:00:00. > :00:00.This is Business Live from BBC News with Aaron Heslehurst
:00:07. > :00:17.Banking on a small profit as HSBC chalks up a 29% fall in profits.
:00:18. > :00:21.We look at why an industry that was once seen as a cash cow
:00:22. > :00:38.Live from London, that's our top story on Wednesday, 3rd August.
:00:39. > :00:43.HSBC saw it's profits fall by an eye watering $3.9 billion in the last
:00:44. > :00:49.six months as a toxic cocktail of issues hit the bottom line.
:00:50. > :00:53.Low rates, fines and economic uncertainty are all part
:00:54. > :00:57.of the problem, but what's the solution?
:00:58. > :01:00.We'll hear from our business editor in just a moment.
:01:01. > :01:02.Also in the programme, cutting the red tape in India -
:01:03. > :01:05.and making it easier to do business across the country.
:01:06. > :01:10.It's the biggest economic change in over 60 years.
:01:11. > :01:26.There is a rebound happening after softening in Asia overnight.
:01:27. > :01:30.You know almost 10% of the world's total economic output is spent
:01:31. > :01:35.on health - that's more than $7 trillion according to the WHO.
:01:36. > :01:38.So as new therapies and drugs push up the price of global healthcare,
:01:39. > :01:42.We'll be talking to one of the world's biggest
:01:43. > :01:56.The Financial Times one boss says, "I have been given a 22-year-old to
:01:57. > :02:01.manage who has a first class degree from Cambridge and he is a first
:02:02. > :02:08.class pain in the butt." The question is, how do you deal with
:02:09. > :02:14.managing an arrogant graduate?" That's the question!
:02:15. > :02:21.Shares in the bank HSBC rise in early trade
:02:22. > :02:24.after announcing it will spend up to $2.5 billion to buy back shares.
:02:25. > :02:28.This follows the sale of its Brazil business in July.
:02:29. > :02:32.This is a bank deep into restructuring territory.
:02:33. > :02:37.The banking world just isn't nearly as profitable as it once was.
:02:38. > :02:40.Let us take a look at some of the issues facing the banks.
:02:41. > :02:43.Top of the list, billions of dollars in fines for everything from rigging
:02:44. > :02:46.the rates to doing business with blacklisted countries,
:02:47. > :02:49.laundering money and charging consumers for services
:02:50. > :02:55.Low and negative interest rates across Europe have also
:02:56. > :03:00.Low rates make it much harder for banks to make money
:03:01. > :03:03.because they decrease the margin that can be charged on a loan.
:03:04. > :03:07.Since the financial crisis banks have also had to hold much more cash
:03:08. > :03:15.So if they are storing it they can't lend it
:03:16. > :03:19.Finally, investors and businesses have been spooked by the UK's
:03:20. > :03:24.decision to leave the EU and the Chinese economic slowdown.
:03:25. > :03:27.Companies are much more likely to hold off borrowing for a big
:03:28. > :03:32.project if they believe the economy is in poor health.
:03:33. > :03:38.Our business editor Simon Jack is with me.
:03:39. > :03:45.Simon great to have you with us as always. Is this the new norm now? It
:03:46. > :03:48.is not a great time to be a banker, but is it the new norm? It is a
:03:49. > :03:51.pretty toxic environment for banks. You have got low or negative
:03:52. > :03:55.interest rates and that's where the banks really make their money.
