FT : Édouard Carmignac says markets will keep French far right on ‘tight leash’

Édouard Carmignac says markets will keep French far right on ‘tight leash’
Fund manager expects political gridlock and market discipline to limit ‘meaningfully’ what Rassemblement National can do

Financial markets will keep France’s far-right Rassemblement National “on a very tight leash” if the party wins upcoming parliamentary elections, limiting its scope for a big spending push, one of France’s best-known fund managers has said.

Édouard Carmignac, chair and chief investment officer of the eponymous asset manager he founded 35 years ago, said he expected political gridlock and discipline imposed by markets to “limit meaningfully the potential damage the RN can do by overspending”.

Emmanuel Macron’s decision to call a snap vote following a heavy defeat in European elections earlier this month sparked turmoil in markets as investors reacted to political uncertainty. Polls have shown the far right and a new leftwing alliance called the Nouveau Front Populaire (NFP) were running in first and second place ahead of the two-round vote, with both promising a break with the business-friendly stance of Macron.

Spreads on French government debt relative to Germany’s — a key measure of political risk — had their sharpest rise since the Eurozone debt crisis more than a decade ago.

But Carmignac said the market reaction demonstrated the RN’s lack of room for extra borrowing, with public debt at around 110 per cent of GDP. “You saw what happened to the spreads . . . the markets will be keeping the RN on a very tight leash,” he told the FT.

The 76-year-old’s comments are the latest signs that France’s business and financial elite is hoping that populists on the right and left will prove to be less radical once in office. French executives have been privately courting the RN, which has not yet issued a complete economic programme but said it wants to cut value added tax on energy and petrol and potentially lower the retirement age.

Meanwhile, Stéphane Boujnah, the French head of Europe’s biggest stock exchange, this week appealed for business leaders to “keep calm” about the election.

Carmignac said that the likelihood of Macron having to share power with a government formed by rival parties — known as cohabitation — would lead to “a stalemate situation” in French politics.

“It’s going to be an interesting game of the cat and mouse,” he said. “Policy-wise, pretty indecisive, kind of messy, not much being done, and not much happening.”

Carmignac expects the RN to fail to secure an outright parliamentary majority, further limiting the party’s ability to pursue policies that upend markets. Party chief Jordan Bardella, who would be prime minister if the RN did manage to win 289 of the 577 seat, has said he would not accept the job otherwise since he would not be able to apply its programme and would be vulnerable to a no-confidence vote.

“They’ll be tempted to show that they are a reliable governmental party trying to make sure that they win the elections that really count, which is the presidential elections in three years,” said Carmignac.

The fund manager also predicted that the unity of the leftwing NFP may not last long beyond the election as its far-left component “do what they can to create havoc” and “moderate socialists realise that they can actually sail on their own”. The NFP includes the far-left party known as La France Insoumise (LFI), centre-left Socialists, Greens and Communists.

Despite being relatively sanguine about the fallout from the election, Carmignac worries that legislative gridlock in France — along with a weakened Germany and the prospect of Donald Trump’s re-election as US president — will leave Europe struggling to present a “decisive front against Russia in Ukraine, and against the Chinese”.

Carmignac made his name by taking a contrarian bet in 2008 after identifying the fragility of the US banking sector and positioning his fund defensively, allowing it to avoid losses when markets crashed and its benchmark index lost 12 percentage points.

In recent years, Paris-based Carmignac’s assets have dropped from €57bn at their peak in 2017 to more than €30bn. Its founder stepped back from day-to-day fund management several years ago.

FT : Russian oligarch shifted ownership of Sardinia resort day after Ukraine inv

Russian oligarch shifted ownership of Sardinia resort day after Ukraine invasion
Musa Bazhaev, who was placed on western sanctions lists, transferred luxury Forte Village to relative in February 2022

A Russian oligarch transferred the ownership of his Italian luxury resort a day after Moscow’s full-scale invasion of Ukraine in 2022, in a move that preceded western sanctions.

Ownership of Sardinia’s Forte Village Resort, named after its founder and influential hotelier Lord Charles Forte, shifted from Musa Bazhaev, a Russian oligarch with interests spanning energy, commodities and telecommunications, to one of his relatives on February 25, 2022, Cypriot company records show. 

