HSBC's Bullish Outlook, France Business Tax Hike, Europe’s Solar Boom Woes

Your morning briefing, the business news you need in just 15 minutes.

On today's podcast:

(1) HSBC raised its profitability outlook for 2025 even as earnings slid following an unexpected $1.1 billion provision tied to Bernard Madoff’s giant fraud case more than a decade ago.

 
(2) BNP Paribas’s trading unit suffered a hit from souring debt in the third quarter, adding to challenges for Chief Executive Officer Jean-Laurent Bonnafe after a string of recent setbacks.

(3) Goldman Sachs Group Chief Executive Officer David Solomon downplayed concerns that have surfaced following the collapse of US firms First Brands Group and Tricolor Holdings, and said he doesn’t see any systemic risk looming in the credit market.

(4) Amazon.com plans to cut corporate jobs in several key departments, including logistics, payments, video games and the cloud-computing unit, according to people familiar with the matter.

 
(5) Tom Hayes, the former star UBS Group AG trader who became the face of the Libor rigging scandal, sued his former employer accusing it of handing him over on a “silver platter” to global prosecutors in order to protect the bank and its senior leadership.

(6) President Donald Trump hailed the US’s alliance with Japan, reaffirming ties with a longstanding partner and praising new Prime Minister Sanae Takaichi on her plans to ratchet up defense spending as the pair met in Tokyo.

(7) France’s National Assembly adopted an amendment on Monday that would increase taxes on the country’s largest companies next year, part of the government’s effort to rein in the deficit and find compromises with opposition lawmakers.

Europe's Solar Boom: In 2020, Europe installed 23 gigawatts of solar, according to BloombergNEF data. Each year since then a new record has been set, with some 69.2 gigawatts expected to be added this year, capping a more than quadrupling of capacity in the last decade.

Podcast Conversation: London’s Black Cabs Face a Driverless Threat

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.

Speaker 2 (00:09):
This is the Bloomberg Daybreak EUROP podcast. Good morning, It's Tuesday,
the twenty eighth of October. I'm Stephen Carolyn London. Coming
up today. HSBC's CEO says his overhaul of the bank
is working as Europe's largest lender upgrades its profitability outlook.
France targets billions of euros and extra tax from the
country's biggest companies. Plus shining a light on Europe's shaky

(00:33):
energy grid. Why a solar power boom risks triggering blackouts.
Let's start with a roundup of our top stories. HSBC
has raised its profitability outlook for the year despite a
decline in earnings after taking a one point one billion
dollar hit over Bernie Madoff's fraud case more than a
decade ago. Revenue at the lender beat estimates in the

(00:53):
third quarter as rising income from its key wealth management
business was offset by litigation expenses. Out third quarter pre
tax profit down fourteen percent to seven point three billion dollars.
HSBC says it now expects to deliver a mid teens
or better return on tangible equity for the year, as
well as higher than previously expected net interest income. The

(01:16):
CEO Jorgel Hedri told investors he believes the bank is
becoming a simpler, more agile, and more focused institution. Will
turning to some breaking earnings news now. BNP parry BA
has slightly missed expectations in its third quarter results, third
quarter net income coming in at three point h four
billion euros. The estimate have been for three point zero

(01:37):
seven billion euros, as well. Its return on equity for
twenty twenty six twelve percent, the full year for this
year eleven point five percent as well. It's also set
aside a little bit more than expected for lone loss
provisions nine hundred and five million euros. Analysts had been
expecting just under eight hundred and eighty million euros. Goldman
Sachs CEO David Solomon says he believes the US economy

(02:00):
he is in quite good shape, though he cautioned that
there remains a lot of uncertainty. His comments come as
the Federal Reserve is expected to deliver its second straight
rate cut tomorrow to support a wobbly jobs market, even
as inflation remains well above target. Speaking exclusively to Bloomberg,
Solomon said inflation continues to pose a significant headwind for

(02:21):
many US consumers.

