Financial Services Sector A Path to Normalized Earnings Christopher Shipley Senior Equity Analyst

Financial Services – A Path to Normalized Earnings The Worst is Behind Us Financial sector is clearly on the mend Industry raised significant equity capital post the stress tests Lessening reliance on government support Some TARP funds repaid Issuing debt without FDIC backing Credit markets showing signs of stabilization Consumer losses seem close to peak C&I and CRE later cycle – more difficult to forecast With capital levels more certain, can use normalized earnings Many stocks have moved quickly to discount these levels Still see opportunities Some quality large caps offer compelling risk / return

Financial Services – A Path to Normalized Earnings Significant Risk Factors Remain Path of economy by no means certain Losses could be higher or have longer tail than expectations Would raise further capital concerns Push out normalized earnings Uncertainty regarding future regulatory framework Capital levels will be higher Higher capital pressures ROEs Lower returns will negatively impact valuations Consumer protections will harm returns and likely shrink portfolios CARD Act, etc

Financial Services – A Path to Normalized Earnings Favorite Stocks Positioned toward names with early cycle credit exposure, capital markets, and leading competitive positions JPMorgan Chase (JPM 1/A) Wells Fargo (WFC 1/A) Bank of America (BAC 1/C) Goldman Sachs (GS 1/B) State Street (STT 1/B)

Thank You. Christopher Shipley Senior Equity Analyst