Monday, May 18, 2009

>Precious metals trade sharply down; equities surge

Mumbai - Gold traded down in global market weighed by U.S. dollar strength and higher equity markets but traders and analysts said the metal could trend higher if the dollar weakens. Following the suite gold-silver futures traded lower on Multi Commodity Exchange Monday on selling pressure from higher levels and strong dollar. As of now precious metals are taking cues from the global market and traded lower on the domestic front.

The gold June futures traded down by Rs 201/10gm and silver May futures down by Rs 204/kg.

MCX most active gold June contract opened down by Rs 28 at Rs 14,719/10gm. The contract saw movement between Rs 14,501 and Rs 14,719/10gm. At 10.35 am IST, the contract traded down Rs 201 at Rs 14,546/10gm. Total volumes in June contract recorded 5376 lots.

MCX gold mini the most active June contract opened down by Rs 22 at Rs.14, 725/10gm. The contract saw movement between Rs. 14,542 and Rs. 14,725/10 gm. At 10.38 am IST, June contract traded down by Rs 197 at Rs. 14,550/10 gm. Total volumes in June contract recorded 6825 lots.

Benchmark silver July contract opened down by Rs 26 at Rs 22,491/kg. The contract fluctuated between Rs 22,265 and Rs 22,500/kg. At 10.39 am, IST, silver July contract traded down by Rs 204 at Rs 22,361/kg. Total volumes in July contract recorded 31925 lots.

MCX silver mini June futures opened up by Rs 29 at Rs. 22,695/kg. It fluctuated between Rs.22,299 and 22,695/kg. At 10.40 am mini silver June futures traded down by Rs 202 at Rs 22,364/kg. Total volumes in June contract recorded 4178 lots.

India gold futures dn 2.3% on strong INR

Singapore - India June MCX gold contract down 2.3% at INR14,408/10 grams due to sharp rise in INR following rally in local equity markets. "The weakness is likely to continue for the next one-two sessions because of the rupee," says Debjyoti Chatterjee of Admisi Commodities. Physical demand still weak, although some stockist buying will be seen at current levels, he adds; tips contract to fall further to INR14,360/10 grams level today.

Asia spot gold edges up, inflation concerns

Sydney - Spot gold nudged higher in Asia Monday, lacking specific news to drive prices but holding firm on long-term concerns about inflation.

At 0716 GMT, spot gold traded at USD931.65 a troy ounce, up 75 cents on the New York close.

Inflation as a future threat has been a focus for investors since the U.S. economy showed some signs of bottoming, even though inflation is unlikely to take off for some time.

"But people feel that if they don't get in on inflation now, they'll miss the boat. We expect long-term inflation to be a positive factor for gold," said a Sydney-based trader.

U.S. economic data on Friday showed again some evidence that the worst of the recession may be over. April consumer prices were unchanged and while industrial output still fell, it declined at a slower pace than in March.

On the charts, gold faces resistance at usd935/oz and usd965/oz, said Barclays Capital, adding that hopes gold could again break out to touch the March 2008 record high of usd1,032/oz looked premature.

"The previous consolidation phase lasted 16 months before breaking to new highs; the current range has been in place for 14 months, which gives further room for consolidation at higher levels before a meaningful breakout to all-time highs later in 2009," Barclays said.

Physical demand for gold continues to disappoint.

Turkey's gold jewelry exports fell 23.21% on the year to 4.983 metric tons in April.

That left gold exchange-traded funds as the only source of demand, with holdings in the SPDR Gold Trust fund, listed in New York, unchanged at 1,105.62 tons.

At 0733 GMT, spot silver traded at usd14.06/oz, up 11 cents. Platinum was up usd5.50 at usd1,106.50/oz and palladium unchanged at usd223.00/oz.

Gold futures on Tocom were down Y5 at Y2,860 a gram for the April 2010 benchmark contract, while platinum futures were down Y61 at Y3,410/gram.

Spot gold eases on stronger dollar, weak oil

London - Spot gold eased Monday as the dollar strengthened and oil prices declined.

Traders said the euro might give back some of its recent gains against the dollar this week, possibly dragging gold lower.

At 0843 GMT, spot gold was trading at $929.20 a troy ounce, down 0.16% on the day.

Spot silver was down 0.25% at $13.895/oz.