Bazhaev was hit with sanctions by the EU and the UK less than two months later.

Ownership of the resort, whose parent company owns various assets in Sardinia totalling about €700mn, was then transferred to Kazakh businessman Shukhrat Ibragimov in early 2023, according to the records. 

Bazhaev, who was born in Chechnya and made his fortune in the oil industry before turning to precious metals, remains on the EU sanctions list.


Brussels has been attempting to close loopholes in its sanctions regime against Russia as it seeks to limit the Kremlin’s funding for its war in Ukraine. However, the effectiveness of the rules have been called into question as companies and Russian oligarchs have found multiple ways to circumvent the rules, including using legal structures in European jurisdictions.

Built in the 1970s, the Forte Village, is located in Pula on the southern coast of the island, and is famous for its pristine beaches and clear waters. A favourite among celebrities and jet-setters, the resort boasts eight luxury hotels and 13 villas, with a total of 770 rooms and 33 suites, as well as a private white sand beach, a multitude of restaurants, pools and a spa.

Half-board prices for the family of two adults and two children during August can cost around €50,000 for a week.

The oligarch and his nephew Deni Bazhaev acquired the Forte Village in 2014 for a reported €180mn through a complex web of Cypriot, Luxembourg and Italian companies.

Before becoming the latest owner of the Forte Village, Ibragimov and his family, including his late father Alijan, a co-founder of Eurasian Natural Resources Corporation, were co-investors with Bazhaev and Deni in Kyrgyzstan’s second largest gold mine, Jeruy.

The Jeruy mine was inaugurated in 2021 by the country’s President Sadyr Japarov and Russian leader Putin, according to media reports. 

“[This is] one of the largest joint projects [that] has been successfully implemented. We are, indeed, talking about record volumes of Russian investments in Kyrgyzstan, which will amount to about $600mn,” Putin was quoted as saying during the event.

In December 2022, two months before the Forte Village ownership transfer to Ibragimov, his 40 per cent stake in the gold mine was transferred to a Russian company owned by the Bazhaevs, which became its sole shareholder, according to Cypriot company records. 

Bazhaev is president of the JSC Alliance Group, which according to the EU “supports a number of significant companies in the Russian gas, oil, and telecommunications sectors”. He is also chair of Russian Platinum which Brussels said provides a “substantial source of revenue to the Government of the Russian Federation”.

Forte Village Resort is ultimately owned by Cyprus based Retivia Investments, now owned by Ibragimov.

The resort’s immediate owner is a Sardinian-based company called Progetto Esmeralda, which owns other assets on the island including the Palazzo Doglio hotel in the city of Cagliari, according to the resort’s website. Progetto Esmeralda’s latest published accounts shows revenues of €66mn in 2022. It also showed a €350mn credit facility with Russia’s VTB Bank.  

Cypriot records show that Progetto Esmeralda is controlled by Quarmine Limited, a Cypriot company, which in turn is owned by Retivia Investments Limited.

Alongside the Cypriot records of the asset transfers, Progetto Esmeralda’s accounts also show that “in [February 2023] 100 per cent of the shares of parent company Quarmine passed to the new beneficial owner of Belgian nationality who is resident in the Principality of Monaco”. 

Ibragimov, holds a Belgian passport and is a resident of Monaco.

Forte Village chief executive Lorenzo Giannuzzi said: “Progetto Esmeralda, as management company of the resort, plays no active role in change of control transactions [and] the company has always immediately informed public authorities, as well as financial and commercial institutions of any change of control, including the ultimate beneficial owner, as soon as it had knowledge thereof . . . This occurred also in connection with the latest corporate control transfer.”

Giannuzzi added that “during the last two decades [the resort] has changed ownership structure at least seven times . . . nonetheless, the continuity of the wholly Italian management in charge of the business have never changed”.

Bazhaev and Ibragimov did not respond to requests for comment.

WSJ : Biden Crashed in First Clash With Trump—and Other Takeaways From the Debat

Biden Crashed in First Clash With Trump—and Other Takeaways From the Debate
Biden appeared unsteady while Trump mostly kept his composure

President Biden, battling a hoarse voice and sometimes stammering, delivered an unsteady performance Thursday evening in his first debate against former President Donald Trump.

