in five minutes. All of that will keep us busy. Still to come:
:15:42. > :15:44.music to his ears? The boom in streaming services is changing the
:15:45. > :15:46.way we consume music - but with more and more competitors, can anyone
:15:47. > :15:55.make money? The boss of SoundCloud will be with us shortly.
:15:56. > :16:01.Parents will lend their children a staggering ?5 billion this year to
:16:02. > :16:06.help them on to the property ladder. It means that the so-called bank of
:16:07. > :16:13.mum and dad will help finance 25% of all UK mortgage transactions this
:16:14. > :16:16.year. That's about ?17500 per home and it puts parents in the top ten
:16:17. > :16:19.league of mortgage lenders. Joining us now from our
:16:20. > :16:32.Salford Studio is Louisa Fletcher The figures are staggering. ?5
:16:33. > :16:36.billion and 17500, on average, where is the money coming from? Well, I
:16:37. > :16:41.didn't get pocket money like that when I was a kid, I have to say!
:16:42. > :16:46.Frankly, I think parents are possibly benefiting from the fact
:16:47. > :16:49.that house prices have increased so much over the last decade and at
:16:50. > :16:53.that point, they're able with the equity that they have in their
:16:54. > :16:57.property to help finance their children's purchases. So that's
:16:58. > :17:03.probably where the money is coming from. However it is worth mentioning
:17:04. > :17:07.if you are accepting a deposit t has to be gifted. So you can't lend
:17:08. > :17:12.someone a deposit, you have to gift it to them and that does have to be
:17:13. > :17:14.ratified in writing because the lender needs to understand the
:17:15. > :17:22.person giving you that money isn't going to want it back.
:17:23. > :17:25.Is it parents and grandparents in a sense gifting the inheritance to
:17:26. > :17:29.their children a lot earlier than perhaps they would have perhaps
:17:30. > :17:34.thought about and therefore, in some ways, some might call it very, very
:17:35. > :17:37.tax efficient when you look at inheritance tax and that kind of
:17:38. > :17:41.thing? It will depend on the amount of money you're gifting and the
:17:42. > :17:45.threshold at which you would say pay tax. Yes, there is probably a trend
:17:46. > :17:49.that we're seeing where people are saying, "Look, we have got the
:17:50. > :17:52.ability. We've got the where with all because our own property has
:17:53. > :17:57.grown so much in value. Let's give you the money now when it is really
:17:58. > :18:03.going to help you rather than in 20 or so years time. Let's get you on
:18:04. > :18:09.the ladder now and the cash is there in some ca obviously." Better you
:18:10. > :18:14.make use of it now. Louisa, thank you.
:18:15. > :18:17.Parents who lend money to their kids to buy a house, they feel they can
:18:18. > :18:26.stay at that house whenever they want. I have got friends like that
:18:27. > :18:28.in London! It is called BOMAD! The bank of mum and dad!
:18:29. > :18:38.You heard it here! One of the world's biggest banks,
:18:39. > :18:47.HSBC, has reported a 14% in profits for the first
:18:48. > :18:49.three months of the year. The bank blamed "extreme levels
:18:50. > :18:55.of volatility" in financial We have heard those excuses before.
:18:56. > :18:59.Many of the European banks have reported today. Take a look online.
:19:00. > :19:00.You can see the details on our website.
:19:01. > :19:02.When was the last time you bought a CD?
:19:03. > :19:09.For many, the way they consume music has changed entirely.
:19:10. > :19:12.We no longer own the music, but instead rent it,
:19:13. > :19:14.paying a monthly subscription to access thousands of tracks
:19:15. > :19:16.and albums to play whenever and wherever we want.
:19:17. > :19:19.And one of the big players is SoundCloud.
:19:20. > :19:22.Today, they're launching a paid-for service in the UK,
:19:23. > :19:24.but can the market sustain a new player in this
:19:25. > :19:37.Last year there was a 45% increase in streaming revenue,
:19:38. > :19:40.with physical music sales being overtaken for the first time.
:19:41. > :19:42.SoundCloud often gets much less attention than its rival Spotify,
:19:43. > :19:45.but it has more than double the number of users,
:19:46. > :19:53.And unlike Spotify, SoundCloud has focused on growth over paid
:19:54. > :20:04.In 2014, the company posted a loss of $56.4 million and so arguably
:20:05. > :20:07.needs to start charging to stay in the game.
:20:08. > :20:19.Alex Ljung is Co-founder and Chief Executive, SoundCloud.
:20:20. > :20:26.Nice to meet you, Alex. It is a very crowded market, but you argue that
:20:27. > :20:31.you are doing so well already forget the numbers for now. In terms of
:20:32. > :20:36.listeners, those users because of what you aurvings the uniqueness of
:20:37. > :20:39.what you offer? Yes. Well, I think if you take a step back as well.
