03/05/2016 BBC Business Live


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This is Business Live from BBC News with Ben Thompson and Sally Bundock.


HSBC blames "extreme levels of volatility" for a 14% slump


That is our top story on Tuesday, May three.


Alongside HSBC's slump in profits, UBS also reports a sharp downturn.


We'll assess what it tells us about the state


Also in the programme, Australia slashes


interest rates for the first time in a year, as it battles


Asian stock markets opened higher on Tuesday


following positive trading sessions in the US and Europe.


And how do you listen to music?


This is Business Live from BBC News with Ben Thompson and Sally Bundock.


Technology has changed the way we listen,


The boss of the world's biggest music platform, SoundCloud -


And as new figures show parents are collectively paying billions


every year to help children buy their first house,


we want to know, do you rely on Bank of Mum and Dad


Let us know, use the hashtag, BBC BizLive.


We've had an update in the last couple of hours from


It says profits were down 14% in the quarter, to


It seems that Tata are about to enter a deal with liberty house.


This is the first concrete bid for the group since the Indian


conglomerate Tata put up the UK operations for sale. We want to do


to make you aware of that news in the last few minutes. Returning to


the top story. Banking giant HSBC says that profits were down 14% in


the last quarter, down to $6.1 billion.


Rival UBS also reported its results today with a 65% drop in first


quarter profits while French banking giant BNP Paribas managed to provide


a little cheer for the troubled banking sector, posting


It's been a bad time for big banks recently.


In the UK, the five largest have all seen their profits and share


Let's have a look at some of the reasons why,


the turmoil on global stock markets and slump in commodity prices


like oil and steel, have made it even harder for investment


The banks have been hit by the cost of mis-selling payment


protection insurance as well as fines for market rigging.


Remember the bank rate that was rigged by a lot of big banks.


Central Banks have been trying to boost borrowing


by using record low, and even negative, interest rates.


But this has, in many cases, simple led to a weakening


the Institute of Financial Services joins me now.


Several banks have reported today that being Europe's biggest, it was


not as grim as some were predicting. It was not, HSBC is mostly an Asian


bank, it is headquartered in London but it is Asian, it is the largest


bank in Europe but it is very much an Asian bank. In what way does that


change its numbers, because many are doing the fact that it is so exposed


to China in particular, it is not necessarily a good thing. HSBC has


made it very clear, they see a substantial amount of their future


being Asia, Asia is still a growing market. I think what we need to


think about is that many markets in Asia, we used to call them


developing markets, but now I call them markets that are roughly


developing economies, development is not that smooth, but the return


tends to be where the risk is. They have gone to where the potential


returns are. Talking about some of the issues that then highlighted


what all banks around the world have been facing this year, terrible


profits when it comes to investment banking because of market volatility


and the really low commodity prices, and adds to that very low interest


rates, meaning the other side of the business is not doing so well, talk


us through some of the headwinds, that the likes of HSBC and others


have been facing. Investment banking has been hit by a slowdown in the


volume of business, thinking about the number of trades going on,


HSBC's investment bank is not the largest, Goldman Sachs, some of the


US banks have much larger Trajan operations. -- trading operations.


HSBC has not been hit in the same way, its investment arm is client


focused, it is not focused as much, that is a positive side. We had


expectations of a much worse set of numbers from HSBC, they were not as


bad as had been imagined. Overall, investment banking, and thinking


about some of the other banks that have announced earnings this


morning, those that had businesses that were much more market focused,


investment banking in a niche, big market players have suffered more.


