Alexandros Kotsonis JP Morgan Presentation

Cardiff University Investment Club

Week 4 | Which Bank Is The Best?


Presentation to the membersOctober 28 2016


Disclaimer

• The 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.

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What’s The Plan For Today?

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What’s The Plan For Today?

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Give The Presentations

Have A Vote To Decide Which Presentation Was The Best

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A Quick Industry Overview (Official Rankings)

What Happens Next?

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1. Presentations

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1. Presentations

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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


Goldman Sachs

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Goldman Sachs

Joel SmithAviraj Dasgupta

Vasily OmshinAbdullah Jafris


What we will be discussing…

Introduction

• Company information

• Company Report

Ratio Analysis

• Financial statement analysis

Technical Analysis

• security analysis for forecasting the direction of the share price

News Announcements

• Internal Information

• External Information

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Introduction

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Brief overview of Goldman Sachs

From 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.

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Competitors

• From the start of the year:

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Company 1st Jan Now % change

Goldman Sachs 175.79 177.25 1.1

Morgan Stanley 30.70 33.82 10.1

JP Morgan 63.95 69.37 8.4


This Week

Company Monday 24/10/16 Now %

Goldman Sachs 175.50 177.75 1.11 Familiar?

JP Morgan 68.97 69.37 0.3

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Goldman share price has the same increase from Monday as the whole of this year! We believe Goldman is UNDERvalued

As for JP Morgan we can see a small increase in the last week which hints it is OVERvalued


Business Strategy

Size as an asset Anticipating changing needs

Aggressive seeking to expand client relationship

Integrity and Honesty


21%

45%

16%

18%

Net Revenues by division

Investment Banking Institutional Client ServicesInvesting & Lending Investment Management

Net Revenues ($bn.)

Investment Banking – 7,027

Institutional Client Services – 15,151

Investing & Lending – 5,436

Investment Management – 6,206

Company Report


48%

20%

21%

11%

Institutional Client Services Revenues

Fixed Income, Currency and Commodities Client Execution Equties Client Execution Commission & Fees Securities Services

Institutional 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


Marcus 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


Ratio Analysis

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Security analysis

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P/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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Technical Analysis

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In Depth Analysis


The main trend

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Support levels (Important)

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Past predicts the future

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Past

Future


News Announcements

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Internal Information

• Goldman 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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M&A

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Goldman for the future

• From 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 bank’s 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 Blankfein’s heir apparent. But Mr Blankfein, 62, is in no mood to step aside, according to people familiar with his plans.

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Citi Group

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Introduction

DILBIR SINGH

Buy Proposal


Geographic Analysis

GLOBAL CONSUMER BANK-ING

North America Latin AmericaAsia (inc. EMEA)

INSTITUIONAL CLIENT GROUPS

North America Latin AmericaAsia EMEA

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


Financial Analysis

DILBIR SINGH

• Gearing

• Debt to Equity

• Saturation Debt

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


SWOT Analysis

JOHNNY GENIN

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


52 Week Share Price Info.

Low in February due to Citi refusing full disclosure of exposure to energy sector.

LOWFebruary 34.52

HIGHNovember 56.46

CAMERON LEE ROBERTS


Growth Strategy

Mexico• Second biggest Bank• Sold Brazilian and Columbian

division to invest $1bn in Mexico

Capital Arrangements• First quarter of introducing buy

back plan to try and increase shareholder wealth

• $6bn returned year to date

Market Innovators• First bank to issue Apple

Watch App• Want to try and increase

simplicity of banking

Brexit• Current exposure to the UK is

$108bn, twice Mexico• Want to chase the passporting

facility introduced by EU laws.

CAMERON LEE ROBERTS


Bullish Argument

• Shares 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


Bearish Argument

• Top Compliance officer, John Davidson set to retire.• Instrumental in steering bank away from financial crisis in

2008

SHIVAM JAIN


Conclusion

DILBIR SINGH


J.P. Morgan

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Buy Proposal

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


Introduction – Alex

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• Sector

• 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


Consistent, Resilient and Elite – Rinay

Consistent

Consistently ranked number 1 in the

world for investment banking fees

Total Revenue surpasses US competitors consistently

Resilient

Lowest Drop in Investment Banking

Fees

12% increase in M&A fees despite

decreases amongst the other members of

the Top 6

Elite

Arguably America’s leading bank

Ranked number 1 overall in investment

banking and individually in Equity

and Bonds

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Wealth of Opportunities – Rinay

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Wealth of Opportunities

AT & T Acquisition of Time Warner

Customer base growing in online and

mobile banking

Wealth Creation in emerging markets and

strong Geographical

presence

Wells Fargo Scandal


Growth and Expanding Overseas - Ben

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2030


Business strategy - Ben

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2017


Forecasts - Ben

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Technical Analysis – Overview

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• EMAs (25, 50 & 100)• Trend Line & Support Resistance• RSI

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


Technical Analysis - Post Brexit

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22nd of June 2016 – 24th of October 2016 (4h Chart)

• StrongTrend Line• EMAs – Bullish crossing and spreading• RSI – No Divergence or Sell Signal


Macro Analysis - Ahmed

• Political Uncertainty• Brexit• Interest Rates• US Election

Democrats Republicans

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Conclusion - Alex

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• CCA Analysis

-JPM’s 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-JPM’s EV/R (-1,93)> peers’s EV/R mean (-3,46) undervalued share price-JPM’s P/B ratio=1,09> 0,75 (mean) shows a bearish argument (fair-priced stock of JPM)

• Summary of all main arguments- Full market analysis Competitors and intrinsic markers - JP Morgan has opportunity to growth- Growth-overall GDP grow in Chin& India well placed in overseas investments- Forecasts at mean JPM’s shares increasing- If JPM end up doing all there goals for sure increase in its share value- Bullish arguments and political environment in USA- Bearish arguments and political environment in USA

• Final Decision


Bank of America

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Cardiff University Investment Club 53


Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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Bank of America

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2. Have A Vote

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2. Have A Vote

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Which team was the best?

Go to: Kahoot.it on your phone


2. Have A Vote

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Results

1. The Quality of Presentation Ranking Goldman Sachs Team and J.P. Morgan Team - Joint First Place with 55 points. Citibank Team - Third place with 42 points BAML Team - 4th place with 37 points

2. The Quality of Analysis Ranking J.P. Morgan Team - First place with 66 points Goldman Sachs Team - Second Place with 51 points BAML Team - Third Place with 49 points Citibank Team - Forth Place with 45 points.


3. Official Ranking

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3. Official Ranking (This Year)

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3. Official Ranking (Last Year)

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3. Official Ranking (2016 by Region)

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4. What Happens Next?

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4. 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 – it’s your partnership capital).

Next week we will summarize the differences between all of the banks, their culture, structure and graduate programs.

Then we’ll 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).

You’ll 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 you’d 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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Alexandros Kotsonis JP Morgan Presentation

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