It was the sort of showing Democrats feared the incumbent, who polls show faces greater concerns about his age and vitality than Trump, would deliver. It lacked the energy and combativeness Biden mustered for his State of the Union speech earlier this year, an appearance that gave Democrats some optimism about his campaign vigor.

The challenger mostly kept his composure, something he isn’t known for. The much-talked-about mute buttons—put in place because Trump so frequently talked over Biden when they debated in 2020—didn’t seem to come into play often.

In an election season where many Americans wish they had other options, the face-off allowed the two rivals to highlight the vulnerabilities of their opponent to the slim set of voters who remain undecided.

Their high-stakes meeting in Atlanta, hosted by CNN and moderated by the network’s Jake Tapper and Dana Bash, delivered some firsts. It was the first modern debate between a sitting and former president, the first featuring a felon, and the first held in a studio with no live audience since the Kennedy-Nixon debate in 1960.

Those factors influenced the dynamics of a 90-minute show that brimmed with insults and policy contrasts, a face-off held much earlier in an election year than is typical. The race is narrowly divided nationally, but Trump leads in several battleground states.

“Biden experienced the worst opening 15 minutes of a presidential debate ever,” said Aaron Kall, the University of Michigan’s director of debate.

Both old, but one looked older
The two men are just a few years apart in age, but Biden looked older in his presentation during an exhausting evening in front of what was expected to be a sizable television audience.

Biden also had his share of gaffes. As he answered a question about the national debt and started talking about health policy, he stammered and appeared to lose his train of thought at the end of his answer.

“Making sure that we’re able to make every single solitary person eligible for what I’ve been able to do with the Covid. Excuse me, with dealing with everything we have to do with,” Biden said. “Look, if we finally beat Medicare.”

Trump responded: “Well he’s right. He did beat Medicare. He beat it to death.”

Trump and his allies in the days leading up to the debate had put forward unfounded accusations that Biden, 81, would arrive on stage with performance-enhancing chemicals in his system. It was an allegation Trump, 78, also made before he debated Biden in 2020.

Age is a top-of-mind issue for many voters, and the current president is the oldest person to serve in the office. Trump, if elected, would be poised to claim that record near the end of a second term.

But the challenger, unlike the incumbent, remained robust in his presentation throughout. He also sought to highlight Biden’s stammers, following a meandering answer to a question about immigration.

“I really don’t know what he said at the end of that sentence,” Trump said. “I don’t think he knows what he said either.”

Asked about the issue of age, Biden had a line at the ready: “This guy is three years younger and a lot less competent,” he said.

Trump responded to a question about his age by saying he would like Biden to take a cognitive test and release the results, triggering a chuckle from the president.

Sharpest attacks
If there was any uncertainty, the debate made clear neither man has any respect for the other, despite their joint status in an elite club of living past and present White House occupants. As they took the stage, neither man moved to shake hands as has often been customary.

Biden challenged Trump over reports that he has called Americans who died in war “losers” and “suckers.” Referencing his son, the late Beau Biden, an army officer, Biden said: “My son was not a loser. He’s not a sucker. You’re the sucker. You’re the loser.”

Trump again asserted he had never made the comments. Trump’s chief of staff at the time has confirmed he used those derogatory words.

The former president also suggested Biden isn’t fit for office. “He’s not equipped to be president,” Trump said. “His presidency, without question, the worst president, the worst presidency, in the history of our country. We shouldn’t be having a debate about it. There’s nothing to debate.”

Biden sought to highlight Trump’s past and potential future legal issues and suggested at one point that the thrice-married man has the “morals of an alley cat.”

Soft landing or surging prices
The economy is typically listed by the largest share of voters when they are asked by pollsters what their top issues are in this presidential race. Trump talked down the current environment, while Biden argued things are looking up, even though more work remains to be done.

Trump sought to hang the issue of inflation, which has slowed considerably but remains especially painful for lower and middle-income Americans, directly on Biden. “Inflation is killing our country,” he said.

The president pointed to low unemployment and a robust stock market. Economists are no longer talking much about the risk of a recession, something that seemed much more likely earlier in Biden’s term as the Federal Reserve raised interest rates to cool inflation.

“Working-class people are still in trouble,” Biden acknowledged. “We’re working to bring down the price at the kitchen table, and that’s what we’re going to get done.”

