Good morning. It's Thursday, the twentieth of July in London. This is the Blueberg daybreakurate podcast. I'm Caroline Hepga. Coming up today, Nigel Farage speaks to us about the KOTS decision to close his accounts, profits tumble at Goldman, as pressure on Solomon grows, and Apple plays catch up on Generative AI. Let's start with a roundup of our top stories. Prime Minister Ishi Sunak says that the British government will crack down on banks who deny services based on their clients' views.
The UK leader was responding to Kotz's decision to close politician Nigel Farage's account. We spoke to Farrage on this program. He is calling for bosses at the parent bank RBS to face questions from MPs.
I think the bosses of the RBS group should appear before a parliamentary committee to explain why they now make political and moral judgments on customers of THEIRS who meet their financial requirements and you give opinions that are entirely within the law and our majority views in this country.
Responding to our interview with Nigel Faraja spokesperson said quote decisions to close an account are not taken lightly and involve a number of factors, including commercial viability, reputational considerations, and legal and regulatory requirements. We'll have more of the interview with Nigel Farage and the response from Coots in
a few minutes. Moving on to earnings now. Tesla shares fell in late trading after profitability shrank, showing the ev maker's industry leading margins are being squeezed by months of price cuts. The company reaffirmed production guidance of one point eight million units this year. Elon Musk said earlier that the car maker had a shot at producing two million vehicles.
I think it makes it does make sense for sacrifice margins in favor of making more vehicles because we think in the nautics in the future have a dramatic valuation increase. I think the test the fleet value increase at the point which prea can upload full full self driving and it's approved by regulators will be the single biggest step change in asset value maybe in history.
That was the TESTA CEO Elon Musk, who also said that the company will probably keep slashing prices of electric vehicles if interest rates continue to rise, production lines will be paused briefly in the third quarter full factory upgrades. Netflix also slumped eight point three percent after market after its third quarter revenue outlook missed estimates. That story now from Bloomberg's Charlie Pellett.
It suggests a crackdown on password sharing and a new advertising strategy are not yet delivering the sales growth that analysts anticipated. Netflix's second quarter sales rose two point seven percent to eight point one to nine billion dollars, coming in slightly below analyst projections that was I do you, in part to foreign exchange rates and to price cuts
in some markets. The company's forecast for third quarter revenue of eight point five to two billion dollars was also shy of Wall Street estimates, which average eight point sixty seven billion in New York. Charlie Pellett, Bloomberg Daybreak Europe.
Goldman Sachs saw profits plunge in the second quarter, in yet more bad news for the banks in battled CEO David Solomon, second quarter earnings fell fifty eight percent on an investment banking slump, real estate markdowns, and a good will write down in its consumer business. Return on equity, which is a key measure of profitability also slid to four percent, that is the worst among the top US banks, But David Solomon says that he is positioning the firm for the future.
You're making tough decisions that are driving a strategic evolution of firm. Given both these factors, that should come as no surprise that we're going to a period of lower results. I remain fully confident that we will deliver on our through the cycle targets of mid teen's returns and create significant value for shareolers.
Solomon spoke to investors on the bank's earning call there after the lender had actively tamped down expectations heading into the report, prompting analysts to slash their estimates for quarterly profit by almost half since June. For Goldman Sachs and just finally, Apple is working on artificial intelligence tools that
could challenge those of Open AI and others. According to people with knowledge of these efforts, the iPhone makers built its own framework to create large language models, known as AJAX. Blomberg's Mark German broke that story.
Apple is going all in on LM's, or large language models. That's the heart of the AI technology that powers chat GPT, Microsoft Being AI, Google Bard and all of these fancy new AI tools we've been hearing about. So they've developed their own underlying framework at Apple called ajax to power its own next generation MS. And it's also built an internal chat GBT like tool for use among its employees that operates very similar to the tools we're seeing from others.