We have seen results from Europe, outside of southern Europe, Italy,


they have been favourable. Europe not as bad. HSBC, coming back,


China, HSBC is more focused on the private sector in China, the state


owned enterprises, where there is more difficulty, as they shift from


heavy industry to a service economy. We see different things from


different banks. UBS reported results, their investment banking


results, down dramatically, as they were supposedly reducing their


investment banking footprint, the size of that business, does not look


like they have reduced volatility in earnings. They are also suffering on


the private banking. So there is a lot to consider as we look towards


the rest of the year, thank you very much for coming in. Then two more


detail on HSBC, BNP Paribas, and UBS, online. -- there is much more


detail. Puerto Rico's debt


crisis has prompted it to default on a $422 million debt


payment that was due yesterday. The governor of the US territory had


already warned that the the island's financial position was


perilous and would not meet Creditors have agreed to hold talks


for 30 days and will not pursue legal action until those


talks are completed. Ferrari says it's on course


for a record year and sales for the first


three months of the year. The Italian sportscar maker


sold nearly 1,900 cars that's up 15% on the same


period last year. Profits rose 19% to $90m,


with sales in Europe, China, and the Middle East


rising by double-digits. German airline Lufthansa has


reported a small loss down from a profit of $490 million


over the same period last year. It made a first-quarter pre-tax loss


of $61 million but missed forecasts. The group has cut its capacity plans


amid fierce competition Last week, one of Lufthansa's


rivals, made a similar cut


to its growth plans. Iterating the breaking news, as


mentioned at the beginning of the programme, it is on the website, in


fact it is Ben's tweet on the business live page, bionic Ben,


getting a tweet before we walked onto the set, talk us through this


letter of intent. Clearly waiting for combination from both sides,


this story, liberty house, it was involved in some of the early


discussions about the future of the British assets of Tata, this is the


first concrete bid since the business was put up the sale, it


simply cannot compete with cheap imports, notably from China, and the


European industry has been suffering as well, news that this is a letter


that they have an intent to buy the British assets of Tata, could be


good news for the thousands of jobs that are at risk. Another story on


the business live page, BMW says that it is seeing record sales in


the first quarter, it has seen an appetite for luxury cars, certainly,


BMW, also high end, first-quarter record for car sales, sales volume,


up 6%, totalling 567,605 cars, they sold all of those in the first three


months of the year. the central bank there has cut


interest rates just hours before the Government is due


to deliver it's budget. It comes after new figures showed


inflation had turned negative from our Asia Business


Hub in Singapore. Central bank action getting


everyone's attention once again. It is indeed, I should say that the key


cash rate, which is the benchmark cash rate, cut to 1.75, that is a


fresh record low for Australia, really an attempt to counter


deflation, also an attempt to level the strength of this trailing


dollar, at a time when it is feeling the pinch from a slowdown in their


largest trading partner, China, prompted by a decision data last


week, which showed quarterly deflation in the consumer price


index and the weakest annual gain on record for core inflation. The


Australian dollar pretty much falling on the decision, that's what


we saw, that dollar has risen 15% since mid-January, making the nation


's key exports like iron ore more expensive, looking to bring down the


spreading dollar, there is also the hope that it would boost household


spending, but of course, next thing we are watching for is the budget,


likely focusing on jobs growth, keeping the budget in check,


expectations for small tax cuts, spending, infrastructure ahead, of


elections that the Prime Minister, Malcolm Turnbull, will likely call


on May 11. So that surprise move


by Australia's Central Bank to cut rates off the back of


weak inflation data. Prices turned negative


in the last quarter. That's largely been driven


by the slump in commodity prices, but the big question is how


temporary these factors In Europe, here's what the numbers


are doing in the first hour. We're seeing some improvement


from the lows of February, but nothing to get excited


about at all. In the UK later we get the latest


manufacturing PMI data from which is expected to show


a small improvement, and will be watched as always,


for signs that it's not only a story of recovery led by


the service sector. We'll talk more about that


in a moment, but let's head Stateside for a look ahead


to the day on Wall Street. Plenty to watch out for this


Tuesday, buckle up, first we turn to the US car industry, most of the


world's big eight auto-makers will report how many new cars they have


sold in April in America, research firm Kelly blue book estimates 17.5


million new rights were purchased. One company to pay attention to,


Volkswagen, tainted by an omission scandal, and omissions cheating


scandal, will they be able to stop their steady decline in sales. --


Kelly Bluebook. Tuesday's report should shed some light. Earnings


season continues, both Pfizer and Haliburton, two of the companies


reporting their first-quarter results. You heard it from Michelle,


buckle up! We are joined by global market strategist at JP Morgan asset


management. Tell us what is on your mind, another busy day. Illustrating


how much markets are looking at monetary policy, central bank rate


cuts, and assets in the open market, even raising rates that you have in


the US, the Australian action was a bit of a surprise, 12 out of 27


economists predicted this. At a time when banks are simply trying to keep


up with expectations, they exceeded expectations and made a big cut.


