>> top global financial firms meet about the french far right's plan for a euro exit. brexit battle. torys hit back after austria eas -- austria's chancellor says the u.k. has a $50 billion euro -- has a 50 billion euro bill to settle. and we break down numbers with the c.f.o. at 7:00 a.m.

anna: i'm anna edwards. it's 6:00 here in london. 7:00 if you're watching in paris or berlin right now. let's dig into the basf numbers, the german chemicals business. adjusted earnings before interest an tax 1.18 billion. that against an estimate of 1.16 billion, in line or a touch ahead of that estimate. q-4 sales coming in above the estimate of 14.1 billion. they're proposing a dividend of three euros per share. they say 2017 will be slightly higher. the estimate has been 7.24 billion for that number. we'll get more details as we go through the earnings release. we'll be speaking to management of basf.

lots to talk about with chemicals an the agriculture business. let's also get to some other things coming up in the show. the french defense business is reporting numbers, they're reporting number this is morning. they see adjusted re-news rising 3% in 2017, that's the guidance part of things. the 2017 adjusted 1.804 billion and they're paying a dividend of 1.52 a share, the divedebbed up by 110.1%. we'll be speaking to the chairman of safran, rob mckinnis, about the numbers but also more about the m&a environment this business faces. that's at 6:45 london time. plenty of questions raised by t.c.i., one of the shareholders in safran. we'll talk excuse live -- exclusively to safran's

chairman. let's see where the asian session has taken us. we see a little weakness as we head to the end of the week. down half a percent. we've seen a fifth weekly gain for asian shares that's helped push the very of global equities above $70 trillion despite or perhaps because of confusion around whether the fed is going to increase rates very soon or whether they're going to take a little more time. we had that conversation yesterday and will continue to do so. he dollar index fairly flat. treasury secretary mnuchin made the statement that fiscal effects on the economy may be limited. perhaps we have to wait longer to get those. we saw copper under pressure yesterday. iron ore under pressure today. down by 3% in the overnight session. concerns tharned esustainability of recent gains. you've seen some of the recent price action around commodities. let's get bloomberg first word news.

>> the u.k.'s ruling conservative party has won the copeland bye election. the last time a government won a seat between election elections was in 1982. but jeremy corbin's labour party held a seat that the anti-e.u. group hoped to take. u. conform conservative m.p.'s have hit back at claims that britain will be charged 60 billion euros to leave the e.u. christian courin became the first to put a value on the size of the u.k.'s brexit bill. may's office was -- had a muted response, many members of parliament responded. pin dvisors to marine he

have met with analysts from several institutions. barclays and u.b.s. were among companies that met with le pen. this is common for mainstream parties in prance, this is the irst time lmbing e pen's party has been approached. president trump has rescinded president obama's order to phase ut the use of private prisons. two key private prison operators rose in after hours trading. malaysian police have said a preliminary report showed v.x. nerve agent was used in the murder of north korea's kim jong nam. the substance, listed as a chemical weapon, was found on his face and eyes.

the son of the late leader kim jong il was murdered in an airport on february 13. bloomberg news, you can find one stories on the bloomberg the go. anna: shery, thank you very much. let's get to what's happening in the asian equity sessions. what a way to end the week a little more sluggish in asia. >> it certainly is. risk the order of the day. i want to show you three big stocks in asia. u can see samsung, all weighing on the regional index as we see investors take profits at the end of what's been another interesting week for asian equity markets to round out the week. asian stocks are on track for a fifth weekly gain. you are seing this rally we've seen in hong kong peter off

somewhat though still some solid musme far lot of these property companies. still a lot of bullishness about the china-hong kong property market. australia closed out herbingsings down by .8%. a little bit of disappointing numbers from some of those myob. ng today including the yen fluctuation closing off by half of one percent. the cost pee under water today but the -- the kospi under water is up. t the yuan you are seeing it up another .7%. overall, risk up ahead of the european session later today. anna. anna: thank you, juliette. with the first round of french voting less than two months away, national front leader marine le pen has ramped up

anti-e.u. rhetoric. yesterday, she took on foreign policy. >> to share france's infence and the freedom of french people there's no price too high. there's no combat that is too frightening to be taken on. it's clear the policies of france are to be decided in paris and no ally new york treaty, no alliance will decide french policies in its place. anna: some of her top advisors have met with strategists and analysts from blackrock, barclays and ubs to explain their economic program and plans to withdraw from the ewe row. while such meetings are common for mainstream parties in france, the -- it underlines how seriously they take the possibility of a national front win. with us to discuss the politics of europe and how that influences investment strategy, alex. let's talk about the french

political scene and what you are assuming because as we understand, bloomberg understands, that various city institutions, financial institutions, are meeting with marine le pen as they would do with any party that lacks as if it could take power. that's not your base case is it? your base case is not that le pen comes to power. alex: whether we're talking about france, germany or countries, the political systems present in these countries were derained after -- designed after the second world war rm it encourages collaboration and makes it hard for populist parties to get their agenda on the table. the two-round system they have in france makes it difficult for le pen to get past the sec round. and the polling data is reflective of that. le pen may make it into the second round, likely to face two opponents who are polling at 65% to her 35% in the second round.