Speaker 3 (02:23):
Businesses that are particularly sensitive to lower income or paycheck
to paycheck consumers have been a little softer, and I
would say, you know, consumers that are paycheck to paycheck
feel more pressure in an environment with three percent inflation.
And so there's no question inflation is very, very difficult

(02:43):
for people who live paycheck to paycheck, and so it's
something I think we have to watch very carefully.

Speaker 2 (02:49):
David Solomon was speaking of the Future Investment Initiative and
read where he also told Bloomer that the Wall Street
Lender plans to triple its headcount in Saudi Arabia. The
boss of one of Wall Street's biggest banks added that
he sees artificial intelligence as an exciting driver of global
growth in the coming years, predicting significant productivity gains over
the next thirty six months. Amazon is planning to cut

(03:12):
thousands of jobs across core departments, including logistics, payments, video games,
and its cloud computing division. RUGS is reporting that as
many as thirty thousand rolls could be affected, with terminations
to be announced as soon as today. Sarah Friar leads
Bloomberg's team covering big tech. She says a number of
firms in the sector are in the same position.

Speaker 4 (03:31):
This is something that the companies all across the board
have been doing since the pandemic era, what they call
over hiring. A lot of these companies saw the growth
in how people were relying on tech during the pandemic,
and the company hired to accommodate that, and now they
don't need as many people.

Speaker 2 (03:52):
Bloomberg Sarah Friar speaking there, The plant cuts would be
the largest since rolling reductions in late twenty twenty two
and early twenty twenty three three, which affected more than
twenty seven thousand corporate employees. An Amazon spokesperson declined to comment.
The former Star trader at the heart of the twenty
twelve libor scandal is suing UBS for four hundred million dollars.

(04:13):
Tom Hayes's conviction was overturned by the UK Supreme Court
in July, and he now wants his former employer to
pay damages. Bloomberg James Wilcock has more.

Speaker 5 (04:23):
Tom Hayes's case was the most high profile financial crime
prosecution of the past decade. That is, until July, when
the Supreme Court overturned that conviction in the UK. He
told Bloomberg at the time he had been blamed for
the entire banking sector's wrongs.

Speaker 6 (04:39):
We were skategoated. We were accused of causing the global
financial crisis, which had nothing to do with how you know,
Japanese and libel moving around by one thousand sort of
percentage point had anything to do with the global crisis.
Financial crisis is completely beyond me. Now.

Speaker 5 (04:56):
His lawyers are arguing his former employer UBS ruined his
life to escape more severe penalties for the libel scandal.
A spokesperson for UBS declined to comment. The case is
filed in the US State of Connecticut's court in London.
James Woolcock Bloomberg Radio.

Speaker 2 (05:14):
US President Donald Trump has praised his country's close ties
with Japan. During his meeting with the new Prime Minister
Sanai Atakeiichi in Tokyo, Trump commended her plans to boost
defense spending and expressed optimism under the two countries had
overcome their trade disputes.

Speaker 3 (05:29):
On behalf of our country. I want to just let
you know anytime you have any question, any doubt, anything
you want, any favors you need, anything I can do
to help Japan.

Speaker 1 (05:40):
We will be there. We are an ally at the
strongest level.

Speaker 2 (05:45):
Donald Trump, speaking there as leader, signed documents on trade
and critical minerals, expanding on a deal negotiated under Takeichi's predecessor.
Documents from the White House suggested that the agreements remained
ill defined, reaffirming ongoing cooperation in The meeting was a
high stakes test for Sanai Takeiichi. He was elected Japan's
first female prime minister earlier this month, and in France,

(06:08):
the National Assembly is voted to increase taxes on the
country's largest companies next year. The Finance ministry had originally
aimed to raise four billion euros in extra revenue in
twenty twenty six by keeping part of a temporary corporate
tax hike, Yet after lawmakers rejected other measures, including a
planned freeze and income tax brackets, the ministry increased its
target to six billion euros. Finance Minister Rollanda Secuer spoke

(06:31):
at the National Assembly.

