Alexandros Kotsonis JP Morgan Presentation

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Cardiff University Investment Club Week 4 | Which Bank Is The Best? Cardiff University Investment Club Presentation to the members October 28 2016
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Transcript of Alexandros Kotsonis JP Morgan Presentation

Project Aardvark

Week 4 | Which Bank Is The Best?

Cardiff University Investment ClubPresentation to the membersOctober 28 2016

Cardiff University Investment Club

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DisclaimerThe views expressed in this presentation are purely those of the author; they do not represent any views that may prevail at Cardiff University nor should they be taken as investment advice.

The writing represents our best judgment as of the date of preparation, and is subject to change without notice.

Before making any investment decision you should always consult your personal financial advisor and conduct your own due diligence.2

Cardiff University Investment ClubWhats The Plan For Today?3

Cardiff University Investment ClubWhats The Plan For Today?4

Give The PresentationsHave A Vote To Decide Which Presentation Was The Best12A Quick Industry Overview (Official Rankings)What Happens Next?34

Cardiff University Investment Club1. Presentations5

Cardiff University Investment Club1. Presentations6

1st : Goldman Sachs

2nd : Citi Group

3rd : J.P. Morgan

4th : Bank of America Merrill Lynch

PS: I would encourage everyone to take notes as the teams are giving their presentations

Cardiff University Investment ClubGoldman Sachs7

Cardiff University Investment ClubGoldman SachsJoel SmithAviraj DasguptaVasily OmshinAbdullah Jafris

Cardiff University Investment Club

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What we will be discussing IntroductionCompany information Company Report

Ratio AnalysisFinancial statement analysis

Technical Analysissecurity analysis for forecasting the direction of the share price

News Announcements Internal InformationExternal Information39

Cardiff University Investment ClubIntroduction10

Cardiff University Investment ClubBrief overview of Goldman SachsFrom the CEO (Lloyd Blankfein)As many of you know first hand, 2015 was a tale of two halves: The first half of the year featured a strong operating environment, but headwinds emerged, particularly during the second half, and these headwinds persisted into early 2016. These factors culminated in record first-half results in Investment Banking and Investment Management, as well as the best first-half performance for Equities in six years.11

Cardiff University Investment ClubI spoke to CEO on the phone asking him his view of Goldman He told me thisAre we over the blip that accrued at the end of 2015 early 16?Does this mean we are back to normal lets take a look11

Competitors From the start of the year:

12Company1st Jan Now % changeGoldman Sachs175.79177.251.1Morgan Stanley 30.7033.8210.1JP Morgan63.9569.378.4

Cardiff University Investment ClubThis WeekCompanyMonday 24/10/16Now%Goldman Sachs175.50177.751.11 Familiar?JP Morgan68.9769.370.3

13Goldman share price has the same increase from Monday as the whole of this year! We believe Goldman is UNDERvaluedAs for JP Morgan we can see a small increase in the last week which hints it is OVERvalued

Cardiff University Investment ClubBusiness Strategy

Size as an asset Anticipating changing needs

Aggressive seeking to expand client relationship

Integrity and Honesty

Cardiff University Investment ClubNet Revenues ($bn.)

Investment Banking 7,027

Institutional Client Services 15,151

Investing & Lending 5,436

Investment Management 6,206Company Report

Cardiff University Investment ClubInstitutional Client Services Revenues($bn.)

Fixed Income, Currency and Commodities Client Execution 7,332

Equities Client Execution 3,028

Commissions & Fees 3,156

Securities Services - 1,645

Total Net Revenues: 15,151

Cardiff University Investment ClubMarcus By Goldman Sachs

Online platform which provides unsecured personal loans.

Marcus has no fees

Marcus has fixed rates throughout the term of the loan

Marcus enables customers to choose their monthly payment dates

Marcus offers dedicated loan specialists who deliver live support

Its an extremely simple and transparent way to consolidate high interest rate credit cards

Growth Strategy

Cardiff University Investment ClubRatio Analysis18

Cardiff University Investment ClubSecurity analysis

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Cardiff University Investment ClubP/E & EPS

Analysis

GOLDMAN SACHS has a lower price to earnings ratio

Also a higher earnings per share ratio than other banks in the same sector.

So investing in its shares would yield higher returns as you would be both, paying less for its shares as well as receiving better earnings than would be possible by investing in the shares of the other banks in the same sector.

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Cardiff University Investment ClubTechnical Analysis21

Cardiff University Investment ClubIn Depth Analysis

Cardiff University Investment ClubThe main trend23

Cardiff University Investment ClubWhat do we see from the start of the chart until the red line?Uptrend No where are we right now compared to the past?We are currently by the break in the resistanceWhat happened last time?Up trend 23

Support levels (Important)24

Cardiff University Investment ClubPast predicts the future 25

PastFuture

Cardiff University Investment ClubLook at fake break out exactly the same as last time!! Even the shape of triangleSmall risk below resistance levels new supportHigh reward 25

News Announcements26

Cardiff University Investment ClubInternal InformationGoldman Sachs top banker, Mark Schwartz, chairman of Asia Pacific, is to retire at the end of the year after 27 years with the bank.