:03:56. > :04:00.Banking is a simple business. You pay interest on deposits and those
:04:01. > :04:04.deposits you lend out at a higher margin. When you have lower rates
:04:05. > :04:11.the margin gets squeezed and it makes it hard for the banks to make
:04:12. > :04:16.money. Looking at HSBC, a 29% fall in first-half profits and a 49% fall
:04:17. > :04:24.if you look at the second quarter. If you look around the world, they
:04:25. > :04:29.are holding up well considering. This a better performance and you
:04:30. > :04:33.are seeing the shares rise. We are talking the comparison to other
:04:34. > :04:37.European Banks. Does this highlight, we had the stress test and we talked
:04:38. > :04:43.about that on Monday, the results came out on Friday evening. Quite a
:04:44. > :04:45.few failed. But I'm trying to work out what the difference is between
:04:46. > :04:49.the European banks and the American banks. The American banks seem to be
:04:50. > :04:54.doing better? Well, they cleaned their act up much earlier. For
:04:55. > :04:57.example, they took bad loan port pole yos and took them off the
:04:58. > :05:02.balance sheet and you had the troubled asset relief programme in
:05:03. > :05:07.the US. Italy for example which is the black spot if you like, you've
:05:08. > :05:11.got banks, you've got 360 billion euros worth of loans, they never
:05:12. > :05:16.took those off the balance sheets. They never did the good bank, bad
:05:17. > :05:22.bank thing and that's why they are suffering. People said if we apply
:05:23. > :05:25.this model to all the other banks, it looks like they will have to
:05:26. > :05:30.raise capitalment what's wrong with that? Well, it is fine. It means
:05:31. > :05:34.your slice of the pie, if the pie gets bigger because you need more
:05:35. > :05:41.capital, you own a smaller part of the bank. Shareholders don't like
:05:42. > :05:48.raising capital because it dilutes their share holding in it. Looking
:05:49. > :05:53.at Asia. Rio Tinto announcing results. China
:05:54. > :05:56.is stabilising, the fact that we are seeing a lower growth environment
:05:57. > :06:03.across the world, but actually, there are real opportunities and it
:06:04. > :06:08.is places like HSBC and Standard Chartered that are more
:06:09. > :06:14.Asian-focussed, so they are going to be able to profit from that? If you
:06:15. > :06:20.look at the share prices of the banks, look at German banks which
:06:21. > :06:25.are down over 70% over the last year-and-a-half, HSBC is down and
:06:26. > :06:29.its Asia focus protected it. Interesting about Rio Tinto because
:06:30. > :06:36.one of the big worries for the banks is the Chinese going to slow down?
:06:37. > :06:41.It has been going bang busters and it is on course to get 8% growth.
:06:42. > :06:44.They have decided to put the accelerator on growth there and
:06:45. > :06:50.that's going to help commodity producers and push prices up which
:06:51. > :06:54.means we won't have a deflationary spiral which may mean we can put
:06:55. > :06:58.interest rates up elsewhere. The issue with China, it is credit
:06:59. > :07:01.fuelled and that potentially will be a problem? Yes, the expansion in
:07:02. > :07:06.credit and the rate of expansion in credit in China has got a lot of
:07:07. > :07:09.economists extremely worried. The Chinese thought about this, and they
:07:10. > :07:14.think we will calm things down a bit. When growth began to slow, they
:07:15. > :07:20.went back to Plan A again. That's a big worry. If you were to ask a room
:07:21. > :07:24.of 50 economists what's the most worrying thing, some would say the
:07:25. > :07:28.European Banking system. Others would say, the rapid expansion of
:07:29. > :07:32.credit in China. So these are things, no doubt, it is good news
:07:33. > :07:38.today, whether we are storing up a big problem for later. Those issues
:07:39. > :07:44.for HSBC? They are trying to restrict ture, if you have been to
:07:45. > :07:49.an airport anywhere, they call themselves the world's local bank,
:07:50. > :07:54.but they have decided they are too local so they are shrinking just a
:07:55. > :08:00.little bit! Their two big focuses are Asia and the UK and they have
:08:01. > :08:04.said, they are going to keep their head quarters in the UK for now. We
:08:05. > :08:10.are watching them for comments on Brexit. Great stuff. We've covered
:08:11. > :08:13.it all. From the commodities in Asia.
:08:14. > :08:19.A leading economic forecaster says the UK has a 50/50 chance of falling
:08:20. > :08:22.into recession within the next 18 months following the Brexit vote.