The president also repeatedly sought to remind viewers of some of the bad things that played out during Trump’s tenure.

“We had an economy that was in free fall,” he said. “The pandemic was so badly handled. Many people were dying. All he said was, ‘It’s not that serious. Just inject a little bleach in your arm.’”

Trump at a Covid briefing in 2020 pondered whether treatments involving light or disinfectants should be studied.

Abortion
Trump continued his effort to stake out a Republican abortion position after the Supreme Court ruling overturning Roe v. Wade galvanized voters in support of abortion access.

First he praised the justices he put on the court for the ruling, repeating a baseless claim that “every legal scholar” wanted Roe v. Wade overruled. But then he stressed that he supports exemptions to any abortion law for rape, incest and the life of the mother, arguing that while some don’t agree, “you’ve got to get elected.”

Trump also appeared to commit to allowing the abortion pill to remain available across the United States. “The Supreme Court just approved the abortion pill. I agree with their decision to have done that. I will not block it,” Trump said.

Biden, who has made abortion rights a central plank of his campaign and has targeted Trump for appointing three justices to the Supreme Court that overturned Roe, seized on Trump’s statement that the issue should be left to the states, saying it was “a little like saying, ‘We’re going to turn civil rights back to the states.’”

The ruling has unfurled a patchwork of laws across the country, and created uncertainty over related issues, including the future availability of abortion pills from mail-order pharmacies. The debate came shortly after the Supreme Court said it would allow emergency abortions in Idaho without deciding key issues in the case.

No rapport
During the commercial break, Biden and Trump remained at their lecterns and looked ahead as photographers took photos, according to a White House pool report. The candidates didn’t say anything or make eye contact with each other.

Toward the end of the debate the two began bickering about golf, as older men sometimes do. “He can’t hit a ball 50 yards,” Trump said of Biden. That prompted a retort from Biden: “I’m happy to play golf with you, if you carry your own bag.”

FT : IMF warns US must ‘urgently’ address debt burden

IMF warns US must ‘urgently’ address debt burden
Fund says rising deficits create a growing risk to the domestic and global economy

The IMF has urged the US to “urgently” address its mounting fiscal burden, as it took aim at the tax plans of both presidential candidates just hours before their first electoral debate.

The fund said projects from its annual Article IV health check of the US economy showed the debt-to-GDP ratio hitting 140 per cent by 2032 — much higher than its current level of 120.7 per cent.

The surge, off the back of successive projected fiscal deficits in the coming years, would leave the debt burden in excess of previous highs in the aftermath of the second world war.

“Such high deficits and debt create a growing risk to the US and global economy, potentially feeding into higher fiscal financing costs and a growing risk to the smooth rollover of maturing obligations,” the fund said in its Article IV consultation. “These chronic fiscal deficits represent a significant and persistent policy misalignment that needs to be urgently addressed.”

The IMF’s warnings come after the Congressional Budget Office, the US’s official fiscal watchdog, predicted earlier this month that the deficit was likely to hit $1.9tn this year, or about 7 per cent of GDP, up from a February estimate of $1.5tn.

Economists and investors have grown increasingly concerned that neither US President Joe Biden nor his Republican rival Donald Trump are prepared to do enough to bring rampant spending under control. The two are set to meet in Atlanta on Thursday evening for the first debate of the current election cycle.

The fund said both candidates needed to “carefully consider” a range of tax rises — including on incomes for those earning under $400,000 a year, who Biden has pledged will not pay more tax should he secure a second term in the White House.

Trump’s tax plans, which include making permanent a series of cuts he introduced in 2017, are expected to add between $4tn and $5tn to US deficits over the coming decade.

IMF managing director Kristalina Georgieva said that strong growth in the US meant that the country had the space to address its fiscal burden.

“There is a temptation to postpone decisions related to debt and deficits for the future, rather than pay them when the sun is shining and conditions are good,” she said at a press conference on Thursday, adding that it was the role of the fund to be the “voice of reason” on the topic.

While Georgieva said on Thursday the fund did not support the Biden administration’s tariffs on Chinese green tech products, or Trump’s plans to impose a blanket 10 per cent levy on all imports, she acknowledged that there was a political case for such actions.