Touching on that notion of what banks tell us about the world


economy, we get caught up in individual figures, these are only


quarterly figures, we should not read too much into them, but it


should give us an indication of which way the economy is heading,


they are players in many big markets around the world, they are a big


indicator. Eusebius trailing bank or any banks forecast really impacting


how we think about global growth for the next one, three, five years.


When you have a bank like the bank of Australia which sees inflation


figures really low and worried, trying to stimulate that quickly, it


does signal they are ready to act but also that maybe we should be


looking closely at whether Australian data is performing the


way that we want it to be. Where I mention the US, I feel like we


haven't spoken about them for quite some time, which is unusual, what


are people saying in the market is about when rates will go up again?


It is always will they won't they, the April meeting that we had for


the Federal reserve was not a surprise that they did not act,


interesting shift in language, they are now looking less about concerns


about a high US dollar, and growth issues in China, now looking more at


the US, is all the growth that we have been expecting airtight, is it


as strong as it can be to justify a hike in June. Still on the table, a


lot of the data has got to come up. A lot happening in June. We will see


you in five minutes. All of that will keep us busy. Still to come:


music to his ears? The boom in streaming services is changing the


way we consume music - but with more and more competitors, can anyone


make money? The boss of SoundCloud will be with us shortly.


Parents will lend their children a staggering ?5 billion this year to


help them on to the property ladder. It means that the so-called bank of


mum and dad will help finance 25% of all UK mortgage transactions this


year. That's about ?17500 per home and it puts parents in the top ten


league of mortgage lenders. Joining us now from our


Salford Studio is Louisa Fletcher The figures are staggering. ?5


billion and 17500, on average, where is the money coming from? Well, I


didn't get pocket money like that when I was a kid, I have to say!


Frankly, I think parents are possibly benefiting from the fact


that house prices have increased so much over the last decade and at


that point, they're able with the equity that they have in their


property to help finance their children's purchases. So that's


probably where the money is coming from. However it is worth mentioning


if you are accepting a deposit t has to be gifted. So you can't lend


someone a deposit, you have to gift it to them and that does have to be


ratified in writing because the lender needs to understand the


person giving you that money isn't going to want it back.


Is it parents and grandparents in a sense gifting the inheritance to


their children a lot earlier than perhaps they would have perhaps


thought about and therefore, in some ways, some might call it very, very


tax efficient when you look at inheritance tax and that kind of


thing? It will depend on the amount of money you're gifting and the


threshold at which you would say pay tax. Yes, there is probably a trend


that we're seeing where people are saying, "Look, we have got the


ability. We've got the where with all because our own property has


grown so much in value. Let's give you the money now when it is really


going to help you rather than in 20 or so years time. Let's get you on


the ladder now and the cash is there in some ca obviously." Better you


make use of it now. Louisa, thank you.


Parents who lend money to their kids to buy a house, they feel they can


stay at that house whenever they want. I have got friends like that


in London! It is called BOMAD! The bank of mum and dad!


You heard it here! One of the world's biggest banks,


HSBC, has reported a 14% in profits for the first


three months of the year. The bank blamed "extreme levels


of volatility" in financial We have heard those excuses before.


Many of the European banks have reported today. Take a look online.


You can see the details on our website.


When was the last time you bought a CD?


For many, the way they consume music has changed entirely.


We no longer own the music, but instead rent it,


paying a monthly subscription to access thousands of tracks


and albums to play whenever and wherever we want.


And one of the big players is SoundCloud.


Today, they're launching a paid-for service in the UK,


but can the market sustain a new player in this


Last year there was a 45% increase in streaming revenue,


with physical music sales being overtaken for the first time.


SoundCloud often gets much less attention than its rival Spotify,


but it has more than double the number of users,


And unlike Spotify, SoundCloud has focused on growth over paid


In 2014, the company posted a loss of $56.4 million and so arguably


needs to start charging to stay in the game.