:08:23. > :08:24.The National Institute of Economic and Social Research says the country
:08:25. > :08:27.will go through a "marked economic slowdown" as businesses
:08:28. > :08:35.The US insurance giant, American International Group,
:08:36. > :08:38.has revealed plans to buy back $3 billion in shares as it fights
:08:39. > :08:47.The insurance firm reported a better-than-expected
:08:48. > :08:51.income for the second quarter, up from $1.8 billion for the same
:08:52. > :08:54.period last year and ending three consecutive quarters of losses.
:08:55. > :08:58.AIG has been under pressure to break up to improve profitability.
:08:59. > :09:01.A lawsuit has been filed against the makers of Pokemon Go
:09:02. > :09:04.after a man in New Jersey said an augmented reality Pokemon
:09:05. > :09:13.in his backyard was attracting strangers to his home.
:09:14. > :09:18.This is the first case brought against the three companies
:09:19. > :09:26.Now to India, where one of the biggest financial reforms
:09:27. > :09:28.since India's independence from Britain -nearly 70 years ago,
:09:29. > :09:35.The goods and services tax aims to simplify the way the country does
:09:36. > :09:38.business and to cut the red tape between the states within India.
:09:39. > :09:40.The tax will turn India into a single national
:09:41. > :09:43.market and could boost economic growth by up to 2%.
:09:44. > :09:57.For the audience around the world and in Britain here, this many will
:09:58. > :10:01.say this is much needed especially when you talk about a country where
:10:02. > :10:04.exporters in India will say, it is cheaper for us to ship goods to the
:10:05. > :10:11.United States than it is to ship from north to south in that country?
:10:12. > :10:18.Absolutely. I mean, recently we found an exporter close to here near
:10:19. > :10:22.Delhi and he wanted to his his articles to Europe and he had to
:10:23. > :10:26.cross six different States. The deal is and the high tax they pay in the
:10:27. > :10:32.process adds a lot to the cost of business. In fact, one estimate says
:10:33. > :10:40.5% to 10% business loss is because of the highways. This will hopefully
:10:41. > :10:43.repair this fractured chain and make it easier for everyone to take their
:10:44. > :10:47.goods and services across the country. The building behind you,
:10:48. > :10:51.the Government doesn't have a majority, it is the Upper House who
:10:52. > :10:55.doesn't have a majority in the Upper House, but they have been working
:10:56. > :10:59.with the Opposition to get everybody on side. Will it be passed? Well,
:11:00. > :11:03.that's the big question. Back room negotiations have been going on for
:11:04. > :11:07.a long time, but the previous Government tried to pass this Bill
:11:08. > :11:11.and failed. Hopefully, this is it because everyone seems confident. It
:11:12. > :11:14.has taken ten years for this Bill to go from the draft stage to a debate
:11:15. > :11:21.here in the Parliament. Hopefully today is the day when we will see it
:11:22. > :11:27.happen. Thanks. In Asia, stocks have been slipping a
:11:28. > :11:31.little bit. Another effort to boost growth in
:11:32. > :11:35.Japan. Markets have been open a little
:11:36. > :11:38.over 30 minutes. Worryingly for energy shares,
:11:39. > :11:43.the general decline in the dollar is still not enough to prevent oil
:11:44. > :11:46.prices from slipping under $40 a barrel for the first
:11:47. > :11:51.time since April. Adding to the jittery mood, yet
:11:52. > :11:54.another sell-off in the bank stocks following those stress tests
:11:55. > :11:56.in Europe on Friday. Futures are pointing
:11:57. > :11:58.towards a softer Speaking of which, lets hear
:11:59. > :12:11.from Samira Hussein about what's Investors will have questions about
:12:12. > :12:16.at thes la's rernt announcement to take over Solar City when the
:12:17. > :12:23.electric car maker reports earnings on Wednesday. Investors will want to
:12:24. > :12:32.see if elon mus k is still planning to make at thes lard profitable by
:12:33. > :12:36.the end of the year. Time Warner. The company is facing stiff
:12:37. > :12:41.competition from streaming services such as Netflix as young viewers are
:12:42. > :12:47.shifting to online media for entertainment, a trend that people
:12:48. > :12:52.have been calling cord cutting. The company's HBO unit is seeing a surge
:12:53. > :13:04.in revenue, helped by its popular shows such as Game of Thrones.