Spot platinum rose 0.55% to $1,106.50/oz and spot palladium was down 0.2% at $222/oz.

"We lost a little bit on profit-taking on fears that we can fall more with the weaker EUR/USD," said Commerzbank precious metals trader Michael Kempinski.

The EUR/USD looks like it will retrace lower in coming days, which could lead to gold testing a key support at $925/oz, Kempinski said.

A break below there could lead to a selloff, although a pickup in risk aversion may avert selling, he added. "We have to see if the safe-haven buying comes back into the market."

Traders said the market was relatively quiet and market participants were waiting for platinum-specialist Johnson Matthey's annual platinum and palladium report for 2008, due out later Monday.

"With platinum week this week, people will be focused on platinum and palladium," said a senior precious metals trader in London.

UBS analyst John Reade said the report should contain positive news, especially about Chinese demand and struggling mine production.

"[The] longer-term outlook looks strong and we see no reason why platinum will not trade sharply higher in coming years," Reade said in a report Friday.



Sensex: We said, "Follow-up support above 11936 can test 12050 ... Watch if it can sustain beyond 12050." Index not only gapped up above 11936, but also sustained strongly above 12050. Gaining a comfortable 300 points, it finished 2.5% higher. Banks and Cap. Goods gained over 3.5%. A/D ratio ended positive at 2:1.

The action formed a bullish Morning-Star-like pattern, indicating confidence of the bulls in approaching previous resistances near 12272. With corrective phase holding strongly above the gapup of 4th May, groundwork for a sharp rally above 12272 appears in place. Width of corrective phase, projected upwards, gives 12800+ levels.

To see full report: CALLS 180509


Key points
Market Outlook — Open with a gap up and trade positive
Positive — Election results, oil steady @ $56, funds buying

Market outlook

The Indian stock market looks set to surge on Monday on expectations the clear election victory of the ruling coalition would lead to a strong and stable government that would accelerate the pace of economic reform. The rupee is expected to strengthen past 49 per dollar. Bond yields are set to fall as the outcome should encourage foreign investors and sharply lower the risk of instability leading to a ratings downgrade. The circuit filter for the index will be calculated form the closing value of the index of the quarter. For the Sensex the closing value was 9708.

The Sensex has supports at 11900 and 11400 resistances at 13050 and 13760. The Nifty has supports at 3600 and 3550 and resistances at 3800 and 3950

Asian stocks were trading weak in the early session. However, the Indian markets will not follow Asian cues and will rally on domestic euphoria

US stocks were trading lower on Friday. For the day our markets will not follow US cues

Stocks in news: Unitech, Tata Motors, Piramal Life Sciences

To see full report: OPENING BELL 180509


Our Top five picks with a time frame of around three months are :

  • Suzlon Energy – Possible target of around Rs.120 or Rs.145. Support at Rs.50.

  • DCB – Possible target of around Rs.55-Rs.60. Support at Rs.21.

  • Bombay Dyeing – Possible target at Rs.345-Rs.400. Support at Rs.165.

  • IB Real Estate – Support at Rs.115. Double bottom reversal target at around Rs.260. Double bottom reversal gets completed when the scrip trades above Rs.172.

  • ABAN –Support at Rs.390. Last swing low at Rs.221. Technical target at Rs.1000-Rs.1100.
We have scanned the graphs of a number of companies to identify five tradable ideas with a time frame of around three months.

We have used the classic or traditional system of technical analysis on the weekly chart to identify these scrips.

On the average front, we have used three simple moving averages, the 5 week, 13 week and 30 week simple moving averages. As per our system when the 13 week moves above the 30 week average, the medium-term trend reverses direction.

Our support zones are identified with the help of these moving averages and the last swing lows posted.

Double bottom reversals were seen in a few scrips and the measuring implications were taken into account.

The target analysis was largely based on pattern implications, retracement of the last leg of the fall and retracement levels of the earlier fall.

Three or more segments of the fall were also taken into account as W.D.Gann was a great believer of this.

Rounding bottoms were also noticed and taken into consideration.

Thus, over various parameters that have traditionally stood the test of time have been taken into account to identify these scrips.

To see full report: TOP PICKS



With the start-up of Cairn’s Rajasthan block imminent in the next couple of months, we expect focus to shift to cashflow generation. In this context, it will be important to track offtake agreements, the pace of production ramp-up and the crude pricing formula. The global crude price trajectory remains the key variable, though; we expect this to continue to trend up in 2H-09 and 2010 as demand supply tightens. Cairn is the most leveraged Indian play on this theme. BUY.