Alex Ljung is Co-founder and Chief Executive, SoundCloud.


Nice to meet you, Alex. It is a very crowded market, but you argue that


you are doing so well already forget the numbers for now. In terms of


listeners, those users because of what you aurvings the uniqueness of


what you offer? Yes. Well, I think if you take a step back as well.


Music is one of the big human passions. Every single person on the


planet loves music. Is passionate about it and it is a big part of


their life. The market potential in terms of usage is enormous. So there


is a lot of space for several different companies in that. How do


you convert people from a free service to a paid for service? If


you're offering something for free? What convinces them to start


shelling out money for it? SoundCloud is unique in that we have


been offering a free service for several years now. And now have over


175 million unique listeners. Well over, you know, 100 million tracks


available for free and it doesn't exist anywhere else. It is the


choice for the artists, artists both big and small use SoundCloud all the


time. We are introducing a paid service that let's you take all of


that and make it off line available, but the unique part is we have taken


all the back catalogue and the big indes and put that in a service, you


have a service that has over 125 million tracks, everything


imaginable, albums, remixes, mash-ups, everything you can think


off and off line and that's what you get for the fee. About the artists,


we know the likes of Apple Music they faced a backlash when it came


to how much they paid artists. Certain artists decided they didn't


want to be on that platform because they weren't being paid. How do you


square that circle? You need to keep your costs down and particularly new


artists that work with you need to be paid? Well, SoundCloud is very


special. If you look at its history like, my co-founder and I we were


both musicians and we started thinking about what can the internet


give to musicians? So we have become very quickly the biggest community


of creators and artists across the world and this was before we had


revenue opportunities in there. So, you know, you think about


traditional radio play, 3,000, 4,000 artists, at SoundCloud we play


12,000 artists every month. It is an explosion for what artists can do


online and there is also revenue opportunities on top of that. So it


is a combination value of both revenue and being able to build a


large audience. It is a very mixed environment, isn't it? Different...


Just like life. To different organisations work in different ways


and for artists, especially new artists, unknown artists, would you


argue they are losing out in this world of streaming in terms of the


revenue potential for them? Look, there are challenges. Real


challenges in terms of, you know, how big I believe the industry


around music should be versus where it is at today, but I'm a optimist


and we are at a point in time where the tools for cre August's of music


are more accessible to, you know, more people than ever before. There


is more creativity than ever before. The world is more global than ever


before, which means there is more creative input from across the


entire world. So I believe we're in a golden age of creativity. We're in


a golden age of how people consume music and we're in a really good


point in terms of how we're starting to ramp up the regeneration around


that which will get a lot bigger over the next few years. You moved


from Sweden to Berlin. Talk me through the environment. Perhaps


what you could do in Berlin and you couldn't do in Sweden and how Europe


is holding its own against the Silicon Valley? Internet connections


were better in Sweden, great connectivity, but the thing that we


liked about Berlin, it is a city with a little bit of a punk


attitude. It has got an edge to it and it is very close to, you know,


creativity and the cutting edge of creativity and good technology. That


was good for us as we said at the inter-- as we sit at the


intersection between arts and technology. We had an office in


Silicon Valley. Silicon Valley is great for technology and maybe less


interesting for the parts. I know that you're friend and the


co-founder that you work with Eric, he had an album which he does admit


was not the greatest by any means, are you tempted? No, his albums are


great. He has done two of them. OK. I read a quote of his saying he is


not impressed with his own stuff! Anyway. Is there a danger when it


comes to the musicians, you were founded on the principles of sharing


music so it was new bands that wanted to get their music out there


and this was a platform to do that and this is a question applicable to


many new start-ups that you get so far away from your founding ethos


now it becomes about money and profit and revenue and shareholders,


all that thing, where it has got so far away from the reason that you


created that it runs away from you. How do you retain that ethos? We


start it had from a personal point, a passion, believing that the


internet could do more for musicians and we have more musicians on


SoundCloud than ever before and it is growing rapidly. So I think, you


know, we are connected to what it started with and you know we have


some of the biggest artists and the smallest artists on the platform


today. Alex Ljung Thank you for coming in.


Nice to have you on Business


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