Today, Bloomberg's Mark German there. He also reports that the company has yet to devise a clear strategy for releasing the technology to consumers. So that news on Apple in our top stories for you this morning. Now I want to move on to an important interview that we've done. The former leader of the UK Independence and Brexit Party, Nigel Farage, has called for a parliamentary inquiry into why
Coots closed his bank account last month. So the pro exit politicians, speaking of Bloomberg Radio, says that the internal documents from the bank, a unit of nat West, show that his account was closed because of his views. Farage published a forty page report from Coots yesterday. Is not limited to Farage's financial position, it also includes analysis of
his public comments and media coverage. And I'm sure you know, but this issue has created a media storm which has drawn in the Prime Minister Johnny Now in studio as Bloomberg's finance reporter Will Share Will good morning, Good morning. We've been tracking this story and we interviewed Nigel Farage together yesterday. How did first of all this route actually all start.
So a few weeks ago, Coots, which is a banker to the wealthy, including the Royal family, closed down his bank account. Now, at the time, people familiar with that decision indicated that that was because he hadn't deposited enough money with the firm. Similar stories round in the BBC and The Financial Times. Nigel Farage, however, had put in a subject access request to Coots, asking documents that would
indicate why the decision was made. Now, these documents appear to suggest that they considered his political views and made an assessment that his values didn't to Kutz's wider commitment to inclusion. In particular, these documents apparently mentioned perceptions of him as being xenophobic and racist, and even describe him or even mention a perception that he's a disingenuous grifter. So whatever you think about Nigel Farage and his opinions, those are very strong words.
Yeah, no, absolutely, well, will you and I spoke to the politician and broadcast in Nigel Farag I want us to listen to that extensive interview. Have a listen now.
Well, it's pretty clear, isn't it that when that decision was taken, it was because I do not fit with their agenda. I do not fit with their policies apparently of diversity and inclusion. I do not represent their values. I am a very very bad person because I happen to hold views which are legal and our majority views in the country that the upper class, upper middle class
types than habit coots don't share. It's pretty clear if you look at the seventeenth of November, it's pretty nija that decision was.
Made, Nigel. Have they lied then?
They've lied about the They've lied about the initial reason for closing the account. Yes, I mean what they would say in their defense is that since November twenty twenty two, there was a big draw down on the account, a temporary draw down on the account, but it's now back up to the levels that they themselves described as commercially barble. So look, you know they've been absolutely dishonest about this all the way through in.
This document it says that at one point it says it's clear that you project cenophobic, chauvinist, stick and racist views, although you've done it within the law. And there's also they also say there's a perception of you as a disingenuous grifter. Do you have any plans to sue the bank? Or is it your view that anyone NatWest or Coots ought to resign over this?
It is bile, it is poison. It is written with venom. It is prejudiced in a most extraordinary way that only the upper middle classes who live in central London postcodes could possibly do. And I think this is why airing it in public is causing them such a panic.
Look should somebody do you think that someone ought to resign over it? And if so, who want to think?
I do any want to think should happen?
I think the bosses of the RBS group should appear before a parliamentary committee to explain why they now make political and moral judgments on customers of THEIRS who meet their financial requirements and who give opinions that are entirely within the law and our majority views.
In this country.
In terms of the timing. Then that was the other question I was going to ask you. Obviously, you were leader of u KIT between two thousand and six, two thousand and nine, Brexit Party leader twenty ten to twenty sixteen. Why do you think the bank made the decision now?
I think it's the whole RBS group. I think that the boss of the group now, Alison Rose, has taken coots and taken that west into territory that I think is highly political. I think it's been a shift in the way these banks view the world and view their customers.
And that is my best guess as to the timing of it.
There's nothing I've said or done there's any different to what I've said and done for the previous twenty years.
In terms of Alison Rose, you think that she has questions to answer personally for this situation.