Production start-up imminent. With production from Cairn’s Rajasthan block
expected to commence soon, we expect focus to shift on crude offtake agreements, the pace of production ramp-up and the crude pricing formula. The resolution on cess will take more time and is likely to require arbitration – Cairn may pay the cess under protest in the interim at current rates (Rs2500/tonne, $68m in FY10, $223m in FY11).

We model a gradual ramp-up. Initial cargoes will go to the government nominated
refiners (IOC, HPCL, MRPL) but this covers only 35-40% of expected production in FY10-11. We expect more allocations to these refiners but Cairn will soon also require marketing freedom (sale to private refiners, exports) to ensure that the production ramp-up is not compromised as the state-owned refineries may not be geared near term to process more than 80kbpd of Cairn’s crude. Our models build peak output for Mangala in July-10; Cairn’s revised development plan indicates peak in Mar-10.

Pricing agreements soon. Cairn is still in negotiations with the nominated refiners on the pricing formula; we anticipate a decision soon. Our models are set at a 10% discount to Brent – the similar Duri-Widuri basket has traded at annual average discounts of 2-13% over the last 16 years. We had anticipated pricing for initial cargoes to be lower but media reports quote initial pricing with IOC, HPCL, MRPL for 64kbpd of offtake at Bonny-Light minus US$2.5-3.5/bbl (= ~2% discount to Brent); this will be a positive surprise. The pricing formula is important (1ppt impacts fair value by 1.1-1.6%) but the crude price trajectory is more relevant ($1 = 1.5-3.5%).

Strong leverage to crude. We expect crude to continue to trend upwards in 2H-09 and 2010 as demand-supply regime tightens on OPEC-compliance and disappointments in non-OPEC production. Cairn’s resource base and attractive fiscal contract makes it a perfect play on this theme. With the stock discounting $53/bbl based on the 2009 correlation with spot-Brent (R2:0.82x) and US$63/bbl on our DCF, we find risk reward favourable. Our target price (Rs250/sh, 12% WACC) is based on $80 long tem Brent.

Attractive cashflow multiples. While reported EPS will depend on the pipeline
depreciation policy (Cairn still undecided, we assume a write-off in four years), our DCF implies 4.5x P/CE on full ramp-up. We anticipate a re-rating beyond these levels as earnings multiples also come into focus. Cairn’s strong multi-year cashflow profile should help; it will generate $1.6bn in average annual cashflow over ten years at $80 Brent ($1.3bn at current Brent). At 5.7x P/CF (10-year peer average), it could trade at Rs310/sh if accorded full going-concern valuations. Cairn is our top pick. BUY.

To see full report: CAIRN


Buy: Gap in Ratings Narrowing = Re-Rating?

Gap between Zee TV and leaders narrowing — Zee TV has gained share within Hindi GEC genre over the last quarter – gained ~60-70bps channel share while other major players have lost share. According to the latest TAM data, the gap between the leaders Colors and Star Plus (both tied with 248 GRPs) and Zee TV's 234 GRPs has been narrowed considerably. ZEEL's Hindi movie channel, Zee Cinema, has remained No. 1 in its genre.

Zee TV becomes non film GRP leader — Zee TV's original programming ratings (i.e., ratings, ex-film based content) of 208 GRPs surpassed the top 2, Star Plus (201 GRPs) and Colors (196 GRPs), for the last week. While we don't focus on weekly GRP ratings, we do note that Zee's improvement in ratings over the last few months is encouraging.

New content to take on competition — Zee is trying to improve its prime time ratings by replacing soaps, Maayka and Saat Phere (~2 TVRs ratings). Both have been losing their rankings to competition over the past year and are being replaced by Aapki Antara and Pavitra Rishta (Balaji Telefilms soap -remake of popular Sun TV Tamil serial, Thirumathi Selvam). Mgmt mentioned that it would add Sa Re Ga Ma L'il Champs after Dance India Dance ends in June.

Sustaining market share is key — In future, sustenance of viewership share gains would be an important consideration from an ad revenue perspective. We recently upgraded ZEEL as risk reward was turning favorable ( and downside relative to the market was limited. We do expect headwinds in Q1, given the muted ad market
growth & divergence of ad spends on cricket (IPL, T20 World Cup) & elections.