that's a big gap, meaning we think the political risk in france is overdone. anna: i spoke yesterday to goldman sachs and they were saying, when you look at the action around the bond market in france versus germany, for example, this is not the kind of action you expect to see if marks were pricing in some kind of explosive market dislocating event. this is actually quite contain for the moment. alex. for the moment it is. there are other forces at play within the markets at the moment which is make it difficult to unpick whether this is politics or a prospect of higher growth, higher inflation, tied to monetary policy, maybe some discussion about the e.c.b. withdrawing or providing some sort of tapering guidance going forward which is putting upwards pressure on bond neeledsover oh -- over the course of this year. >> you see european growth picking up still and you see hat as a reason why european

equity. alex. like it, we think the fierce of frexit or others have overdone. that's clouding out an improvement in the fundamentals in eurozone commodities. the composite to the eurozone has hit its highest level since may of 2011. this economy is getting moving, but investors are reluctant to invest because of political movements. anna: you're happy to put political risk to one side and look at the fundamentals and you see them as sustainable because some who sit in that chair say, a will the of this is being driven by china and the global growth story is being driven by china and a lot of that is not sustainable because it's all what the government is choosing to spend to boost the economy in the short term. alex. sure, an there's always question

marks around the tpwhrobe growth environment. when it comes to the eurozone, this is a region that has further to run. it's not as far in the cycle as maybe the u.s., there's still a lot of room to run in this economy. >> let's talk about the other performance. anna: this is a measure of global equities. puts nicely into perspective what we saw through 2016 and 2017, flobal value of share surpasses $70 trillion. so you would thick this and go to europe, not the u.s., u.s. is too expensive now? alex. i think the u.s. is a more selective market. e hit 17.7 forward earnings, 11% above its long run average. we're not talking about a cheap benchmark anymore. very few companies are trading at that 17.7%. one othey have sectors we like is trading at a discount to its

u.s. is u.s. finances. tissue financials. we continue to like the high yield environment with the prospect of deregulation starting to filter through to help u.s. financials going forward. anna: that's based on regulation rather than the growth story in the u.s. it's interesting that treasury secretary mnuchin was talking when the fiscal changes may come through and benefits may be felt by the u.s. economy and he said that's not necessarily a story for this year. alex. i think that's something i'd agree with. markets are being driven by the fiscal policy fumes since november, the promise of tax cuts an fiscal spending but we've got painfully little detail about what that would look like. frankly the republicans that sit in the -- in congress are unlikely to sign off on unfunded tax cuts, unfunded fiscal stimulus and i think when investors start to see the plans and the actual details of this

fiscal policy, some fiscal frustrations might filter through into marks and that's where we might start seeing softness and pmpance. >> the fed, it was clear from the minutes, doesn't seem to be in any hurry with frump's fiscal policies and the inflation pressure not necessarily as great as some wants to see before they're removed. and i pulled up the work function on bloomberg, you mentioned that without clarity on fiscal policy it's unlikely the fed will move in march. the question is when do they get clarity on fiscal policy? alex: fiscal and monetary policy go hand in hand. you can't use one without knowing what's happening with the other. we've had little detail about that. when will we get clarity? april or may when the president is due to submit some sort of budget for the next expected year. within that we'll finally get some hard details on what sor of tax tutts he -- tax cut he is

wants to do. when you get that clarity from fiscal policy, that's when you can see the fed think about what that means for monetary policy and plan accordingly. anna: assuming he gets it through congress. alex: assuming he gets it through congress. anna: alex, thank you very much. here are some highlights for your day ahead and beyond. we get new home sales out of the u.s. at 3:00 p.m. u.k. time. after the european close, rating updates set for germany and for greece an we'll get you to those on friday evening. and tomorrow morning, warren buffett is set to release the company's annual report and letter to shareholders. still to come, crude reality as doubts emerged about the true value. take a udi be forced to whole lot less? brexit's price tag, austria's chancellor touts the cost of leaving as 60 million injure

res. and war of words. safran hits back at criticisms of its zodiac takeover. we speak to the company's chairman. this is bloomberg. ♪

anna: welcome back. this is "daybreak europe." hang seng, some weakness to the end of the trading week but that doesn't change the overall path which has been upward. let's get bloomberg business. >> thank you. vivendi forecast 2017 earnings below analyst estimates. this year the media company run by billionaire vincent bolari

predicts a more than 5% increase in sales. that would put the measure at about 905 million euros, compared with the arch estimate f 968 million euros. chire in a appointed the new head of the banking regulators. he'll replace someone who is etiring. it was announced earlier today. credit suisse may need to find new ways to help clients who generate as much as $750 million of revenue in the event of a hard brexit. losing access to european markets would endanger 10% to 15% of income at the two units which have a revenue base of as much as $500 billion. banks have strug told quantify

brexit risk because so many unknowns around britain's future relationship with the inch u. that's your bloomberg business flash. anna: juliette, thank you. saudi's oil joint is worth enough to consume apple twice with some spare change left over. now they may have to set farl lot less. industry executive analysts and investors told bloomberg their analysis suggests aramco is worth no more than a half or maybe as little as a fifth of that amount. let's bring in will kennedy, editor of energies and ommodities for bloomberg news. good morning. so maybe not $2 trillion. maybe less than that. why the different estimates, take it into the murky world of