Speaker 5 (06:34):
The government has committed to listening to the debate that
will take place within the National Assembly, and I believe
that by introducing this amendment, that is exactly what it
is doing.

Speaker 2 (06:46):
For Finance Minister rolland a Securer there, speaking via translator.
The amendment means that the corporate tax rate would fall
less than initially planned next year. It's part of the
government's efforts to rein in the deficit and find compromises
to avoid no confidence otens that could topple Prime Minister
Sebastian Nakanu. And those are your top stories on the markets.
The mscis Specific Index four tenths of one percent lower,

(07:09):
the MSCI China Index is down by one percent. Eurostructs
fifty Future is two tenths of one percent weeker this morning.
Goal prices sliding again today, down six tenths of one
percent at three thousand, nine hundred and fifty eight dollars
a troy ounce, so below the four thousand mark as well,
looking at the ten year treasury yield holding steady at
three point nine to eight percent this morning. In a moment,

(07:30):
we'll bring you more on hspc's results, plus why a
surge in solar power is stressing out electricity grids across Europe.
But I just wanted to mention another story that I've
been reading this morning, perhaps another nail in the coffin
of London's black calves. Our opinion columnist parme Elsen has
been writing about how after private hoire car cars, Airport
Express trains and Uber calves are now facing a threat

(07:53):
a new threat from Waimo's driverless cars. The company seeking
a license to test their cars on London streets from
next year, and a Weimo claims that its cars are
in fewer collisions than those driven by humans and that
many passengers actually prefer the silence of not having a driver.
But Parmi writes about the potential cultural loss, although she
does say a Weimo executive told her that nobody says

(08:15):
I missed the conversations with drivers. Black cab numbers are
already dropping in London. Just one hundred and four new
drivers were given licenses last year. That number was closer
to one thousand, less than a decade ago on A
twenty twenty five study by Transport for London warned that
black cabs could be wiped out entirely by twenty forty five.
For Parmi, she says this could be worse than the

(08:35):
loss of London's phone boxes and it spells out our
preference for algorithmic convenience over human connection and skill. It's
a great piece I recommend it a Bloomberg dot Com
forward slash opinion, and we'll put a link to it
in our podcast show notes. Well, let's dig into the
earning from HSBC now revenues. The bank came in higher
than expected in the third quarter, even as it took

(08:56):
a one point one billion dollar hit tied to fraud
cases link to Bernie Madoff, Our Asia Finance reporter and
Brien Chowdry joins me now for more. And this is
a strong set of earnings aside from that legal provision.
What drove the strength.

Speaker 7 (09:09):
Stripping out the made of litigation charges if you look
at everything else. Basically, its key driver was the Hong
Kong business and that drew profits before tax. It basically
jumped eleven percent to about two and a half billion
in the quarter, and that ultimately is being driven by

(09:29):
the higher client activity across its wealth management business, which
has been a key focus for the bank over the
past few years. You know, in short, since becoming CEO
about a year ago, the new CEO, Newish i should say, CEO,
Georgia Silhedri, has struck a noticeably bullish tone in Hong
Kong as a financial center. He's predicted that the city

(09:51):
will surpass Switzerland by the end of the decade to
become the world's largest cross border wealth hub. And you know,
to a certain extent already seeing that is true because
they are making so much money from Hong Kong and
over the past few years, the wealth business has been
a huge earner for them, despite all the other legal

(10:12):
issues elsewhere.

Speaker 2 (10:13):
Well, interesting with that bullish sentiment Hong Kong that actually
one of the wrinkles in HSBC's earnings reports was the
bank's exposure to the Hong Kong property markets.

Speaker 7 (10:22):
Yes, exactly, that has been a bit of a wrinkle
for them, so they are quite grim. It makes for
quite grim reading. They basically are warning that market conditions
remain tough in the near term as a result of
weak leasing conditions, and it's said that the commercial property

(10:43):
sector continues to face downward pressure, with both rental and
capital values impacted by oversupply, particularly in the office market
in Hong Kong. And their current exposure in this quarter
stands at around two hundred million US dollars, which isn't
too bad, but still an ongoing issue for them.

