>> bailed out. portugal takes control of banc o espirito santo. on thers left cease-fire. we are live in tel aviv to see how a key israeli industry is coping with the gaza conflict. and out of control. becomes thetbreak deadliest ever. we are going to weigh the risk of doing business in west africa. ♪ >> good morning, everybody. welcome. you are watching "the pulse."

we are here in london. i am guy johnson. what do we have coming up? ready for recovery? legal woes may be a thing of the past for hsbc. the bank reports results in about 15 minutes. we will bring you those numbers as we get them. ppi could still be a big problem. we are going to talk about that. we are taking you to our top story. portugal is taking control of boko a spirit of center -- banco espirito santo. mark is here with the details. a lot of money. how is it being spent? >> it is being spent by the bank of portugal, the central bank. up resolution fund was set in 2012, financed by the country's 84 banks. they will take over the bank as a whole. suspended shares on friday. it will move most of the assets and put it into this new bank,

baank --, which is new bank. it will use the proceeds when it sells the bank to pay off the treasury. so the resolution fund to the bank. >> exactly. >> within the central bank. that is what has bailed out banco espirito santo. luckily, portugal still has $6 billion remaining from its bailout in 2011. the bad bank, problematic to use the word assets, held by the shareholders and the junior bondholders. they will include the loans in other parts of the espirito group. taxpayersews is that are not on the hook. >> well, they are in the short

term. >> exactly. the senior bondholders are not on the hook. as in cyprus, the depositors are not on the hook as well. this is similar to what happened with the bank in england. arejunior bondholders taking some of the hip as well as the shareholders. the berlin sharing process was put in place by the european union the last 12 months. >> 2016, seniors could be brought in as well. >> exactly. some are already saying that if the bad bank needs funding, it is possible that the senior bondholders would be wiped out, which could bring in some of the junior bondholders. which could bring in the senior shareholders. that is what some are speculating.

next?t happens you have laid out some of what happens next. there are still some open questions about what this bank looks like going forward, how it is broken up. are there issues? are there potential losses that could still be out there? >> you would hope that the new bank has enough money. you would hope that they get enough capital. fears we were just talking about was with the bad bank. the novo bank ceo says it removes key uncertainties around the bank. earlier, we spoke to the dean and collegiate professor at robert kennedy college in zürich and he still has his doubts that this draws the line in the sand when it comes to not only portuguese banks, but banks in general within the eurozone.

>> i do not think it draws a real line in the sand. it is a positive for the banking sector. you usually see a weak intervention without too much disruption. systematic. the evolution of the banking sector is not over yet and there might be more surprises. is it a line in the sand? we do not know. it was a bit of a surprise to see that all of those accounts did not match at the end. that is why a lot of investors want to stay away from banks. so much that we have to be careful of still. >> he makes a valid point. months ago, we were just approaching this surprise. the group of companies owned by the parent company. ofm there, it spiraled out

and troll. shares down by almost 50% last month. hitting the number 2 in portugal. saying,is essentially this came out of nowhere. thatnnot be assured might notnto -- santo emerge. >> is like the troika hearing over the shoulder of portugal's biggest bank. do notppened because we understand the leadership structure. i would say there will be a lot of parliamentary hearings as a result of this. asset you hope, with the quality review and the stress testing that eventually, that will draw a line in the sand. , taking overope the role as the new provides ory body of- provis

the eurozone. but today it was quickly resolved. it was resolved over a weekend. we think that gives hope. i am sure you have tweeted that out. >> so it is out there. it is interesting. isking within that, the eu to find a good bank as a temporary credit institution. >> which they will sell off in pieces or as a whole. maybe santander would buy it. >> depends how much capacity there is in terms of understanding the balance sheets and the risks. a lot of people will be doing the numbers. spreadsheets at the ready. thank you very much, mark barton.

let's go to russia now. roflot scrambled its low-cost units after notice contracts following -- after nulled contracts following sanctions. did this local unit start flying to crimea? was it told to by the kremlin and what are the implications of that? >> certainly, there is suspicion. it only started operations this year. it is a new local airline set up by aeroflot. and the kremlin has been wanting to promote tourism, russian internal tourism into crimea because the tourist sector has since theremendously province was annexed. ukrainians have stopped traveling to crimea. it is not the only russian airline traveling to crimea.

it is low-cost, it is providing a cheap way for russians to visit crimea. of the specifics of why it is not able to fly, what are they? does it mean it is a short-term problem or more longer-term problem western >> it would appear as though the airline is no longer able to operate. madennouncement that was yesterday said the european companies which had been providing services leasing and servicing and ensuring -- and insurance, were no longer willing to work with it. ,nless the situation changes and it would take a switch of destinations and the eu would agree to remove it from the blacklist, the airline is effectively out of business. >> i guess this is part of the message that the west wants to send.