valuing oil companies. will: when they announced they might like to privatize this oil company, and it is enormous, produces more oil than any other company in the world, the estimate seemed to rest on saudi's enormous reserves, times $8 which is a typical value for a barrel of oil reserve when you get to two trillion. not many oil companies are valued like that. it's more common to value an oil company around cash flow. discounted into the future. and there are considerable unknowns and risks about aramco, what the tax rate will be, and then the whole issue of climate change and how long these reserves will have an economic value. anna: you make the point in the story that if every barrel of oil reserve is valued at $8 billion, exxon would be very different and others would be. not every barrel of oil, i guess is worth the same, depending on how much cash you can get out of

it. will. a russian giant, five million barrels a day, lots and lots of reserves, however it has a very small value and there are reasons for that which may play through to the aramco example, such as people don't like being minority investors in state-owned entities. and there's political risk. saudi arabia is a monarchy. its future path is unknown. are you going to assign an economic value to that asset 70 years into the future? anna: a tricky business valuing oil assets. what assumptions are you making? it seems fairly stable this morning. alex: what we're looking at is the supply and demand dynamics behind oil, continue to favor high oil price going forward. we saw an awful lot of supplies taken off the table after the summer of 2014 with oil plunging

into the $20 a barrel. we saw about $350 billion of expenditure delayed until next decade that works out to about one billion to three billion barrels a tai delayed for a considerable period of time. that will give a little bit of lift to the share price -- to the oil price, sorry. what i would also say is demand is starting to pick up. we're seeing stronger tpwhrobal economic growth that will typically help lift not just oil by commodities broadly. that's why we've got a price target for oil for the end of next year around the high 60, to 6 dollar a barrel. anna: you think it will go substantially higher than where it is at the moment. alex: yes. anna: when you're valuing oil, the various things go into the mix and taxes. we don't know what taxes will be applied to this business. will: that's absolutely right. as we understand it, saudi aramco, the main source of income to the saudi state pays

n income tax of 25% plus its revenue. clearly almost all the money it generates go into the saudi treasury. to make it attractive to investors they said they're going to cut that rate but slnt said by how much. it's hard to value the company until we know what that will be. that said, it's clearly difficult decision for saudi arabia to make here. if they're serious about selling this company they may have to cut it a long, long way. then everything changes for the saudi treasury. though they'll get dividends, that's not quite the same source of income as a daily tax on income you pay every day. anna: when this company is being valued, when you're discounting the cash flows they'll get in the future from oil assets, you have to make assumptions about climate change and how much that weighs down on people's willingness to still consume these type of oil products to the extent we consume them at the moment. that's what saudi knows and is

prepared for. alex: the climate costs, the value of oil itself, it makes it very difficult to value a company such as this one. it's probably one of the most challenging m&a activity going forward. what we would be saying around the commodities broadly is that we're continuing to see higher oil prices going forward. higher commodities moving forward. continuing to favor that with import, still continue to make sense. continue -- after a very good 2016. anna: you think commodities overweight still make sense. will: there's always going to be question marks particularly when it comes to looking at the chinese economic data. they are the main consumers when it comes to these minerals and whether or not they're going to keep the chinese economy afloat. we continue to see robust growth for the chinese, at least in 2017. we might have some question marks into 2018.

anna: thank you so much, alex and will. up next, the brexit battle heats up, the austrian chancellor tells bloomberg the side of the bill. that's next. ♪

anna: welcome back, this is "bloomberg day break europe." we have the dollar against the yen, the dollar a little higher against the japanese currency this morning. 3:30 in the afternoon if you're in tokyo. 6:30 here in london. 7:30 if you're in paris or berlin of course. we see currency markets fairly muted reaction, the dollar index down just .1%. let's find out what else the overnight market action has the breakdown. >> we saw a tenth straight day of gains for the dow, its longest streak of record closings since 1987 of course the global equity rally pushed

the value of global shares above $70 trillion. we're seing a note of caution in the overnight asian session today. the asia pacific index off slightly. you can see here the weakness in south korea, singapore and new zealand. that said the index is still heading for a fifth weekly gain. if we take a look at the dollar, you just mentioned it, seeing a bit of a mixed picture against major currencies. the 10-year treasury yield is pretty much unchanged. that's not where we're seing a lot of movement at the moment. a lot of movement in commodities. gold up on the week after heading for its highest closing level since november. silver heading for a ninth straight week of gains, the best in 10 years. crude oil trading at its highest level since 2015. metals, interesting, because we're seeing some of them up on the london metal exchange. we're seeing weakness coming thru in shanghai.

copper, aluminum tun there as well as iron ore which i'll talk about more. that weighing down the materials stock, providing the biggest drag on the asia pacific index down 1.5%. i mentioned iron ore, getting a bit of a reality check. we've got futures in singapore retreating for a third straight day after prices lifted to the highest level since 2014. iron orpe up 18% last year, perhaps that rally is being seen as a little overdone. finally work wanted to show you the dollar, stabilize, trimming its weekly decline after a slump on thursday, following comments by treasury secretary steven mnuchin. this is the bloomberg dollar index. if you look at dollar against the yen, it's strengthening from a two-week low versus the yen. anna: you can go to bloomberg

and see what's making it into today's edition. the cover story about the banking sector. it's been a busy week for bank earnings so far. the focus on r.b.s.'s report will be on its plans, its scrapped plans for williams and glensdale and when it may pay a dividend. investors will want ed of c.e.o. bill winters' turn around efforts. they want to see they're bearing frut. the next story is also in the financial secor. the italian bank said they're committed to 99.8% of its 30 billion euro offering, this is vital to the c.e.o.'s turn around plan. they'll seek buying for the rest from february 27 to march 3. finally, account daybreak" focus os then epolitical story around brexit osmen the suggested 60 billion euro brexit bill.