:20:40. > :20:43.Music is one of the big human passions. Every single person on the
:20:44. > :20:47.planet loves music. Is passionate about it and it is a big part of
:20:48. > :20:52.their life. The market potential in terms of usage is enormous. So there
:20:53. > :20:55.is a lot of space for several different companies in that. How do
:20:56. > :21:00.you convert people from a free service to a paid for service? If
:21:01. > :21:03.you're offering something for free? What convinces them to start
:21:04. > :21:06.shelling out money for it? SoundCloud is unique in that we have
:21:07. > :21:12.been offering a free service for several years now. And now have over
:21:13. > :21:17.175 million unique listeners. Well over, you know, 100 million tracks
:21:18. > :21:22.available for free and it doesn't exist anywhere else. It is the
:21:23. > :21:26.choice for the artists, artists both big and small use SoundCloud all the
:21:27. > :21:30.time. We are introducing a paid service that let's you take all of
:21:31. > :21:36.that and make it off line available, but the unique part is we have taken
:21:37. > :21:42.all the back catalogue and the big indes and put that in a service, you
:21:43. > :21:47.have a service that has over 125 million tracks, everything
:21:48. > :21:53.imaginable, albums, remixes, mash-ups, everything you can think
:21:54. > :21:58.off and off line and that's what you get for the fee. About the artists,
:21:59. > :22:02.we know the likes of Apple Music they faced a backlash when it came
:22:03. > :22:05.to how much they paid artists. Certain artists decided they didn't
:22:06. > :22:10.want to be on that platform because they weren't being paid. How do you
:22:11. > :22:13.square that circle? You need to keep your costs down and particularly new
:22:14. > :22:18.artists that work with you need to be paid? Well, SoundCloud is very
:22:19. > :22:21.special. If you look at its history like, my co-founder and I we were
:22:22. > :22:26.both musicians and we started thinking about what can the internet
:22:27. > :22:30.give to musicians? So we have become very quickly the biggest community
:22:31. > :22:33.of creators and artists across the world and this was before we had
:22:34. > :22:38.revenue opportunities in there. So, you know, you think about
:22:39. > :22:42.traditional radio play, 3,000, 4,000 artists, at SoundCloud we play
:22:43. > :22:46.12,000 artists every month. It is an explosion for what artists can do
:22:47. > :22:50.online and there is also revenue opportunities on top of that. So it
:22:51. > :22:55.is a combination value of both revenue and being able to build a
:22:56. > :22:59.large audience. It is a very mixed environment, isn't it? Different...
:23:00. > :23:03.Just like life. To different organisations work in different ways
:23:04. > :23:07.and for artists, especially new artists, unknown artists, would you
:23:08. > :23:13.argue they are losing out in this world of streaming in terms of the
:23:14. > :23:17.revenue potential for them? Look, there are challenges. Real
:23:18. > :23:21.challenges in terms of, you know, how big I believe the industry
:23:22. > :23:26.around music should be versus where it is at today, but I'm a optimist
:23:27. > :23:30.and we are at a point in time where the tools for cre August's of music
:23:31. > :23:34.are more accessible to, you know, more people than ever before. There
:23:35. > :23:38.is more creativity than ever before. The world is more global than ever
:23:39. > :23:42.before, which means there is more creative input from across the
:23:43. > :23:48.entire world. So I believe we're in a golden age of creativity. We're in
:23:49. > :23:53.a golden age of how people consume music and we're in a really good
:23:54. > :23:58.point in terms of how we're starting to ramp up the regeneration around
:23:59. > :24:06.that which will get a lot bigger over the next few years. You moved
:24:07. > :24:10.from Sweden to Berlin. Talk me through the environment. Perhaps
:24:11. > :24:14.what you could do in Berlin and you couldn't do in Sweden and how Europe
:24:15. > :24:18.is holding its own against the Silicon Valley? Internet connections
:24:19. > :24:21.were better in Sweden, great connectivity, but the thing that we
:24:22. > :24:25.liked about Berlin, it is a city with a little bit of a punk
:24:26. > :24:31.attitude. It has got an edge to it and it is very close to, you know,
:24:32. > :24:36.creativity and the cutting edge of creativity and good technology. That
:24:37. > :24:39.was good for us as we said at the inter-- as we sit at the
:24:40. > :24:44.intersection between arts and technology. We had an office in
:24:45. > :24:47.Silicon Valley. Silicon Valley is great for technology and maybe less
:24:48. > :24:50.interesting for the parts. I know that you're friend and the
:24:51. > :24:55.co-founder that you work with Eric, he had an album which he does admit
:24:56. > :24:59.was not the greatest by any means, are you tempted? No, his albums are
:25:00. > :25:03.great. He has done two of them. OK. I read a quote of his saying he is
:25:04. > :25:08.not impressed with his own stuff! Anyway. Is there a danger when it
:25:09. > :25:11.comes to the musicians, you were founded on the principles of sharing
:25:12. > :25:14.music so it was new bands that wanted to get their music out there
:25:15. > :25:19.and this was a platform to do that and this is a question applicable to
:25:20. > :25:22.many new start-ups that you get so far away from your founding ethos
:25:23. > :25:26.now it becomes about money and profit and revenue and shareholders,
:25:27. > :25:31.all that thing, where it has got so far away from the reason that you
:25:32. > :25:35.created that it runs away from you. How do you retain that ethos? We
:25:36. > :25:39.start it had from a personal point, a passion, believing that the
:25:40. > :25:42.internet could do more for musicians and we have more musicians on
:25:43. > :25:47.SoundCloud than ever before and it is growing rapidly. So I think, you
:25:48. > :25:52.know, we are connected to what it started with and you know we have
:25:53. > :25:55.some of the biggest artists and the smallest artists on the platform
:25:56. > :26:01.today. Alex Ljung Thank you for coming in.
:26:02. > :26:02.Nice to have you on Business