:13:05. > :13:12.Richard Hunter, Head of Research at Wilson King Investment Management.
:13:13. > :13:23.Congratulations on the new job. Touching on Japan, the Prime
:13:24. > :13:28.Minister is pumping $270 billion into that economy and today the
:13:29. > :13:34.markets go, don't like that. This has been going on for decades. There
:13:35. > :13:39.is a level of sin is a nism about what Japan can and can't do. It is
:13:40. > :13:42.seen as a haven currency, the yen has been strong which probably
:13:43. > :13:45.hasn't helped. In terms of the latest round of funding which is
:13:46. > :13:51.going to take nine months to a year to filter through, if it works, it
:13:52. > :13:55.is trying to boost infrastructure spending and boost low wage earners
:13:56. > :14:02.in order for them to spend and get the economy moving. We shall see.
:14:03. > :14:06.OK. We go from third biggest to the US Friday, jobs numbers. Last
:14:07. > :14:10.Friday, we had growth numbers which were really disappointing, weren't
:14:11. > :14:14.they? What are we expecting on the jobs and will this be a decider will
:14:15. > :14:19.they, won't they raise interest rates? Two months ago we had a
:14:20. > :14:24.terrible jobs number. This month, it is likely to be around where it
:14:25. > :14:28.should be, around 170,000, but there is no Fed meeting in August so we
:14:29. > :14:31.have to wait until September to see if they will move in term of
:14:32. > :14:34.interest rates, but the current betting is that there will be some
:14:35. > :14:47.sort of hike before the year is out. OK.
:14:48. > :14:50.We will see you later when we talk about the papers.
:14:51. > :14:58.And as new therapies and drugs push up the price of global healthcare,
:14:59. > :15:03.We'll be talking to one of the world's biggest insurance firms.
:15:04. > :15:15.You're with Business Live from BBC News.
:15:16. > :15:25.Samsung have unveiled its latest fablet and it is trying to build
:15:26. > :15:34.momentum before competitors bring out their new gadgets. What can the
:15:35. > :15:45.latest Galaxy do? It is Samira again.
:15:46. > :15:53.Tech sure. Drummer, definitely. Cinematic unveilings have become
:15:54. > :15:57.standard for new products. Samsung released its Galaxy Note 7. Its pen
:15:58. > :16:04.is more precise and you can charge the device wirelessly.
:16:05. > :16:08.This is the newest edition in Samsung's line of products. Samsung
:16:09. > :16:12.has just had one of its best quarters in more than two years.
:16:13. > :16:17.Helped, of course, by smartphone sales. It is predicting that the
:16:18. > :16:18.rest of the year is going to see even more sales of these kinds of
:16:19. > :16:26.phones. In stark contrast to one of the
:16:27. > :16:31.biggest competitors, Apple has seen iPhone sales dropped by 15% in the
:16:32. > :16:36.last quarter, and the outlook for the next three months is no better.
:16:37. > :16:40.When you look at those consumers, they are the most loyal to Samsung,
:16:41. > :16:46.and the most satisfied of any smartphone on the market. Really, we
:16:47. > :16:49.want to be true to our consumers, in addition to bringing in new people
:16:50. > :16:54.and really letting them try the Samsung experience. Samsung believe
:16:55. > :16:58.that they can but the trend of slowing smartphone sales, by
:16:59. > :17:06.improving upon one of its greatest hits. STUDIO: Another big story in
:17:07. > :17:10.the UK, of Jem has approved plans to reduce energy bills, announcing an
:17:11. > :17:16.interim price cap for households on pre-pavement meters, save and ?75
:17:17. > :17:18.every year. -- prepayment. This is in response to the Competition and
:17:19. > :17:23.Markets Authority report into the industry that came out in June, the
:17:24. > :17:26.morning of the referendum result, nobody was really paying much
:17:27. > :17:29.attention when it was published. It said that customers should be in
:17:30. > :17:35.courage to switch to better tariffs, but here on the today programme, UK
:17:36. > :17:41.managing director, first utility says that they do not go far enough.