Speaker 2 (11:02):
So what does this update tell us then about how
Jorge L. Hadrie's strategy in leading HSBC is going. I
suppose the outlook as well looking pretty positive for the
bank for now.

Speaker 1 (11:14):
That's right.

Speaker 7 (11:15):
They basically they've raised their profitability outlook for the year
for twenteen twenty five, even his earnings fell because of
the provision tied to them made off fraud case. They've
basically said that they expect to deliver a mid teens
or better return on tangible equity for the year, as
well as higher than previously expected net interest income because

(11:38):
all their businesses are doing quite well despite all these
legal issues that have come to front over the past
day or so. And also, you know, we have to
keep in mind that the bank's been undergoing a broad
revamp of its businesses since Celedri took over last year,
so he has undertaken quite a radical review and also

(11:59):
a bunch of asset sales throughout the world.

Speaker 2 (12:02):
Okay, I'm Breen, Thanks so much for joining us with
the latest on those numbers out of HSBC. Ambering Chowdy
our Asia Finance reporter with the latest Stay with us.
More from Bloomberg Daybreak Europe coming up after this Now.
Solar Power's rapid growth across Europe has countries racing to
revamp their electricity grids to prevent dramatic blackout. The situation

(12:24):
is getting more difficult to manage, and operators say they
lack the tools they need to balance out the effects
of solar power. Our energy reporter Will Mathis joins us
now for more. Will, Good morning. How big? First of all,
a part does solar power play in Europe's power mix?
And how fast has that grown?

Speaker 1 (12:42):
Well, it's growing incredibly fast. Just in the past five
years of some places gone from sale digits like a
span to more than twenty percent of annual literacy and
just growing work everywhere, even places that traditionally haven't use
solar power all whole that's relied along in coal. They're

(13:02):
wrapping up solar incredibly fast, partially because it's gotten much cheaper,
and also to get rid of those imported important natural
gas that became so expensive and controversial in recent years
because so much of it was coming from Russia. And
it's just really gone much faster than anyone would have
predicted even five years ago. And you know, the strongest

(13:23):
solar power proponents in twenty twenty would be surprised today
how much has actually been built.

Speaker 2 (13:31):
So what issues then is that creating for electricity grades.

Speaker 1 (13:34):
It's really just an incredibly different system the way the
power moves in the system. Instead of going from like
a few small a few large power stations and a
few points on the grid to many, you know, you
could have just a system on my house, on your house,
on every house on the street, and that just creates

(13:55):
an incredibly different dynamic to manage. And what I talked
to a lot of the grid operators, who are the
people who are you know, every day, every second of
every day, keeping the lights on, managing the balance between
some event. They said, you know, if you have one
house on a street put on solar panels, that's really
no big deal. It doesn't really matter what they're doing.

(14:16):
But if you have every house on the street and
have solar panels and something goes wrong, then it could
cause a big problem.

Speaker 2 (14:23):
So what's being done a bisas, So what's.

Speaker 1 (14:26):
Being done is different things. I mean, one we did
see earlier this year what happens when enough is being
done and in some places not enough is being done,
like in Spain where they had this incredible blackout where
they didn't really have any new backup on the system,
and that led to this cascade, which European invest scaries

(14:48):
have described as unprecedented event and a precedented kind of blackout,
but is a sort of potemic worst case scenario of
what could happen to other places. You can do. You
can get different equipment that sort of simulates what fossil
fuel or like nuclear plants do to stabilize the grid.

(15:10):
Or you can also change some of the software settings
in solar plants so they don't cause problems that they
can actually help manage stability instead of worsening it. But
these things need new regulation. They take time, and we'll
have to see how the regulators who are used to

(15:32):
working on like quite slow time scales for power grids,
if they can adapt to the speed that this transition
is actually taking. Advice there.

Speaker 2 (15:41):
This is Bloomberg Daybreak Europe, your morning brief on the
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Speaker 8 (15:47):
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