To see full report: ZEE ENTERTAINMENT


On Expected Lines…

Q409 results of Hindustan Zinc Ltd. (HZL) were as per our expectations. HZL reported net revenue of Rs. 12.9 bn (down by 43%), an EBIDTA of Rs.6.05 bn (cut by 61%) and PAT of Rs. 5.5 bn (a decline of 57%). The EBIDTA margins witnessed a correction of 2235 bps. Average realizations for Q409 for Zinc and Lead were $1174/tonne and $1160/tonne respectively.

Margins compression was less severe than forecasted: Q409 had experienced a highly volatile Zinc trading at LME. The Zinc prices dropped from $1300/tonne to a low of $1110/tonne before rising back to $1300/tonne level. Though HZL finds itself in the first quartile of the cost curve, the volatility of the Zinc and Lead prices on LME were expected to affect the margins. We had foreseen a margins squeeze of 3200 bps taking the EBIDTA margins to 37% in our quarterly preview. However, the company bettered our expectations by posting an EBIDTA margin
of 47%.

The stock has appreciated sharply in the span of last 2 months concomitant with the market rally. At CMP the stock quotes at P/E of 6.4x and EV/EBIDTA of 1.9x for FY2011E earnings. The company is virtually debt-free and cash rich with cash of Rs. 232 per share. Considering positive prospects for the LME Zinc prices in future we upgrade the stock to a Hold with a price target of Rs. 590. At the target price the stock would quote at an EV/EBIDTA of 2.5x for FY2011E earnings.

Zinc in slight Surplus
Consumption of Zinc is directly related to the Steel Industry prospects. Currently, LME is having a stock inventory of 0.34 mmT for Zinc and 0.063 mmT for Lead. The Zinc inventory is less than 3% of the global annual consumption and it is expected to remain flat with negative bias which may prop up the Zinc prices currently at $1475/ tonne. As per ILZGS, the global Zinc surplus for CY2009 is expected to be 0.26 mmT which is less than the current stock inventory at LME. We assume an average $1550/ tonne for Zinc and $1500/tonne for Lead for FY10E and $1650/tonne for Zinc and $1550/tonne for Lead for FY2011E respectively.

To see full report: HINDUSTAN ZINC


Strong operating performance…

Great Offshore (GOL)’s standalone results were above our expectations. GOL reported a YoY rise of 45.1% in revenues in Q4FY09, while on a QoQ basis revenues declined by a meagre 2.2%. This rise was mainly due to revenue addition from heavy lift vessel and project income of Rs 86 crore during the quarter. The EBITDA margin rose from 39.7% in Q4FY08 to 48.8% in Q4FY09. This was on the back of a reduction in the other expenses to sales ratio from 26.3% in Q4FY08 to 16.6% in Q4FY09. The overall net profit rose 29.6% YoY to Rs 71.35 crore in Q4FY09, owing to a decline in the depreciation cost by 6% to Rs 24.69 crore.

For FY09 (on a consolidated basis), the company reported a 39.5% rise in sales to Rs 1139.25 crore as against Rs 816.18 crore in FY08. The EBITDA margin for the entire year rose by 181 bps to 47.5% from 45.7% in FY08.

AT the CMP of Rs 296, GOL is trading at 4.6x FY10E earnings of Rs 63.27 and at 3.8x FY11E earnings of Rs 77.39 We expect GOL’s operating performance to remain strong, but are cautious on the other events related to the stock like low promoter stake and pledging of shares with corporates as collateral. We have valued GOL on multiple valuation parameters using global benchmarks, with a target price of Rs 307, which provides an upside of 4%.

Expansion in operating margin
GOL’s EBITDA margin saw a sharp rise from 39.7% in Q4FY08 to 48.8% in Q4FY09. The rise in the margin was on account of the other expenses to sales ratio declining from 26.3% in Q4FY08 to 16.6% in Q4FY09.

Delay in acquisition of vessels
GOL had placed an order for a jack up rig and multi support vessel (MSV) with Bharati Shipyard, which was expected to join the fleet in Q1FY10 and Q2FY10, respectively. However, there has been a delay in the delivery of these vessels, due to amendments in design. To factor in the delay of these two vessels we are downgrading our revenues estimates for FY10E by 5.9% to Rs 1300.65 crore and EPS by 18.6% to Rs 63.27.