“Decades of globalisation has led to overall positive outcomes,” Georgieva told journalists. “But there have been negative consequences for some communities, including here in the United States, with jobs disappearing as a result of cheap imports from other countries.”

She added that the pushback to free trade from people in the US, and in Europe, indicated a “genuine concern” that “has to be taken seriously”.

FT : EU leaders endorse second term for Ursula von der Leyen as bloc’s top offic

EU leaders endorse second term for Ursula von der Leyen as bloc’s top official
But European Commission president fails to secure the backing of Italy

EU leaders have endorsed a second five-year term for Ursula von der Leyen as European Commission president, although she failed to win the backing of Italy, the bloc’s third-largest member state.

A majority of leaders at a Brussels summit on Thursday night agreed to von der Leyen remaining in post, alongside choosing former Portuguese Prime Minister António Costa as the next EU Council president, who chairs meetings of the 27 heads of government, and Estonian Prime Minister Kaja Kallas as the bloc’s next chief diplomat.

Italian Prime Minister Giorgia Meloni abstained, rather than supporting von der Leyen. Hungarian Premier Viktor Orbán voted against.

Meloni’s stance came after she voiced her discontent that the three pivotal appointments had been proposed in a private gathering of six EU leaders last week that excluded her and her hard-right political grouping, which performed strongly in this month’s European parliament elections.

She said the appointment process was “wrong in method and substance”.

“I decided not to support it out of respect for the citizens and the indications that came from them in the elections,” Meloni added. “We continue to work to finally give Italy the weight it deserves in Europe.”

Von der Leyen told reporters after the vote that she was “very grateful” for the endorsement. “Indeed, Giorgia Meloni abstained. I think it is very important to work well . . . with the prime minister, with Italy, like with other member states. And this is a principle for me which I follow all the time.”

Dutch Prime Minister Mark Rutte said Meloni “clearly had her own views on how this whole process should have been conducted. And she made her views known . . . with total clarity, but the close personal ties we all have remain.”

Supported by Europe’s largest centrist parties, von der Leyen had been expected to remain commission president, as EU capitals preferred continuity over change given the turmoil buffeting the continent due to the war in Ukraine, tensions with China and political uncertainty in some of the bloc’s key member states.

“Kaja, Ursula and Antonio accepted,” said Polish Prime Minister Donald Tusk. “Satisfaction. For Poland and for Europe.”

German Chancellor Olaf Scholz said the agreement on the EU appointments was “an important signal. With them we can make good and quick progress.”

Von der Leyen must now win a majority in the European parliament to secure her second term as head of the commission. A vote is scheduled to take place in the week of July 15.

A coalition of von der Leyen’s centre-right European People’s party, the Socialists and Democrats, and the liberal Renew Group have about 410 seats in the 720-strong chamber.

But because of potential defections in the secret ballot of MEPs, she could also need some votes from Meloni’s European Conservatives and Reformists group, which came third in the European parliament elections.

The Greens are also a possible source of support for von der Leyen, but are likely to demand strong commitments on the EU’s ambitious climate plans.

>>> US After Hours Summary: NKE -10.3%, ACCD -27.7%, KRUS -15% lower on earnings

After Hours Summary: NKE -10.3%, ACCD -27.7%, KRUS -15% lower on earnings/guidance; INFN +21.7% jumps as NOK will acquire INFN; PTGX +9.1% to join S&P SmallCap 600

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: None.

Companies trading higher in after hours in reaction to news: INFN +21.7% (NOK to acquire INFN), PTGX +9.1% (to join S&P SmallCap 600), ELYM +6.9% (closes its acquisition with Tenet Medicines; announces related $120 mln private placement), FLR +1.2% (awarded contract for Northvolt's lithium-ion battery factory), TNYA +1% (announces research leadership updates), LQDA +1% (stock offering by selling shareholders), DVAX +0.5% (initiates Phase 1/2 study of shingles vaccine program), GD +0.3% (awarded $323 mln U.S. Army contract modification), MRK +0.1% (CDC recommends pneumonia shot for adults 65+)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ACCD -27.7%, KRUS -15%, NKE -10.3%