leader said it's nonsense. we'll get some thoughts on that in a moment . our next guest says we're at a crossroads regarding western ttitudes to trade. for more, we're joaned by global managing partner and former head of the u.k. foreign office sir simon fraser. fwret to have you on the program once again. you delivered a lecture last night setting out your thoughts around tpwhrobalization and around trade and where we are on that. the loose of the u.k. and the u.s. as hoomps of free trade, are we really there? do you take at face value everything that donald trump said about trade? >> i think it's clear there's a loss of confidence among a lot of people in richer wen countries about the benefits

they derive from the system of globalization and open trade that we've seen over the last couple of decades. i think there is one of the reasons that lies behind the political shocks we've seen in the last year in the u.k. brexit and obviously the election of president trump in the u.s. as we look forward to this year with big political events in europe, it may be one of the issues which is going to lie behind the outcomes there as well. >> what will the political reactions, you think, be to this challenge to tpwhrobalization and challenge to the post-second world war consensus in many forms? is it going to be a repeat from global trade? or is it going to be a different type of politics? >> i really hope it isn't a retreat from hope trade. i think we'll all be worse off both economically and in terms of international security if that is rolled back. so i think we need to learn the lessons and react and a lot of it is about our nestic policies and how we equip people to compete in a modern economy so that they feel they have a stake in it. and then i think if it's for the

u.k., for example, we've got to look post brexit at what our international trade relationships are going to be, where the markets are we're going to preertize on. and how we're going to shift focus to making a reality of global britain which is what the government has set out to do. anna: we've seen donald trump being vocal about what he want taos see as a renaissance of manufacturing in the u.s. his approach is influencing u.s. leaders to think about where they're expanding and where they're not. in -- in the u.k. we've seen theresa may and her government being tested over the oingization and they were going to be tested by this unilever acquisition but that hasn't come to pass. what kind of industrial strategy should countries like the u.s. and u.k. be adopting? >> i think we have to remain open to investment, that's an important thing. when you talk about industrial strategy, the porn thing the

government here has said is it wants to review that and have a more active approach toward ensuring that the government supports the economy, the whole economy, across the whole of the country, in terms of investment, bhilleding skills and as i said before, helping people to be ready to compete internationally. that's a policy that they're launching. there's a consultation going on at the moment and in the next few months they'll take that forward. anna: does that mean blocking m&a could be ok if it were going to lead to job losses? >> i think we'd have to look at that carefully. the policy in this country has been open for investment. i think that will remain the majority view here. but each case will always be looked at in its own right. >> let's look at the trade side, what your lecture was about yesterday. despite the comments about the u.k. government about where they'll seek to do trade dreels after a brexit you want to remind them yesterday that priority has to stay with the e.u. and doing that within the e.u., that's really what matters

in this. >> the lecture i gave looked at this these things. what i was saying, when you're thinking about future strategy, look at the realities of where your markets are. almost half of our trade is done in the european unit. 16% tone with the united states. those are ethis biggest marks and they will remain the biggest markets. we have to work out how to continue to have access and improve access in those markets an also as you say looking forward, strategically about trade, we need to think carefully about what modern trade is and how it will develop, the digital economy, the protection of things like intellectual property and investment rights. those are important for modern trade more than tariffs. anna: a lot of trade takes place outside of trade deals doesn't it? so to that extent do we hold trade deals in too much high regard? >> i think that's a good point. we do trade without having trade

deals. if you can do trade agreements, you get trenchrble access into the market. in the e.u. that's a different thing completely. we are integrated in a single market. that's by far the most integrated international trade arrangement anywhere in the world. with the united states, for example, where we don't have a free trade agreement, if we can get agreement on better access, for example , in terms of recognition of qualifications, access to public procurement, better access for financial services, then you can improve trade and real tyity -- relatively small increase in that market yields very big dividends because of the volume of the trade. >> what are the stumbling blocks going to be with a transatlantic deal? privatization of health care provision or is it around the food chain? >> i think the -- there hasn't been enough focus on the content of the deal. there's been an awful lot of talk about the need to get it and the desire to have it fast. we know from the t-tip

negotiation between the e.u. and u.s., that there's porn issues but there are sensitive issue on both sides of the atlantic and you mentioned some of them. we need to take that forward recognizing on both sides that can be tricky. in addition to that, there are certain market access things, for example, in the agricultural sector, the u.s. will seek in britain like the export of hormone treated beef which has been a sensitive issue here. we need to focus on the content, what really matters, and get a plans of advantage for both sides. anna: amongst all of this, the brexit negotiations will take place, it seem. we spoke to the austrian chancellor who said $60 billion is going to be the bill the u.k. will have to play for brexit to which many tory skeptics say, show us the workings. what do you base this on? give us your analysis of what that means as an opening salvo rom the euro zone.