>> it is a very strong message. i mean, it really is ironic because the european union, for so long, was seen as dragging its feet on sanctions him being weaker than the u.s. here we have a subsidiary of aeroflot which has been taken out of business. it is the first real consequence that russia has suffered tangibly. the message is if the crisis is not resolved, we are going to see more of this. >> we will leave it there. thank you very much indeed. else is on our radar this monday morning? emirates says services to the capital of guinea have been suspended until further notice. this is due to the outbreak of the ebola virus which has claimed more than 800 lives. this is pending the advice of the government and international health authorities. the current outbreak of the

virus is threatening liberia's economic recovery. that is a warning for the country's vice president. he said the international community must do more to help stop the virus from spreading. that weis an emergency have never experienced before. so the control measures have .een put in place they are not being adequately put into place. now gearing up and we need to move very fast so that it does not get out of control. >> more from him a little bit later. israel has begun a seven-our -- 7-hour ceasefire. except in across gaza those areas where israeli defenses are currently

operating. israel he troops were redeployed yesterday across gaza and israel he artillery in place across the south. we will talk about that later as well. coming up, we will dwell a little bit more on portugal saving the ailing banco espirito santo. in, a new name, but lots of questions remain. of course, minutes away from hsbc's latest earnings report. we will have coverage of those results. all of this is coming up on "the pulse." ♪

>> good morning, everybody. welcome back. you are watching "the pulse." we are on the radio, streaming on them are.com, we are on your tablet, your phone. we are waiting to see what is happening with hsbc this morning. we are just beginning to get the numbers coming through. let me just wait until i can see a little bit more detail. i just want to make sure i have the right one here. shares extending losses. reportingexpenses

pretax profit of 12.3 billion. 12.9 was the expected number. those are the details as i have them. manus cranny is working his way through the numbers as well. the stock is down. on the headline. $12.3 billion, just under 11% on last year. the buffer of capital they have, this is a big issue. ain't no more capital. capital at a just is much more robust. that rises to 10.8%. what we want to see is how are they performing in brazil and argentina question -- and argentina? not so much concerned with china. litigation is one of the key areas we want to keep an eye on here. >> i want to look at the ppi numbers as well.

>> i do not know if that was an expense. they had a headlined of 75 million pounds conserved for ppi. underlying profit before tax down $175 million, or 4%. we will dig into these, guys. guy. >> stay there. when you see more detail, talkback. ferguson joins us from macro strategy. hsbc is one of the biggest, most secure, most diversity spread banks there is at the moment. still has litigation issues, still problems within this institution. a vector, a space, and get yourthat you can

arms around and fully comprehend at this stage? .> i think historians can that is the biggest trick you can have. history of banking crises tell you what goes on. often because the capital has run down too much. it means that they have to spread these losses out over a long time. the average is about six years. that is what we have to put into perspective. we have to puts, that into perspective. what exactly is the job that needs to be done? it may be missing a quarterly estimate -- >> but it has a strong balance sheet. peers, it iso its immeasurably stronger. it has done much more work in terms of realizing cumulatively since the crisis broke. it looks much more like a eger u.s. bank -- a bigger u.s. bank.

att is what we need to look with these banks. we need to look at the balance sheet. the p to obsess about and l. they look for whether things are better or worse. they get massively surprised by big balanceeet -- sheet adjustments. n> there has got to be a argument for the need more hsbc's and fewer bes's. hsbc took a massive hit what it was able to weather them. >> that is an interesting issue. we are going to going to the resolution period. once we realize the growth period was a mistake, then we have to repair that damage. two types of banks come out of

this fairly well. number one, banks that did not really lay the game. hsbc a more conservative bank. secondly, because of the big, strong capital base, it is able to realize losses earlier on and move on with its financial life. >> they did make some mistakes. there were mistakes that were made. is, inthe real point terms of magnitude. if you are a bank that really geared up and has an awful lot ,f losses on the balance sheet then you have to dig in for the long term. those banks stay digging in for a long-term. we have seen in europe, shrinking levels of bank lending. banks,look at these management 45, 6, 7 years it takes. >> that is what we thought we were doing here and then we get

bes. >> most bankers now, early on, you might have a funding crisis. you might reveal that you cannot play the game. this is what happened to northern rock, famously. stages get to the latter where management has changed as we are going through. and goes, icomes in think we should show more of this hidden loss stuff to people. be honest and put a line under the story, etc. , likehe new guy comes in we have seen here, the new guy comes in and says, i inc. things are much worse than you have said. he has come up with a loss that is bigger than the total humility losses that they fessed up to since the beginning of the crisis in 2007. >> are we at the point where we

can understand the difference between the good and the bad? we do not have the level of clarity. where now in a situation they are gone. what part in the hierarchy do you want to own these banks? from senior down, you are at risk. >> the day before things start to improve, they are going to look their worst. especially if you bring the news forward in time. if you look at the losses we have had so far, they are about 7.5%. these losses will bring us to about 15%. 15% is not a bad central guesstimate for what the damage might be to bank assets. it might go as bad as 20%. this is where the large u.s. banks are. citigroup has gone through that. the japanese banks went to 20%.