:17:42. > :17:51.Top story: HSBC says profits in the first half, first six months of the
:17:52. > :17:58.year, came in at ?7.2 billion, $9.5 billion. Almost 30% lower in the
:17:59. > :18:05.same period in 2015, there has been exceptional volatility, concerns
:18:06. > :18:09.about China's economy and Brexit, Britain's decision to leave the
:18:10. > :18:15.European Union. Shares seem to be up 3.5% at the moment, not another to
:18:16. > :18:25.really... I say that, and then... The FTSE is up by one measly little
:18:26. > :18:28.point. Live television! The rest of Europe looking pretty downbeat at
:18:29. > :18:33.the moment. As new medical therapies and drugs live longer and healthier
:18:34. > :18:39.lives, they bring higher costs. And a big challenge, how can affordable
:18:40. > :18:44.health care be delivered? Almost 10% of the world's total economic output
:18:45. > :18:46.is spent on health, more than $7 trillion, according to the WHO.
:18:47. > :18:49.While governments pay for a big proportion of global health care
:18:50. > :18:54.costs - more than 18-per cent of spending is made directly by
:18:55. > :18:56.patients to providers. -- 18%. And of course another way to fund health
:18:57. > :18:58.care is through insurance. One of the world's biggest firms is Allianz
:18:59. > :19:00.and it's international health and life insurance division has more
:19:01. > :19:17.than 75-million customers across dozens of countries.
:19:18. > :19:28.Joining this is the chief executive of Alianza worldwide care. --
:19:29. > :19:33.Allianz. We will talk about the cost in a moment, you'd part of the
:19:34. > :19:40.business, first I will let you do a promo. -- huge part of the business.
:19:41. > :19:44.This was a greenfield start-up, now you are the leader, that is fair to
:19:45. > :19:47.say, that is not just giving you a plug, you are the leader in this
:19:48. > :19:55.sector, have you do that in 15 years? Absolutely! Thank you for
:19:56. > :20:03.this introduction. Valiant worldwide care is a teenager, if you will, 15
:20:04. > :20:10.years. -- Alley and is. -- Allianz. Very good timing, global trade has
:20:11. > :20:16.begun to trigger, 15 years ago, old big corporate companies all went
:20:17. > :20:20.abroad. I come from Poland, it is where I was born, in 1989, after the
:20:21. > :20:28.Berlin Wall was torn down, all the businesses went to the eastern
:20:29. > :20:33.Europe. Look at China and Asia. The whole mobility of the workforce
:20:34. > :20:37.started, and at that time Allianz had a good strategic fit with what
:20:38. > :20:42.were the needs of us, of the employees, of the employers, and the
:20:43. > :20:51.second, we put the focus on the service. The main thing is not the
:20:52. > :20:54.health insurance, it is that you want to get the right doctor, you
:20:55. > :20:58.want to have access 24 hours, you want someone who speaks your
:20:59. > :21:01.language, you want to have access to the health club providers who are
:21:02. > :21:06.quality or specialised in the problem, that is what we provide,
:21:07. > :21:11.24-hour, seven day, every day of the year, with seven basic languages and
:21:12. > :21:14.then we have 45 different languages sitting in the Dublin heart.
:21:15. > :21:20.Multinational, understanding the countries. That was the success,
:21:21. > :21:23.that will continue. You talk about the fact you are able to capitalise
:21:24. > :21:31.on the fact we have more mobility, people moving more, there is big
:21:32. > :21:36.barriers to that, terrorist related attacks, Zika virus, spreading into
:21:37. > :21:41.Florida, companies are where, now more than ever, the need to monitor
:21:42. > :21:47.please help. What are you doing in that space? That is going to be a
:21:48. > :21:53.tricky area. Very much changing, 15 years ago, the main purpose was
:21:54. > :21:57.health care, how do I help when I have a health problem, nowadays,
:21:58. > :22:02.with what you have said, we provide many more services in terms of
:22:03. > :22:07.security, guiding people in this country, the risks, providing peace
:22:08. > :22:12.of mind to the employee again, to the HR, or whatever risk manager, we
:22:13. > :22:18.have corporate assistance, which is providing all of these services.