>> we've heard this figure up to 60 billion before. aisle not sure there's sound evidence to back it. there's it's a figure that's on the e.u. side. that will be part of the negotiations. the british side will say that's not the correct figure. part of the negotiation, we have to work out exactly what the appropriate amount is. >> should it be taken as an opening gambit to be bar gained with, to be brought down? >> since the european side hade said they're not prepared to negotiate until we notified article 50, i don't see how we can take it as a serious part of the negotiation at this point. but there will be a figure which covers our ongoing programs, the cons of pension payments for british european civil servants and things like that. anna: the e.u. government will assume there -- the u.k. government will assume there's something there >> i think they will accept that

there's a monetary portion but not to the extent suggested by the austrian official. anna: it's been been suggested that one bargaining chip the u.k. has is money to spend on projects in parts of injure. is that a good way to go around europe, trying to win friends give fluence people, to money? >> we should always try to win friends an influence people. that's diplomacy. we need to focus on our own interests. but one of the important things about brexit is when we leave the e.u., we want to find all the ways we can to have strong, positive relations with the countries of europe who are our close neighbors and allies. anna: you predict that is still possible? >> i hope it is, i think it's incredibly important not only for us but also for them. anna: thank you very much for your time and taking us through

your thoughts on trade. former head of the u.k. foreign office and diplomatic service. if you load p.v. go into your bloomberg, you can watch what we're doing, not just the live streaming but the extra feature, charts and functions we take you through. you can reach out to the show's producers directly using the link at the bottom of your screen. coming up on the program next, french aerospace equipment maker safran out with number this is morning, we talk to their chairman. then bank earnings, bank of irmente reports at 7:00 a.m. u.k. time. 15 minutes later, bank of irbledecrmple e.o. richie basher will speak to us live here on "daybreak." ♪

anna: welcome back. the time in new york is 1:46 in the morning. futures suggest they will be weaker at the start over in the city that never sleeps. right here in london people are up and ready for their friday. 6:47 in london, 7:47 in paris or berlin. let's get a business flash from juliette saly. juliette: saudi arabia has said oil giant saudi aramco is worth more than $2 billion. but other analysts suggest it's worth no more than half or maybe a fifth of that amount. hat means the king tom would earn less than 5% of its valuation if it sells as planned.

shareholders committed to 99.8% of its 13 billion euro offering. italy's biggest bank got funding for other a million new shares. it supplies the lender with a h funding pass part of turn around plan. vivendi forecasts less than analyst estimates. for this year, the media company, predicts a more than 5% increase in sales and said it will rise by about 25%. that would put it at about 905 million euro, compared to arch estimate of 968 million euro. high in a has appointed financial sector expert has the tissue as the new head of the

banking register. the appointment as chairman and party sec retear of the china banking regulatory commission was announced internally to cbrc staff earlier today. credit suisse may need to find new ways to serve client whosen $750 s muches a 750 -- as million at its u.k. facilities after brexit. losing access to european marks would enteenage 10% or more. banks have struggled to quantify brexit risks to their business because so many unnoneses surround britain's future relationship with the e.u. that's your bloomberg business flash. anna: french aerospace company safran announced earnings, announcing a dividend rise of 12.1%. the company's chairman responded

to a public campaign by the children's investment fund a shareholders, to block its 9.6 billion purchase of zodiac aerospace arguing the proposed teal is sound. ob joins us now. p.c.i. not happy with regard to the plans you have with zodiac. how much to they speak for the rest of your shareholders? how many soundings have you done -- have you done with shareholders and do they generally like what you're trying to do with zodiac? >> i believe they do and if you look at stock price sense the announcement, it's testimony to that view. what the board did last night in a letter we released was set the record straight on a couple of points. our track record in terms of our management of our portfolio is pretty good. we group together our security businesses which we grew, developed and integrated them

and made them a strategic choice to dispose of that business. that's currently in the process and we shall generate a healthy capital gain. first point. we're good at acquire, we're good at integrating and when we do decide to sell, we sell well. another example, when t.c.i. wrote to us in 2012 suggesting we should sell ingenico, if i'd listened to them we would have received $470 million. we did it in the following couple of years with good timing and got more, approximately $900 million. that's a difference of over $400 million. i would argue that the safran board and management are good stewards of shareholders' capital and that record shows it. anna: you set out your record there. if any commentators or shareholders wanted to suggest that perhaps the merger in 2005 was -- didn't go as well as it

could have done or the acquisitions in security in 2008 to 2011 did not prove successful you would dispute that, you would say the board has a strong record? >> i won't go back as farr as 2005. i wasn't around. but in terms of our record in terms of acquiring, integrating, and then making the right strategic call in terms of who is the best owner of a business in the case of security, the track record speaks for itself. anna: t.c.i. says this represents, quote, terrible return on investment for shareholders. what do you say to them specifically on that point? there's also a suggestion that family and core holders won't pay tax on gains whereas minorities will have to pay capital gains tax. is this a dispute you recognize? >> that is an issue which concerns zodiac shareholders.