15%, not a bad case to be made that what they have done now is finally fessed up. what does that tell you about other european banks? if the amount is 15%, how many european banks have lost 15%? none. >> we are going to leave it there. we are going to take a break. actinic couple of minutes. ♪

>> welcome back. you are watching "the pulse." down a littlek is bit. let's find out the devil in the details with manus cranny. >> profits missed analyst estimates. operating expenses are up at the bank. expenses are up 2%. compensation and benefits just up from $9.5 billion last year. the dividend comes in at $.20. asia comes down from 9.20 6 billion last year to just under 8 billion. impairments are also down. the overall takeaway is the numbers are worse. expenses are rising and the cost of running the bank is rising. >> one of the interesting lines i have seen talks about the higher u.k. rates being positive.

you would have thought it would have been the other way around he -- around. he is saying that is not the case. we will begin to that a little bit later as well. manus cranny working our way through the ages bc numbers. still to come, we will head to tel aviv. ♪

>> good morning. welcome back. we are live from bloomberg headquarters in london. it an earthquake in southwestern china has killed 357 people and injured 2000. it was a 6.5 earthquake. more than 12,000 homes were destroyed and communications in the region are cut off. of agal has taken control

bank. the bank was once the entries largest lender. this will leave bondholders with losses. humanitarian window goes until 5:00 local time across gaza. from tel more on it aviv. cease-fire is a almost. it is a little bit different than the previous ones. walk us to the details. there have been few atempts to cease -- hold cease-fire. the last one was for three days but it was roque in a few hours after it was announced. this is another attempt. there haven't been any breaches. neither side has claimed a major

breach. so far it is holding. this theis that during sides can diplomatically engage sustains intoger the violence. >> where are we with the violence? there seems to be a different stance coming up from hamas and the israelis. how thederstand translation of cease-fire is working into a possibility of a solution? previouse of the cease-fires melting away, john kerry went to paris and convened all the foreign ministers from major european countries. achievednot get the cease-fire. after the three-day cease-fire was announced this weekend, is really accused hamas of reaching

it and capturing a soldier. israel says they no longer want a truce with hamas. whenll unilaterally decide this war has finished. are can say we won and we done here and destroyed all of theattack tunnels and the missile launching facilities and we are out of your. that is the israeli version. this is how they are seeing the situation now. >> in terms of international perception of the situation, how significant was the showing of the u.n. shelter? >> that is still being investigated. the united states ambassador has called the yuan to investigate the situation. it has been condemned the globally by the u.n. and the united statess --

and the united kingdom. the u.n. should look into this. incertainly has not worked -- it has been a tragic incident. it has not worked in israel's interests. perhaps it was part of the reason why they wanted this humanitarian cease-fire for the next few hours. >> thank you for the updates. thank you for joining us from bloomberg in tel aviv. we will be back later to keep you up-to-date on the situation. i want to take you to live features from belgium. heads of states have joined king philippe they to commemorate the 100th anniversary of the start of world war i, or at least britain be involved in the war. that was when this actually happened. this is a significant day for enormouse most

conflicts in human history. we will show you pictures from what is taking place in the country. it is a somber and difficult day for europe to get through. were closed.kets thousands of young men found themselves out of work. they listed in the army with their friends. we spoke to a historian about the impact of the stockbroker battalion. the stoke broker battalion was comprised of men from the city of london. group.a very homogenous they came together in late august of 1914. banking broke out, the industry was involved immediately.

it required the closure of banks and the stock market. it it was to prevent a run on both. mondayy, bank holiday on and war on tuesday. they were an unusual group in that they were one of the first group of friends to come together as a battalion. you joined the territorial's or you were a saturday soldier. they went off to war. the first and the worst of the fighting. they were in some pretty tough fighting and they lost a lot of men in the process. who signed up,s

about 900 of them one across to france on july 31. about one third were killed. the bankers were very keen to participate. they wanted to be there. they had not been forced in. the war them won finished simply picked up their lives. some of them had gotten married. some of them wanted to get married. they did brush the dust off their ahlers and there -- bowlers and pick up their lives and go on. never before or since. we will take a break and will be back in a couple of minutes.