The move comes after Goldman cut in the past month about 15 per cent of its investment bankers across the region, excluding Japan and Australasia, according to a person briefed on the departures.

Across Asia ex-Japan, M&A volumes so far this year are down 17 per cent, according to Thomson Reuters data, while equity capital markets volume in the region has fallen a fifth.

The move turned heads on Wall Street, as Goldman rarely rehires top managers who leave.

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Cardiff University Investment ClubM&A

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Cardiff University Investment ClubGoldman for the futureFrom 2013 there was 4 chairman roles now there is only 1

The vice-chairman title at Goldman is largely honorific with a senior role. In the banks history the more common route to the top job is via co-president or president a role occupied by Gary Cohn, 56.

Gary Cohen has long been seen as Mr Blankfeins heir apparent. But Mr Blankfein, 62, is in no mood to step aside, according to people familiar with his plans.

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Cardiff University Investment ClubCiti Group30

Cardiff University Investment ClubIntroduction

DILBIR SINGH

Buy Proposal

Cardiff University Investment ClubA diversified financial services holding company, providing various products and services for consumer, corporations, goverments and institutions worldwide.

Operates through two segments; citicorp and citiholdings.

The citicorp segment offers traditional banking services to retail consumer through retail and comemercial banking.This segment also offers various banking and investment services through network local branches.

The citiholdings provides consumer services such as providing consumer loans and retail alternative investments and other services.

Citigroup was founded in 1812 and is based in New York

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Geographic Analysis

Clinton has close ties with big banks that have been criticised by Trump.

Less likely to break up banking powerhouses.

Simple idea that Clinton brings with her less uncertainty.

CALLUM CLOSE

Cardiff University Investment ClubEMEA is included in Asia sector first pie chart

NA accounts for around 47.51% of Citicorps total net revenue

Clinton currently winning

Annual report does not show the affects the of Brexit but depending on how city decide to operate in EMEA there will definitely be significant changes reflected in this years report32

Financial Analysis

DILBIR SINGH

Gearing

Debt to Equity

Saturation Debt

Highest between Sept. 2007 and Mar. 2008 w/peak of 5.05

Cardiff University Investment ClubA debt to equity ratio of 5 means that debt holders have a 5 times more claim on assets than equity holders.

Between sept 2007and mar 2008, Citibank experienced their highest scare from debt holders, reaching a peak of 5.05.

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SWOT Analysis

JOHNNY GENIN

MY OPINION: STRENGTH > WEAKNESS DUE TO DIVERSIFIED PORTFOLIO VS POLITICAL RISK

Cardiff University Investment Club

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52 Week Share Price Info.

Low in February due to Citi refusing full disclosure of exposure to energy sector.LOWFebruary 34.52HIGHNovember 56.46

CAMERON LEE ROBERTS

Cardiff University Investment Club Range of 21.94 over the past year

Only information they disclosed was that they added an additional $300million to reserves protect against any companies in the energy sector going bust. This does not exactly make shareholders feel confident about investments.

Other big banks like JP Morgan, Bank of America and Wells Fargo provided full transparency when shareholders demanded the information including total loan exposure and total reserves for the exposure. 35

Growth StrategyMexicoSecond biggest BankSold Brazilian and Columbian division to invest $1bn in Mexico

Capital ArrangementsFirst quarter of introducing buy back plan to try and increase shareholder wealth$6bn returned year to dateMarket InnovatorsFirst bank to issue Apple Watch AppWant to try and increase simplicity of bankingBrexitCurrent exposure to the UK is $108bn, twice MexicoWant to chase the passporting facility introduced by EU laws.CAMERON LEE ROBERTS

Cardiff University Investment ClubBullish ArgumentShares are trading at 30-40% discounted Value

Once the Cost of Capital exceeds the return on equity, shares may trade at a premium

SHIVAM JAIN

Cardiff University Investment Club

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Bearish ArgumentTop Compliance officer, John Davidson set to retire.Instrumental in steering bank away from financial crisis in 2008SHIVAM JAIN

Cardiff University Investment Club

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Conclusion

DILBIR SINGH

Cardiff University Investment Club

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J.P. Morgan40

Cardiff University Investment ClubBuy Proposal

JP Morgan Chase& Co.Ahmed, Alexander, Benjamin, Michael, Rinay

Cardiff University Investment Club

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Introduction Alex 42Sector

Brief Introduction of JP Morgan Chase& Co.