as chairman of the board of safran, my duty is to safran shareholders. we consider and we have done very thorough analysis on the matter that zodiac is a sound business. 40% of the business, err systems business, has been largely at e margin of the current -- aero system business, has been current the margin of cabinet business. they have had growth pains but we're con vince vinced that given the quantity of their products there's a path over the next two to three years an that's what the management of zodiac have signaled, there is a path to return to the margins they enjoyed two othree years ago. the dom by nation -- the combination -- anna: you're clearly not happy with what t.c.i. said, are you most unhappy about the objections they raised or the

tone they've gip to the dispute? >> i don't think it's a matter of being unhappy or otherwise. the board's response was based on sound facts. it's a duty of the board to be a good steward of shareholders' capital. we have a fundamental disagreement with the board with the views which t.c.i. articulate. they believe we should concentrate excuse live i -- exclusively, virtually, on the aerospace compulsion business but we don't want to be a one trick pony that would increase our dependence on one business, however great that business is. we have a very successful aerospace equipment business, landing gear, brakes, and zodiac will grow that business. and that is exactly what our major players in aerospace are doing and have done, take u.t.c. who acquired goodrich. as a strategy, the long-term strategy, which industrial

strategy with safran's board is implementing under the stewardship of management, is a long-term strategy which will create value for shareholders and we do not accept the short-term logic which would amount to milking the business, taking cash out and ultimately increasing our dependence on one business, however great that business is. that's the fundamental disagreement between the board's point of view and the t.c.i. point of view. anna: do you feel the deal could come unstock as a result of the objections from t.c.i.? they say they represent their own 4% but also a further 10% of your share holding. >> that's for them to speak to, not me. anna: ok. can i ask you how involved has the french state been in this deal, giving it a blessing of some kind? we see potential political change in france.

>> i think there's great continuity in both defense and aerospace industrial policy by the french government in all -- of all shades. the french state owns 14% of safran, down from 38% just a few years ago. the state's behavior as a shareholder is impeccable in terms of government and indeed in the case of the zodiac deal, they had -- they were fwiven the same information as the rest of our board. no more, and no less. but their behavior once again in terms of governance is impeccable. anna: thank you very much for your time this morning. safran's chairman of the board joining us there exclusively there from paris on the subject of their attempts to get hold of zodiac. that conversation will run in paris. up next we talk about the banking sector once again. we have had plenty of numbers from that sector already, we'll get numbers from rbs at the top

of the next hour. how is that business performing in the u.k. and how is the shrinking of the business going under the management team in place there? we'll talk to the c.f.o. in a few minutes. ♪

♪ anna: will britain's biggest taxpayer owner bank refinance now, i speak to the cfo. me global financial firms with national front aides about the french far right for a euro exit. and the brexit battle. after austria's chancellor tells us, the u.k. has a 60 -- 60 billion euro bill to settle. ♪ a warm welcome to bloomberg: daybreak europe.

i am anna edwards. we are waiting for a host of earnings report to come through. waiting for rbs numbers, britain's largest taxpayer owned bank waiting for the numbers to come through from that bank. also waiting for iag. this is britain's second-biggest airline group. and pearson also expected to report. let's look at futures. looks a little sluggish at the start of the trading day. the asianned in session, a fifth weekly gain for asian shares, but the asian specific down towards the close of asian trading. we are expected to be flat to negative at the start of european equity trading day. a look at the risk radar and where we were overnight. the negative story around asia, one of the themes. in fact, we are just getting those numbers through from rbs. let's have a look at those. the rbs full-year revenue seems

to have beat estimates. we have rbs four your revenue, 12.4 billion against an estimate of 12 billion. estimates come in at 2.21 billion. a host of numbers coming through. operating profits, 3.60 7 billion against an estimate of 3.2 billion. that does seem to be ahead of estimates for the full year, operating profit. if we look at the fourth 4.06er, q4 operating loss, billion. those are some of the head numbers coming through on rbs this morning. profit,-year adjusted against an estimate of 3.1 billion. let's get to the cfo. manus cranny sat down with you and stevenson. stevenson.

ewen: we have been quite open that we have another tough year ahead of us for 2017, provided we can get your issues, u.s. rbs.ly we think we will be back to profits by 2018. manus: which draws me to the question, will you settle? in the first half of the year, have you any visibility for the market? we continue to cooperate and we are hopeful we can get debt-free this year. manus: the other aspect of the numbers, additional cost cuts mapped out over the next couple additional 2-- an billion pounds. where will that come from? ewen: if you look across franchise, we have taken 3

billion pounds out the last three years, including another billion for the last year. we announced today we are taking another 2 billion out today and another 50 this year. that will be broadly spread, but we have a very inefficient office infrastructure. say, how can we simplify, delivering better outcomes for customers and better cost outcomes. manus: will that include outsourcing? ewen: probably not, it means making our profits more efficient. manus: last week, the market rejoiced, rallied and you are not going to have to sell, but you are going to have to set up this fund. is it a done deal with the eu? there is no way this potential deal can be undone? ewen: as we saw with last week's it is clearly up

for the european commission and treasury to talk about the proposal and see. we think it is a good outcome for williams. it delivers a better outcome for competition, better for williams and glenn customers and employees. do you say to the market who say this is a puranas moment. it could cost you in terms of businesses that you may lose over the medium term. to theu want to say market trying to understand this? ewen: we have got a clear position to improve competition out of the williams england. -- williams and glenn. withink working hard treasury to develop that theosal, we would welcome