Companies trading lower in after hours in reaction to news: FL -5.1% (in sympathy with weak Nike earnings), ONON -2.6% (in sympathy with weak Nike earnings), DHX -2.3% (ClearanceJobs named official partner of Dept of Labor's Employment Navigator and Partnership Program), CCCS -2.2% (30 mln share offering), SKX -2% (in sympathy with weak Nike earnings), TMO -2% (to expand facility in Kentucky), DKS -1.8% (in sympathy with weak Nike earnings), UAA -1.3% (in sympathy with weak Nike earnings), GXO -1.2% (signs deal with Agility Robotics), DECK -1.1% (in sympathy with weak Nike earnings), MMS -0.4% (awarded $87 mln task order by IRS), COIN -0.1% (COIN partners with Stripe to expand global adoption of crypto)

WSJ : NFL Ordered to Pay $4.7 Billion in Sunday Ticket Case

NFL Ordered to Pay $4.7 Billion in Sunday Ticket Case
A federal jury in California ruled that the league violated antitrust laws with its out-of-market broadcasts, a verdict that delivers a sweeping blow to the business model of America’s richest sport

A federal jury in California dealt a sweeping blow to the media rights model of America’s richest sport on Thursday, siding with plaintiffs in a class-action antitrust lawsuit against the NFL over its out-of-market broadcasts and awarding $4.7 billion of damages to consumers of the league’s “Sunday Ticket” telecast package.

The league said it was disappointed with the verdict and plans to appeal.

After a trial that included testimony from the likes of commissioner Roger Goodell and Dallas Cowboys owner Jerry Jones, the jury awarded damages of about $4.6 billion to residential subscribers and just under $100 million to commercial users, sums that will be tripled to more than $14 billion under antitrust law if the judgment is upheld.

The number represents nearly two-thirds of what the NFL pulls in annually, with significant implications for antitrust law in sports going forward.

“Justice has been done,” said Bill Carmody, the lead lawyer for the plaintiffs. “The jury spoke loud and clear to protect consumers.”

The NFL said in a statement that the league’s media distribution strategy was “by far the most fan-friendly distribution model in all of sports and entertainment. We will certainly contest this decision as we believe that the class-action claims in this case are baseless and without merit.”

The verdict is the latest twist in a saga that dates all the way back to 2015, when a San Francisco pub named the Mucky Duck filed a lawsuit that accused the NFL of violating antitrust law and harming consumers through the sale of “Sunday Ticket.” Others quickly followed and the action has been crawling through the legal system for nearly a decade.

For a league that earns more than $20 billion annually, the verdict poses an enormous threat given its potential to upend the NFL’s business model, in which media deals are the lion’s share of its income.

The case essentially pitted the NFL against its own fans. The plaintiffs argued that the way teams pool together and collectively sell their media rights with the Sunday Ticket package is anticompetitive because it forces consumers to pay hundreds of dollars for a product that also includes games they didn’t want, and whose price might be inflated.

On Sunday afternoons, CBS and Fox air games regionally, while out-of-market games are available for purchase as a package through Sunday Ticket. That means that Cowboys games air locally on television in Dallas, but Kansas City Chiefs fans who live in Texas have to subscribe to Sunday Ticket in order to watch Patrick Mahomes every weekend. The product was sold through DirecTV until last season when it became a YouTubeTV offering.

The NFL countered that it is one of the few leagues that airs most of its games—and all local ones—on broadcast television. On the stand last week, Goodell called Sunday Ticket a “supplemental package” for the most ardent fans and acknowledged there has been concern from CBS and Fox about it undercutting the value of their deals.

Jones testified that while the Cowboys would make more money if they could sell their own TV rights, owing to their popularity, such a dynamic would ultimately hurt the league overall.

WSJ : Biggest Banks Can Withstand Severe Downturn, $685 Billion in Losses, Fed S

Biggest Banks Can Withstand Severe Downturn, $685 Billion in Losses, Fed Says
Latest stress tests find banks remained above minimum capital requirements

WASHINGTON—Big U.S. banks passed their latest annual stress test, with the Federal Reserve finding they would be able to continue lending to households and businesses in a severe recession, even while suffering steeper losses than last year’s tests.

This year’s exercise measured the 31 biggest banks’ ability to maintain strong capital levels in a hypothetical recession marked by double-digit unemployment and a severe stock-market decline.

