Banking Industry (1)

8/7/2019 Banking Industry (1)

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Commercial Banking in theUS

Masha AustinCody BaileySara JosephJason Van OsdellGary Whittle

Agenda Industrysnapshot Financialanalysis

Externalanalysis

Internalanalysis


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K e y sta tistics

.$570 9bnRevenue

.$52 0bnProfits

- . %2 3-Growth 06 11

. %5 5-Annual growth 11

16

Industry snapshot


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The Big Four and everyone

else Bank of America . %11 8

& . Wells Fargo Co . %11 3

. .J P Morgan & .Chase Co . %7 7

.Citigroup Inc . %5 0

( , )Remaining banks 6 494 . %64 2

Industry snapshot


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Products and services Deposits %58

Mortgages %16

Business lending %15

Home equity loans %6

Other services %5

Industry snapshot


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Major market segments &Consumer retail %45 ,Small businesses ,corporations institutions %35 Government %15

Other %6

Industry snapshot


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The industry

Capital levels are at unusually high levels

-Growth in NIS has help offset drag of non

performing loans and lower outstandingloan balances

ROE hit historically record lows for the

-industry in 2007 2008 Falling efficiency ratios likely due to

.consolidation

Financial analysis


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Return on assets

Financial analysis


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Average BofA JP Morgan Citi Wells

NIS 2009 .3 47 .2 65 .2 81 .3 33 .4 80

2008 .3 18 .2 52 .2 51 .3 61 .4 57

2007 .3 29 .2 53 .2 21 .3 16 .4 43

2006 .3 31 .2 77 .1 89 .2 74 .4 58

Efficiency2009 .55 50 .50 41 .56 27 .60 83 .49 25

2008 .59 00 .54 41 .57 41 .76 91 .56 76

2007 .59 40 .59 14 .61 62 .73 78 .60 36

2006 .56 80 .50 40 .65 28 .61 72 .59 59

ROA 2009 .0 09 .0 30 .0 50 - .0 24 .1 29

2008 .0 08 .0 41 .0 68 - .0 50 .0 72

2007 .0 81 .0 93 .0 86 .0 20 .1 332006 .1 28 .1 32 .0 88 .0 97 .1 57

ROE 2009 .0 74 .2 94 .6 52 - .2 63 .14 46

2008 .0 35 .4 45 .8 99 - .6 71 .8 37

2007 .7 75 .10 69 .10 70 .2 71 .14 02

2006 .12 30 .14 30 .10 90 .12 09 .16 94

Financial analysis

Profitability measures


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-Net charge offs

Financial analysis


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Measures of Financial ConditionIndustry BofA JP Morgan Citi Wells

TotalCapitalRatio

2009 . %10 90 . %13 70 . %13 50 . %15 03 . %11 87

2008 . %11 00 . %11 58 . %12 33 . %15 18 . %10 71

2007 . %9 30 . %10 94 . %11 82 . %13 33 . %11 14

2006 > %10 . %11 11 . %11 44 . %12 39 . %12 05

DebtLeverage

2009 < %45 . %26 22 . %13 11 . %19 61 . %18 36

2008 < %45 . %18 84 . %12 44 . %18 55 . %16 92

2007 < %45 . %16 59 . %18 72 . %19 52 . %17 27

2006 < %45 . %13 94 . %16 18 . %15 31 . %18 08

Liquidity 2009 < %65 . %38 93 . %31 17 . %29 92 . %60 972008 < %65 . %49 40 . %34 25 . %34 28 . %64 43

2007 < %65 . %48 45 . %33 25 . %34 83 . %65 50

2006 < %65 . %44 48 . %35 75 . %35 57 . %65 43

Financial analysis


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How they stack up :JP Morgan and Bank of America trend closest to the

.industry averages Lower volatility and more.consistent returns

:Citi least efficient bank with lowest ROA and ROE.ratios Also highest non performing loans while

. ,having the most conservative portfolio Butgrade out well on long term measures such as

.liquidity and capital ratios

: Wells Fargo , %riskiest portfolio but lowest of- . ,non performing loans Highest ROA and ROE ratios

.but illiquid

Financial analysis


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General environment

External analysis

Economic Corporate profitsEmployment

Stock market Housing starts

Interest rates

Sociocultural 2008 crisis Fear Increasing savings rate Decreasing loan rate

Global Broad globalizationof business

EU crisis More uniform regulations

Technological Internet Mobile banking

/Political legal Regulation -Frank Dodd

Federal reserve FDIC

Demographic Aging population Population shifts

Population growth Racial shifts

Demands of young customers


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Economic drivers Corporate profits LEmploymentLDemandL Corporate profits qEmploymentqDemandq