european commission. u.k., in terms of the am interested in the net lending, i am looking at 20 million pounds, how strong is it? what have you seen at the front end of his this lending, small and medium-term business lending over the past few months? ewen: what we have seen in our business is robust. 10% volume growth last year in u.s. -- u.k. business banking. we continue to see very good activity on the remortgaging side. we are beginning to see signs of a slowdown, we are the biggest lender to the commercial sector in the u.k.. you can see a gradual slowdown consistent with the slowdown of the u.k. economy. manus: the one reason that holds a lot of people back from they don't think

they have the disability on the dividend. we talked about profits. where are we with visibility? you said i think we will make profit in 2018, settle our rbs -- dividend, can you assure the market that your operation can clear a profit? ewen: we have things to solve before we can get back to talking about paying dividends. we have talked about rbs and williams and glenn. we have got to make profits. today that we are confident about making profits in 2018, it is a very big part of getting there. we are confident we will be back on a path of paying dividends. manus: finally, the bane of most bankers life, where are we on the latest numbers? am i correct to assume we are seeing the final moments of ppi

doggedly hitting rbs? ewen: we took another 200 .illion pounds to provisions i think that reflects a conservative assumption about how long it may take until we sca, buten out of the i think we are getting out of provisioning now. rbs. that was the cfo of also bank earnings, we've got that. good morning to you. profits expected in 2018. some 10 years after the financial crisis. how did obvious do this time around? onif we look at the results an annual basis, the ninth annual loss in a row. they made a 3 billion underlying profit, but that was wiped out i 10 billion in exceptional items.

took more ppiey charges in the last quarter and have to take another charge as well as for the nondisclosure of the williams and glenn branches. anna: just the conduct charges, 5.9 billion pounds. isphen: this is a bank that still restructuring. it is nice that they think they 10 get to a profit after years of losses, but that remains to be seen. consumer spending, no one knows what structure rbs will look like. they have identified another 2 billion of costs they want to take out in the next four years. anna: you get some interesting maneuvers. story,liams and glenn they were going to sell profit to me competition rules from the eu and now they are going to do something different. that the solution seems to involve creating competition to their own business. stephen: the plan came out a

couple of weeks ago and it will be interesting to see what form that takes. transfer some to of their customers to new challenger banks coming through? they spent 1.5 billion pounds trying to create a new computer system to spin off williams and glenn. them to a 7 billion loss for this year. we should try to look for areas the management team are improving, their capital came in slightly better than expected. the do have a buffer sufficient to pay a dividend. they have exceptional items out of the way. anna: 13.4% and we are talking about the path to paying dividends. the cfo telling manus they are confident about being on a path to paying dividends. let's go to bank of ireland. just a few minutes ago. a lot of focus on the dividend and whether they would pay one or not. comments we are getting on the

dividend -- the first dividend payment is expected in 2018. before 2017. they are going to return to paying one. stephen: they were in a similar situation to rbs. one of the national champion lenders, hamstrung by what they did before the crisis. provide said, we will cups -- some dividends. but until it is paid, you can't take it for granted. on the road to recovery, not there. anna: we will speak to bank of ireland's ceo. thank you for joining us. 7:11 here in london. europe's second-largest airline has reported numbers this morning. billiong profits 2.50 4

2.545 4 billion -- billion. this is the owner of british airways, they cut their guidance two times last year as they were reining in spending and slowed capacity after the brexit vote. that led to questions as to much -- how much cash they would return to shareholders. they do say they will carry out a 500 million euros stock buyback. here are some highlights of your day ahead and beyond. sales out of the united states at 3:00 p.m. u.k. time. get to enjoy those and tomorrow, warren buffett is said to release the company's annual report to shareholders. up next, they give ireland

released earnings. we speak to the cfo next. this is bloomberg. ♪

♪ welcome back. this is "bloomberg daybreak: europe." we see the pound slightly stable against the dollar. it is 7:16 in london. keep an eye on the bond markets right now. we have in just the last few minutes seen some interesting moves come through on the two year yields in germany. touching an all-time low. and nice chart illustrating a very long-term story around the two year. highs, 8%the 1991 down to our -0.94 is where we trade on the german two year. let's get the business flash. juliette: thank you.

giantarabia has said oil saudi aramco is worth more than $2 trillion. the executives, analysts and investors have told bloomberg their analysis suggests it is worth no more than half and may be as little as 1/5 of that amount. us means the kingdom would earn a fraction of the 100 and dollars implied in its valuation if it sells 5% in 2018 as planned. and aramco person said it doesn't comment on rumor or speculation. -- saidt has asked shareholders have committed to part of its 13 billion offering. it secured pledges to buy 1.6 billion new shares and will seek buyers for the rest of the shares for february 27 to march 3. it supplies the lender with fresh funding to the ceos turnaround plan. 2017di has forecast earnings below analyst estimates

as revenues slump and losses widen. this year, the media company, run by vincent lori predicted in more than 5% increase in sales and said there would be a 25% rise. that would put the measure at about cash ledger at about 9 million -- 900 million euros. china has appointed a financial oftor expert as the new head the nation's banking regulator. according to people familiar with the matter, he will replace the current retiree. internally toed staff earlier today. credit suisse may need to find new ways to serve clients who generate as much as $750 million of revenue in u.k. subsidiaries

in the event of a hard exit. a warning that losing access to loseean markets would units, which have revenue base up to $5 million. its have struggled to quantify risk because so many unknowns surround britain's future relationship with the eu. that is the bloomberg business flash. that's checking on markets across the asia pac region. we have seen the shanghai index close higher by 1/10 of 1%. the red for most of the session. still seeing weakness coming through from hong kong today. reportf those properties well. remember, an index that has a inr the risk of the region 2017. rounding out earnings in downalia, the 200 closed less than 1%.