:22:19. > :22:25.Again, security, medical, certain pandemic situation, maybe in the
:22:26. > :22:31.very far away, mining rig, oil rig type of places. I want to talk about
:22:32. > :22:34.the cost, the cost with the medical therapies and the new drugs that
:22:35. > :22:37.come through, costs seem to go up, that makes it more expensive for
:22:38. > :22:42.you, but I am wondering, with costs going up, do you pass that on... Is
:22:43. > :22:49.insurance more expensive today than it was yesterday, you pass that on?
:22:50. > :22:53.The health care industry, as you say, it is good news that it is
:22:54. > :22:56.increasing, we have better therapies and all of these things which are
:22:57. > :23:00.good for us as consumers. In terms of funding, what we see more and
:23:01. > :23:05.more, public and private get-together. We have to make sure
:23:06. > :23:09.that we have private medical insurance is, so for example,
:23:10. > :23:13.international private medical, but also we must look at how you can
:23:14. > :23:17.combine and make a dialogue between the public funds, the private
:23:18. > :23:22.insurers, which is providing better service in terms of stealing people
:23:23. > :23:27.to the right health care providers, prevention, prevention will be the
:23:28. > :23:30.word of the future. We have not done enough. The technologies, the
:23:31. > :23:37.variables, although things bringing us the possibilities. This is
:23:38. > :23:42.closing the gap in terms of distance, getting better diagnosis,
:23:43. > :23:47.and then, of course, having less leakage in costs. We really
:23:48. > :23:48.appreciate you joining us. I wish that we had more time on the
:23:49. > :23:55.programme. You can always get in touch with us,
:23:56. > :23:59.this is how you can do so. The business live pages where you can
:24:00. > :24:03.stay ahead of all the days breaking business news. We will keep you
:24:04. > :24:06.up-to-date with all of the latest details with insight and analysis
:24:07. > :24:27.from the BBC's team of editors around the world.
:24:28. > :24:37.We ask you the question, how do you deal with arrogant graduate, Charlie
:24:38. > :24:42.Brown says, fire them! Alex said, how should talented graduates deal
:24:43. > :24:45.with stuck in the mud bosses who are not as good as they think they are!
:24:46. > :24:50.One viewer turning it around. Depends upon your industry, we get
:24:51. > :24:58.some pretty sharp feedback but he quickly in the industry I work in.
:24:59. > :25:08.Promoted, resigned, or they get fired, it is their choice. And we
:25:09. > :25:14.quickly have a look at another newspaper. In the Independent, we
:25:15. > :25:17.said we would talk about UK interest rates, interesting, someone is
:25:18. > :25:21.saying some of those big stress tests we have seen to the banks, it
:25:22. > :25:26.means actually that the Bank of England has been asleep at the
:25:27. > :25:30.wheel. I think that if you compare banks now to before the financial
:25:31. > :25:33.crisis, they are in better shape, they have been reducing risk and
:25:34. > :25:38.building up capital cushions, there could be a shock, that is the point
:25:39. > :25:43.of a stress test, its own test which is coming up in the next water is
:25:44. > :25:50.going to be interesting, 20 bucks a barrel oil, 4% fall in UK GDP. 33%
:25:51. > :25:57.slide in global growth. That will be the interesting one. Always a
:25:58. > :26:00.pleasure, thank you for joining us. That is all for business live today,
:26:01. > :26:13.20 more throughout the day. Unusually windy conditions for
:26:14. > :26:17.August, gale force winds expected across western parts of the UK,
:26:18. > :26:21.because of this area of low pressure, quite deep, for this time
:26:22. > :26:22.in the season. Bringing about pretty heavy rain