The banks would collectively lose nearly $685 billion in the Fed’s imaginary worst-case recession, the Fed said. That would be more than last year, but all the banks would still remain above their minimum capital requirements.

The banks were expected to lose more in this year’s test because they faced higher projected credit-card losses, riskier corporate loans and lower projected income, the Fed said.

The bank balance sheets are “somewhat riskier and expenses are higher,” Michael Barr, the Fed’s vice chairman for supervision, said in a statement.

“The goal of our test is to help to ensure that banks have enough capital to absorb losses in a highly stressful scenario,” he said. “This test shows that they do.”

The annual exercise aims to project confidence about the health of the banking system. If banks do poorly, they could face automatic restrictions on shareholder distributions and discretionary bonus payments. None of the banks face those limits after this round of tests.

Wednesday’s results could give banks and their lobbyists more ammunition to push back against large increases in capital requirements, which the Fed and other regulators have floated. Supporters of the plan say it will improve the overall resilience of the financial system after a spate of regional bank failures last year.

This year’s stress test included a severe global recession in which the U.S. unemployment rate jumps to 10%, housing prices crash by 36% and commercial real-estate prices drop by 40%.

Another wrinkle in this year’s tests, an “exploratory analysis” of the system suggests banks could withstand a repeat of the deposit crisis of 2023 or a potential catastrophe in hedge funds. The biggest banks could in the aggregate lose up to $85 billion if five big hedge funds failed, the Fed found.

Those scenarios have no impact on bank capital requirements.

The stress tests were introduced following the 2008-09 financial crisis, when the U.S. government bailed out some of the largest financial institutions. The results of the first tests helped restore investor confidence in the banking system.

Over the years, the annual stress tests have lost a lot of the stress they once had for big banks and are no longer as dreaded by bankers.

Daniel Tarullo, who oversaw bank regulation at the Fed from 2009 until 2017, said the tests have become more routine and predictable and questioned whether the Fed should continue to use them to set big banks’ minimum capital levels.

>>> Nokia to acquire Infinera (INFN) for $6.65/share or an enterprise value of $

Nokia to acquire Infinera (INFN) for $6.65/share or an enterprise value of $2.3 bln; deal financed from Nokia's cash on hand (3.73 +0.06)
  • Nokia (NOK) and Infinera (INFN) announce a definitive agreement under which Nokia will acquire Infinera in a transaction valuing the company at $6.65 per share or an enterprise value of US $2.3 billion to increase scale in Optical Networks and accelerate product roadmap.
    • The transaction represents a premium of 28% to Infinera's share price at the close of 26 June 2024 and a 37% premium to the trailing 180-day volume weighted average price (VWAP).
  • At least 70% of the consideration will be paid in cash and Infinera's shareholders can elect to receive up to 30% of the aggregate consideration in the form of Nokia ADSs.
  • Nokia's Board of Directors has committed to increase and accelerate Nokia's share buyback program to offset the dilution from the deal. This will be in addition to Nokia's on-going EUR 600 million buyback program.
  • The transaction aligns strongly with Nokia's strategy, as it is expected to strengthen the company's technology leadership in optical and increase exposure to webscale customers, the fastest growing segment of the market. Nokia believes the transaction has compelling financial and strategic merit. The combination with Infinera is projected to accelerate Nokia's journey to a double-digit operating margin in its Optical Networks business.
  • Nokia targets to achieve EUR 200 million of net comparable operating profit synergies by 2027. Nokia targets mid-single digit organic growth for the overall Network Infrastructure business and to improve its operating margin to mid-to-high teens level.
  • The transaction is expected to be accretive to Nokia's comparable EPS in the first year post close and to deliver over 10% comparable EPS accretion by 2027, with a return on invested capital (RoIC) comfortably above Nokia's weighted average cost of capital (WACC).
  • At or around the time of closing of the transaction Nokia will repurchase Infinera's outstanding convertible notes for an estimated total value of approximately US $760 million including estimated change of control costs which is already considered in the previously mentioned US $2.3 billion enterprise value.
  • The acquisition has been unanimously approved by the board of directors of both Nokia and Infinera. It is targeted to close during the first half of 2025, subject to approval by Infinera's shareholders, regulatory approvals including antitrust, CFIUS and other foreign direct investment approvals and other customary closing conditions.