>> we know what to do. what we need now is a bodies on the ground. >> that was a spokesperson from the world horse -- world health organization. it this is the deadliest outbreak ever of this virus. more on this story with caroline hyde. in terms of where we are with this, the numbers are getting

fairly dramatic. there is not an obvious solution to basic precautions. there is not much available. 1500 people are now infected. if we have got three countries and a national state of emergency. category ad a bioterrorism agent. it is used as a lethal weapon. there is no cure. it is just not commercially viable. it was found on the banks of the ebola river. less than 10,000 people who actually died. the big drug companies, the numbers don't add up. we have small pharmaceutical companies being helped when the ..s. government to dispense the defense department is adding

$140 million to a company that is helping develop the drug. they have had the first human trial back in january. other small drug companies are helping. there is a drug company in tokyo. on the back of that they found it also helps to tackle ibo. there is a swiss vaccine company that is helping. so far, there is no breakthrough. it there are two key cancer --gs that seem to help the fight the virus. there is no key to her. the numbers don't add up for the bigger drug companies. is helping totes supply and the world health organization hoping to raise $100 million to get more doctors into africa to help fight at the moment. >> let's talk about how this is

affecting a business. it many of these economies are getting back on their feet. where does this leave them? >> many are saying we just started to see a turnaround and now this fits us. this is the most difficult moment. liberia has been saying that. businesses are not that hard hit areas you have got a number of oil companies in liberia. london mining is in sierra leone. you have got african minerals which is the biggest contributor to the economy in sierra leone a. things areat so far ok. they are testing the workforce to see if they are well. so far production is not hurt. as i say, three countries are in

a national state of emergency. one company to keep an eye on has 6000 employees. it they say they are not affected. it might in the future. >> thank you very much indeed. caroline hyde. let's talk to our next guest. alexander, good morning to. the businesses are being affected but not dramatically at this stage. >> i would think so. i went toperience, ginny twice in the last six months. the risk is limited of getting contaminated. a mining company in a remote part of the country. you have 2000 people over there.

you have to pull out some of your staff and what in place a protocol to avoid them getting contaminated. i would stay for the passing business traveler, it is fine to go into the capitals of these countries. i read the hotels are empty. >> i went to ginny a couple of weeks after the a bullet broke and was declared in country. june, returned back in the situation had turned and was back to all. capital, youn the don't see ebola. it is an invisible enemy. he bullet is a very scary disease. the risk is not necessarily as high as the numbers could indicate. agencies talking

about this being out of control at this stage. is there a correct middle point? if it is uncontrolled we don't know the trajectory or how it will be impacting these countries. if you are the ceo of a country havehad involvement, you reached 800 and the aid agencies are saying it is out of control, what would your advice be to somebody in that situation? you have people on the ground and you need to look out for your business. it depends on where you are located in the country. if you're in the capitals i would say to put in a basic protocol and cemetery measures. -- sanitary measures. some of the mining companies

have pulled out some of the nonessential staff and left the most essential people. i think that is a good way toward the situation. >> if you are in a neighboring diseases tend to not obey boundaries. how do you treat this if you are in the country next door or the country next door to that? is this a west african problem or is this a country specific problem? >> diseases don't stop at frontiers. ebola as a regional problem. what has caused the disease to spread so much in light. .nd any and sierra leone an exchange ofbe

information in the countries in this region. economies, ifse you think about a country like sierra leone the and just putting its infrastructure back together and getting the resources back as a pot of the economy, how significant is this? we are not there yet. >> it is hard to quantify. i would say the health organizations are talking about three to six months to stop the spread of the disease. the damage would be more in terms of perception. when you go ont, the ground to run your business in the capital, the risk is not as high as you would think. >> one more question. should the message be that we

aid?more the more resources they have the more this doesn't happen again. >> this is of the strong messages of this summit. put an emphasis on trade. the united states is counting on that. they relate to the party when it comes to africa in compared to china. they need this summit to make their economic ties better. more resources and financial resources will fight the disease likable. >> thank you very much for joining us. thank you very much. look atoing to take a

companies investing big and sculptures. ♪

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the first word is up next on bloomberg radio. has beenirito santo bailed out. information on what this means to the banking center. we will go to the president to talk about the impact the complexes have on tourism in israel. i want to take you to pictures him -- belgiumld . they are commemorating the 100th anniversary of world war i. britain entered the war on august 4, 1914. we leave you with the pictures and we will see you after the short break. ♪

>> we're going to weigh the risks of doing business in west africa. good morning. a warm welcome to those waking up in the united states. i