Pledging of shares to Bharati Shipyard a major concern
GOL’s promoters have pledged 14% from 15.5% promoter’s shareholding to Bharati Shipyard in order to raise money required to clear off their dues with creditors. This is a major concern for GOL as the collateral given is far lower than the loaned amount.

Award of new contracts
Great Offshore Services Ltd secured a contract for three years commencing by the end of April 2009 with ONGC for three of its vessels (one PSV and two AHTSV) for an aggregate contract value of around US$65 million.

The company also commenced a firm charter contract with Gujarat Sate Petroleum Corporation Ltd (GSPL) for its AHTSV- “Malaviya Nine”. The contract is worth US$32 million and is initially for two years with an embedded option.

Detailed valuations
GOL is trading at 4.68x FY10E earnings of Rs 63.27. About 35% of GOL’s fleet is more than 20 years old, which results in higher repairs & maintenance expenses. Though the company has more than 70% of its fleet on long-term charters providing sustained revenue visibility, concerns remain over low promoter’s stake and pledging of majority of promoter stake to BSL. We have
valued the stock on multiple valuation parameters with a target price of Rs 307. At the target price of Rs 307, GOL would trade at a multiple of 1x its FY10E price to book value, FY10E market cap to revenues multiple of 0.9x, EV/EBITDA of 4.3x FY10E earnings and P/E of 4.8x FY10E earnings.

To see full report: GREAT OFFSHORE


LT model intact, liquidity strengthening; adjust ests, price target

What's changed
We adjust our estimates following reported 4QFY09 results. For FY10, we lower our GAAP EPS estimate to $0.13 ($0.34 prior); however, on an “adjusted” basis ex. stock compensation and amortization, our FY10 EPS estimate of $1.15 remains unchanged, with lower revenues (due to FX) offset by higher margins and lower taxes. For FY11, we reduce our GAAP EPS estimate to $0.26 ($0.46 prior), reflecting lower margin assumptions, offset by lower taxes. Our adjusted EPS estimate now stands at $1.28 ($1.25 prior) also reflecting slightly lower margin assumptions offset by lower taxes. Our organic revenue growth assumption remains unchanged. We introduce a long-term FY12 EPS estimate of $0.36 ($1.38 adjusted). We raise our 12-month price target to $10 (from $5 previously) to reflect recent sector relative multiple expansion, as well as improved sentiment regarding management transition and liquidity.


WNS’ initial FY10 revenue outlook (7%-8% yoy organic growth) coupled with results from offshore BPO peers confirm long-term growth opportunities remains, albeit at a slower rate. Importantly, we view WNS’ proactive efforts to improve its working capital and capex management as positive steps in restoring investor confidence. Our fundamental view remains constructive; however, we retain our Neutral rating as the shares appear fairly valued at 9X our FTM adjusted EPS estimate.


Our 12-month price target of $10 is derived using a weighted average model incorporating a sector-relative Investment Framework, FTM P/E, and EV/EBITDA multiples; implying a FTM P/E of 9X on adjusted EPS.

Key risks
(1) Lower than expected revenue growth and/or margin leverage. (2) M&A integration risk. (3) FX volatility

To see full report: WNS LIMITED



The day is finally here — At 5pm today, the Fed will officially release hypothetical credit losses and required capital additions (if applicable) for each of the 19 banks that participated in the Government’s stress test. The banks will have until June 8th to develop a plan to address any capital shortfall and they will be required to implement their plan by November 9, 2009.

Capital shortfall might result in some TRUP dividend suspensions — In a press release issued last night, the Gov’t listed several actions that the banks’ plans could include to address any capital shortfall. We were surprised that the Gov’t mentioned that plans “should include...waivers and suspensions on preferred securities including trust preferred securities” among possible steps.

TRUPs are debt, in our view — We view trust preferred securities (TRUPs) as junior-subordinated debt, so we believe that a suspension of TRUP dividends could have a negative impact on a still-fragile debt market. Non-cumulative equity preferreds are a different story, in our opinion. We have expected Bank of America (Deteriorating, Low Risk) and Wells Fargo (Deteriorating, Low Risk) to suspend dividends on non-cumulative equity preferreds.