I think she's going to be questioned by I think mainstream media as we speak are asking those questions. You know, what have you done? What have you done to this banking group? What direction are you taking it in? Aren't you beginning to behave to behave a bit more like
a political organization that a bank. Is that a bank group that is forty percent owned by the taxpayer so yeah, look, I just hope by coming out in public, I sponsor a very very big debate about what banks are for and ultimately, ultimately what I want is for everybody to have the right to a bank account, the right to their own business account. This used to exist in our
country before the privatization of the post office. It still exists in commonable countries like France and Germany, and I think it's a very very important and fundamental issue because as we move towards a more and more digitized society, whether we like it or not, without a bank account, you simply can't exist.
I mean, you've virtually become a non person.
So that was the politician and broadcaster Nigel Farage talking about the contents of that report. Why Coots made the decision now. In response to Farage's comments, a spokesperson for Coots has given us this statement. It's being read here in full by Ablinberg journalist.
We recognize the substantial interest in this case. We cannot comment on the detail given our customer confidentiality obligations. However, it is not Koutz's policy to close customer accounts solely on the basis of legally held political and personal views. Decisions to close an account are not taken lightly and involve a number of factors, including commercial viability, reputational considerations, and legal and regulatory requirements. We recognize the critical importance
of access to banking. When it became clear that our client was unable to secure banking facilities elsewhere, and as he has confirmed publicly, he was offered alternative banking facilities with that west, that offer stands. We understand the public concern that the process for ending a customer relationship and
how that is communicated are not sufficiently transparent. We welcome the anticipated HM Treasury recommendations in this area, alongside the ask to prioritize the review of the regulatory rules related to politically exposed persons. We look forward to working with the government, the regulator, and the wider industry to ensure that universal access to banking is maintained.
Okay, So that is the COOTS response then to Nigel Farage's comments there in full, Bluebig's finance reporter Will Shaw is still with me, just really go through this story. How significant an issue actually is this idea of closing bank accounts for customers.
I think it would be easy to say, oh, this is just Nigel Farage, this is just something that affects one person. Obviously, he has a very unique political standing in UK life. Despite his sort of class war rhetoric, he is for a wealthy background. He's a former trader until very recently he even had an account with Coots. However, like there is concern that this might well set a
wider precedent. As you heard in warning there there are lots of people that share Nigel Farage's views, as he would be he would be quick to point out, and as the Brexit vote demonstrated in twenty sixteen, so he would argue that if he can be targets on his political values, all kinds of people can be targeted in the same way.
And speaking of which it has drawn in quite a number of politicians. You know, we heard it discussed in Parliament yesterday and in fact the Prime Minister made some comments too. Have listened to what he said.
It wouldn't be right if financial services were being denied to anyone exercising their right to lawful free speech. Our new Financial Service and Markets Act puts in place new measures to ensure that politically exposed persons are being treated in an appropriate and proportionate manner, and having consulted on the Payment Services regulations, we are in the process of cracking down on this practice by tightening the rules around account closures.
So Rishie Sunak there speaking yesterday, So what do you think will could actually result from all of this?
So Nigel Farraje obviously is called for a parliamentary inquiry. Now a lot of the criticism that we were hearing in Parliament yesterday is from what you might call ideological bedfellows of Nigel Farage. What I would say is it seems to have this incident seems to have raised eyebrows at the Financial Conduct Authority, which is probably a little bit more concerning for Coots in that west. So Nikil Rati, who's head of the Financial Conducts Authority, was speaking to yesterday,
he said he'd spoken to Coots. He was talking at Parliament's Treasury Select Committee. He discussed UK and European Union regulation and he said that essentially the financial firms are not able to discriminate on the political views of their customers.
Okay, So just lastly a final thought on what it might mean for Cootsnatwez CEO Alison Rose.
I mean, we've heard very little of them from them so far, particularly from Nat West, who appeared to be letting Coots do do the most of the talking on this. Nowwest obviously is still largely stay owned. It doesn't look like the headlines are going to fade on this anytime soon. I would anticipate further pressure.
This is Bloomberg Daybreak Euroup, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning, on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bluemberg Business app, and Bloomberg dot Com. Our flagship New York station is also available on your Amazon Alexa device. Just say Alexa play Bloomberg eleven thirty.
I'm Callen Hepyer.
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