Products and services

-Investment banking (IB) i.e. M&A services for corporations and institutions - Markets & Investor research clients services in; i.e. proprietary pricing data and analytics -Treasury services i.e. solutions regarding all transaction functions -Investment management i.e. traditional banking service - Private banking i.e. services include; Real-estate banking- Wealth management -Commercial banking

Cardiff University Investment ClubConsistent, Resilient and Elite Rinay 43

Cardiff University Investment Club

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Wealth of Opportunities Rinay 44

Cardiff University Investment Club

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Growth and Expanding Overseas - Ben45

2030

Cardiff University Investment Club

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Business strategy - Ben46

2017

Cardiff University Investment ClubForecasts - Ben47

Cardiff University Investment Club

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Technical Analysis Overview

48EMAs (25, 50 & 100)Trend Line & Support ResistanceRSI

11th of December 2013 24th of October 2016 (Daily Chart)

Cardiff University Investment ClubOverview:Using technical indicators of: EMAs (25, 50 & 100)RSITrend LinesBullish Since Brexit48

Technical Analysis - Post Brexit 49

22nd of June 2016 24th of October 2016 (4h Chart)StrongTrend LineEMAs Bullish crossing and spreadingRSI No Divergence or Sell Signal

Cardiff University Investment ClubSince Brexit JP Morgan has faired well; Appreciating from a price of $57 to a price of $68

Bullish:Strong support from the trend lineEMAs are crossing each other and spreading in a bullish mannerRSI is in the oversold area (which should raise some concern). However, it is not diverging from the market trend.

Bearish argument:Breaking the trend lineEMAs crossing in a downward movementRSI diverging or exiting the overbought level

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Macro Analysis - Ahmed Political UncertaintyBrexitInterest RatesUS ElectionDemocratsRepublicans

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Cardiff University Investment ClubSummary Macro Analysis:

BearishBrexit uncertainty can cause possible market volatility for JP MorganU.S. interest rate hike could cause major market volatility and effect JP Morgan

BullishUS Election may have a positive impact on stock market if the democrats winClearly seeing an improved market with democrats compared to republicans

Bullish based on a strong trend continuation and possible election outcome of the Democrats in the U.S.

Bearish based on possible trend-line break, with confirmation with other indicators and the possible election outcome of the Republicansin the U.S.50

Conclusion - Alex 51CCA Analysis

-JPMs P/E ratio (10,57) < P/E mean (12,01) of its relative competitors share price potentially undervalued-P/E implied share price Min $61,96 to Max $89,41-JPMs EV/R (-1,93)> peerss EV/R mean (-3,46) undervalued share price-JPMs P/B ratio=1,09> 0,75 (mean) shows a bearish argument (fair-priced stock of JPM)

Summary of all main argumentsFull market analysis Competitors and intrinsic markers JP Morgan has opportunity to growthGrowth-overall GDP grow in Chin& India well placed in overseas investmentsForecasts at mean JPMs shares increasingIf JPM end up doing all there goals for sure increase in its share valueBullish arguments and political environment in USABearish arguments and political environment in USA

Final Decision

Cardiff University Investment ClubBank of America52

Cardiff University Investment Club

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Cardiff University Investment ClubBank of America54

Cardiff University Investment ClubBank of America55

Cardiff University Investment ClubBank of America56

Cardiff University Investment ClubBank of America57

Cardiff University Investment ClubBank of America58

Cardiff University Investment ClubBank of America59

Cardiff University Investment ClubBank of America60

Cardiff University Investment ClubBank of America61

Cardiff University Investment ClubBank of America62

Cardiff University Investment ClubBank of America63

Cardiff University Investment ClubBank of America64

Cardiff University Investment Club2. Have A Vote65

Cardiff University Investment Club2. Have A Vote66

Which team was the best?Go to: Kahoot.it on your phone

Cardiff University Investment Club2. Have A Vote67

ResultsThe Quality of Presentation RankingGoldman Sachs Team and J.P. Morgan Team - Joint First Place with 55 points.Citibank Team - Third place with 42 pointsBAML Team - 4th place with 37 points

The Quality of Analysis Ranking J.P. Morgan Team - First place with 66 pointsGoldman Sachs Team - Second Place with 51 pointsBAML Team - Third Place with 49 pointsCitibank Team - Forth Place with 45 points.

Cardiff University Investment Club3. Official Ranking68

Cardiff University Investment Club3. Official Ranking (This Year)69

Cardiff University Investment Club3. Official Ranking (Last Year)70

Cardiff University Investment Club3. Official Ranking (2016 by Region)71

Cardiff University Investment Club4. What Happens Next?72

Cardiff University Investment Club4. What Happens Next? You have to go to Wall Street Survivor and buy the shares of the Investment Bank that you think is the best. You can buy the shares of all banks if you so decide. (How many shares you decide to buy is up to you its your partnership capital).Next week we will summarize the differences between all of the banks, their culture, structure and graduate programs. Then well have an anonymous survey so that we can give some feedback to each other. (This will be done after everyone submits their Buy Proposals and all members have a chance to review them).Youll also have a chance to give individual feedback to everyone on your team (again this will be anonymous).Finally, over the weekend, we will post another short survey on Facebook so that you can tell us which industry youd like to look into next.Teams will be reshuffled, and new members will be selected as Senior Partners. (The team may choose to select the same person to be the senior partner).

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Cardiff University Investment Club