DJIA LConsumer confidenceLDemandL DJIA qConsumer confidenceqDemandq

Interest rates qDemandL Interest rates LDemandq

External analysis


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Sociocultural drivers

-2008 Sub prime crisis Consumers changed

behavior

,Consumers saving morespending less Consumers spread their

money out Banks failed

Mergers and Acquisitions . %1 3 annual decrease

since 2008 Down from more than

,14 000 in 1980s

External analysis

$ .79 1bnThe big four s losses


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/Political legal

Federal intervention Toxic Asset Relief

( )Program TARP saved

many banks ,Increased revenues

growth

But comes with a cost

External analysis

$45bnBank of America

$45bnCitigroup

$25bn

JP Morgan Chase

$25bn Wells Fargo


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/Political legal drivers - ,Frank Dodd 2010

Increased transparency Fee reductions for interchange fees

Lowers limits on fees charged for debitcard transactions from and average of 44 to between 7 and 12

Expected to reduce related revenues by%57

Negative economic impact Lower profits Costs likely passed to consumers

External analysis

%12Profit losses

near 2016


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/Political legal Rising fees

Pilot programs to increase revenuesfrom fees

No free checking

: ;Chase $3 monthly debit card fee $15monthly checking

: ,BoA $6 $9 monthly checking fees : Wells Fargo $5 monthly fees

External analysis


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Technological drivers Online banking

Lowered costs Opened up new markets Increased new forms of competition

External analysis

Globalization

Low but increasing More uniform regulations lower entry

barriers

,Crisis shifted focus back to US willreverse


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General environment

External analysis

Regulation level HEAVY

Technological change MEDIUM

Globalization ,LOW RISING

Life cycle stage MATURE

Competition HIGH

Barriers to entry MEDIUM


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Porter s 5 forces

External analysis


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Value chain

Internal analysis

Regulatoryreporting and

compliance Deposit services Loan admin Treasuryoperations Item processing Payment processing

Branch network ATM networkInternet Telephone banking Mobile banking Call centers

Product mix ;BrandingAdvertising Account acquisition Deposit acquisitions Cross sales Fee revenuegeneration Community relations

Banking products Insurance products Investment products Business services Wealth management

Technology Development

Human Resources

Infrastructure and Procurement

/Strategic decisions Risk management


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. . & .J P Morgan Chase Co

Internal analysis

/Resource Capability V R I N O SCA?

Client Selection d d Competitive Parity

-Cross sellingCapabilities d d d TemporaryAdvantageContinuous

Investmentin Growth

d d d TemporaryAdvantage

Expense Management d d d Competitiv

e ParityManage Real Estateand Cyclical

Exposure



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Bank of America

Internal analysis


Largest MarketShare

d d d d TemporaryAdvantage

-Cross sellingCapabilities d d Competitive ParityTechnological

Innovationd d d Temporary

Advantage

Corporate

Relationships

d d Competitiv

e Parity/Customer ServiceTransparency

d d Competitive Parity


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& . Wells Fargo Co

Internal analysis


DiversifiedProducts

d d Competitive Parity

/Technology OnlineServices d d Competitive Parity#1 in CustomerService


Education

Internal andExternal

d d d Temporary

AdvantageConservative

Lending Principlesd d Competitiv

e Parity


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, .Citigroup Inc

Internal analysis


Client selection d d Competitive Parity

Largest network d d d d TemporaryAdvantageModernized banking d d d Temporary

Advantage

Investor

perception

d d Competitiv

e Parity


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Commercial Banking in the US. .20 February 2011 :// . .http www ibisworld com. & Wells Fargo Company Profile. .20 February 2011

:// . . / / / .http subscriber hoovers com H home index html. .Citigroup Inc Profile. .20 February 2011:// . . / / / .http subscriber hoovers com H home index html.

& .JPMorgan Chase Co Profile. .20 February 2011 :// . . / / / .http subscriber hoovers com H home index html.

Bank of America Corporation Profile. .20 February 2011:// . . / / / .http subscriber hoovers com H home index html.

: :Industry Surveys Financial Services Diversified. &Standard Poor's Industry. , . .Surveys New York NY 3 June 2010 .Checking Isn t Free at More Branches , . . .Sidel Robin Wall Street Journal Feb

, .19 2011 . .www yahoofinance com . .www bankofamerica com . .www chase com

. .www wellsfargo com

Resources
http://www.ibisworld.com/http://www.ibisworld.com/http://www.ibisworld.com/http://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://www.yahoofinance.com/http://www.yahoofinance.com/http://www.bankofamerica.com/http://www.bankofamerica.com/http://www.chase.com/http://www.chase.com/http://www.wellsfargo.com/http://www.wellsfargo.com/http://www.wellsfargo.com/http://www.chase.com/http://www.bankofamerica.com/http://www.yahoofinance.com/http://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://subscriber.hoovers.com/H/home/index.htmlhttp://www.ibisworld.com/

Banking Industry (1)

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