The Government clarified a precondition of TARP repayment — To repay TARP, banks must be able to issue non-guaranteed debt, with a term greater than five years, in amounts sufficient to satisfy funding needs. (So doing one nonguaranteed deal would not suffice, we believe). Although the bond markets have improved recently, it is not yet clear how many financial institutions could
successfully tap the markets to satisfy all of their long-term funding needs outside the Temporary Liquidity Guarantee Program.

Minimum capital ratio — The Government will require a Tier 1 common ratio of at least 4% at the end of 2010, under its “more adverse” scenario. Tier 1 common is Tier 1 capital less hybrids and preferreds, so it is similar to tangible common equity (TCE). This is a somewhat easier target, because unrealized losses are not deducted from Tier 1 common, while they are from TCE.

Capital shortfall details leaked — Based on press reports, the Government’s stress tests could indicate capital shortfalls at Bank of America ($34 billion), Wells Fargo ($13-15 billion) and at least five others. Press reports have also indicated that several banks under our coverage will not need additional capital: American Express, Capital One, Goldman Sachs and JPMorgan.

To see full report: U.S. BANKS


Dreaded toxic assets: the general perception is that a lot more is still lurking out there. According to the IMF and its latest “Global Financial Stability Report”, the bill for the world’s financial sector has now swollen to the enormous figure of USD 4,100bn; banks have to shoulder some USD 2,800bn. Although financial firms around the world have already recognized more than USD 1,300bn of losses (USD 950bn by banks), the “reality-gap” has in fact risen. So, with its new estimate the IMF did nothing less than remove the light at the end of the tunnel for banks. The figures sit oddly with the recent stabilization of the financial sector. However, the markets, jaded by an overflow of bad news in the past, seemed to decide simply not to listen and continued with the rally of bank stocks.

Financial crisis loss estimates by the IMF
Total: USD 4050bn
Loans*: USD 2100bn
Securities: USD 1950bn

Global writedowns and capital raised by financial institutions

Could it be that the loss calculations are themselves pro-cyclical? Certainly it is important to look at the figures in more detail. The IMF analyzed four classes of assets: residential and commercial mortgages, consumer and corporate debt; for all classes, it looked at loans still sitting on banks’ balance sheets as well as at securities, including structured loans.

As in the past the IMF used market data to estimate losses for structured products, i.e. derivative indices like the ABX index. Of course, pricing on ABX is convenient. It is the only transparent and publicly available index for securitized subprime mortgages. However, ABX prices reflect the technical imbalance of supply and demand more than the fundamental value of the underlying assets. Trading is thin. Using ABX prices can produce loss estimates wide of the mark.

But it is not only that these indices may not be very reliable. More disturbing is the fact that the IMF, in calculating the losses for securities, seems to follow slavishly market sentiment, a blemish also embodied in our accounting regulations for capital market instruments. That sits ill with its new mandate, given by the G20, to inform policymakers around the world of market exuberances countering the procyclical herd behavior of market participants. Early warning can only fulfill these expectations if based on independent analysis. How can an approach that derives its forecasts from actual market prices lead to new information that the market does
not already know? Applying IMF’s methodology at the height of the last boom would have resulted in “forecasts” that the banking sector is massively overcapitalized.

In this regard, the IMF’s approach to estimate losses for loans, from prime residential debt to plain vanilla corporate loans, is more robust. Here, the IMF uses its own models to predict charge-off rates for different loan types. Given its gloomy economic outlook and the size of the global banking industry sitting on more than USD 40,000bn of loans, it is no surprise that the IMF now expects that loan losses will top USD 2,000bn.

On the contrary, it is pretty obvious that rising credit losses are likely if the real economy were to deteriorate further. But these are normal second-round effects. By sharply increasing loan loss provisions, banks are preparing themselves for worse to come. Credit losses triggered by an economic slowdown are by no means signs of a financial crisis or evidence of wrongdoings or structural failures. It seems as if the IMF has attempted to calculate all credit costs deriving form the current world recession. However, slapping such “normal” costs of banking onto the bill for the crisis only inflates loss estimates and is pro-cyclical.

Therefore, the question remains: What is the purpose of the whole exercise? Without doubt, the IMF’s estimates will influence the debate about how to rescue the banking sector. In the end, it is the taxpayer as the capital provider of last resort who will have to foot the bill. Inflated loss estimates may have a real impact. They do more harm than good when it comes to finding a way out of today’s mess.