you had weakness coming through in japan as well, although interestingly, toshiba got a good bid, up by over 4%. that stock gained about 30% over the course of this week. it is a company that has lost about 50% of its value in the last couple of months. the korean won and outperform in the region. still getting a lot of traction , in relationollar to how we are seeing markets react to the trump administration. that is the fourth consecutive day of gains for the korean won and anna, even though we saw weakness in asian markets, they are on track for a weekly gain. anna: thank you very much, julian solly with the latest in hong kong. bank of ireland just reporting earnings this hour. the lender says it expects to

pay a dividend for the fiscal year 2017. on the phone from dublin is the ceo. great to have you on the program again. you said this morning that all trading divisions are profitable. is it safe to say that the crisis is over for the bank of ireland? >> i think we are very much moving to a much more normal basis on the economy in ireland, is growing. we expected to grow 3.4% next year. in largerticipating market shares in ireland and are benefiting from that. we're the largest lender in our economy last year and expect that to continue. on the subject of dividend, you make clear your plans for the timing of the read -- introduction of the dividend. richie: i think the main thing that was that our

defined-benefit pension schemes, we were impacted by bond yields and particularly, the volatility in the bond yields in the first three quarters of last year. the issue was probably very much resolved in the last quarter, that we do want to see some further stability, which we expect. what we want to do when we start paying dividends is make sure that for our shareholders, the dividends are predictable, sustainable and progressive. anna: sustainable and progressive, that means an increasing share of profits? richie: yes, we would be normalize at a payout ratio about 50%. anna: ok, let me turn to the u.k. part of your business. about half the more just -- mortgage is in the u.k.. how much is brexit impacting your business? richie: the impact for us has been the translation of our u.k. and the translation

impact on the capital we hold against our u.k. businesses. but in our irish businesses and u.k. businesses, haven't seen any deterioration, credit colicky -- quality. our u.k. businesses are performing well. in great britain, the businesses are really about working with our two partners. the post office and the automobile association. the products we are putting out are going well. a watching brief on it, but we haven't seen any material impact as of yet. anna: you have high hopes for the financial services sector question mark the benefits at the expense of london over the effects of brexit? richie: we have to look at the scale of our infrastructure here. i think we will benefit and we -- are already starting to see insurance companies, lawyers coming over here. i think we will benefit, but we

are not anticipating it will be transformational. i think we will see some benefits, yes. doa: bank of ireland didn't all that well perhaps in the eba stress test late late. what are your plans there for the bank capital levels? richie: we think a sustainable capital is around where we are at the moment. 12%target capital is around and i think one of the features that hit banks like us in the stress test is obviously the level of nonperforming loans that we had at the time the stress tests were done, based on december 2015 balance sheet. since then, we have brought nonperforming loans down by another 34%. we are making strong progress on that in the restructures we have are working. that is starting to reflect in provision releases, as well. anna: how difficult is it to build the business with interest rates as low as they are. you talked about the strength of

the irish growth story. should ecb move to a higher rate environment at some point soon? richie: i don't think my opinion would matter much. us, lowobviously for interest rates are a problem but we are seeing expansion. pointsgin of 219 basis last year, it has moved to 227 basis points. heart of that is a mix of new lending, that we also have legacy products which we are tracking at an ecb rate. we see gradual improvement from that. thingsou've talked about that are not worrying about you, the irish growth story, little impact from the brexit story and the u.k.. richie, what does worry you? are you worried about other parts of the u.k. economy, anything donald trump might do? around globalization? what are your worries question mark richie: i think we are

looking at the irish economy, the big thing about the economy here is, expansion is happening in all of the regions and across sectors. political risk is something -- we are a 230-year-old bank, we have had to list -- live with political risk many times. the way to do it is to have a sustainable business. with versification. -- diversification. continental businesses, we keep our capital strong and our liquid he's strong. -- liquidity's strong. anna: i hate to ask this question, but you have been in the job eight years, happy to stay? richie: i am enjoying my job. anna: excellent, that's all we can hope for, all of us. richie, thank you for joining us. the bank of ireland ceo joining us from the phone in dublin. that is it for "daybreak europe." the european open is up next.

bundesbank will join surveillance. a lot to look forward to on bloomberg television. this is bloomberg. ♪

i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business.

♪ markets,e to bloomberg the european open where we bring you the first trade of the day. i am anna edwards. rbs sees its ninth straight annual loss, but the cfo tells bloomberg he sees a return to profit next year. >> provided we can get through issues, particularly u.s. rbs, we think we will be firmly back making profits in 2018. mark: explaining brexit. we need depends team for answers