1. Paul Verdier, Xiang Wu, Huiwu Wang, Zhihao Wang
MAX M. FISHER COLLEGE OF BUSINESS
Financial Sector Stock Presentation
Paul Verdier, Xiang Wu, Huiwu Wang, Zhihao Wang

2. Sector Overview

3. OSU SIM Fund VS. S&P 500
- 0.11%

4. Current Holdings
4.04%
2.7%
3.32%
1.76%
3.50%

5. Goldman Sachs Group Inc Company overview
Stock prices

6. Business Key Drivers-Segments
Investing & Lending
Net revenue in investing and lending segment is $6.58 billion, 61% higher than The equity securities revenue is $2.00 billion, 78% than 2016 and the revenue in debt securities and loans is $2.00billion, 32.91% higher than 2016.
Net revenues in Investment management is $6.22 billion, 7% higher than Pre-tax earnings are $1.42 billion, 25% higher than The segment benefits from the 2017 high stock price, both equities and fixed income assets appreciated and leads to the improvement of segment performance.
Investment Management
two segments were doing good since the macroeconomic environment and the business cycle influence

7. Macroeconomic environment
The company is highly correlated with the GDP

8. Business Cycle Influence

9. Political regulations
Recently, the tariff impacted the stock prices badly.
The company’s stock price dropped from $ to $245.64, causing a 9% loss for shareholders in this period.

10. Financial analysis Revenues projections vs Analyst’s consensus
EPS projections vs Analyst’s consensus

11. Comparisons Multiples ROE
The buisness will continue to grow with the growth of market

12. GS VS Financial Sector and S&P 500

13. Valuation

14. Recommendations
Hold: higher stock prices and tighter credit spread benefit the company in 2017 and we believe this favorable economic environment is going to continue in 2018
Risks: Economic Growths: GDP and inflation
Contral Bank activities: increase the interest rates
Political regulations: more limitations on the market

15. MetLife Company Overview
Leading financial services company in the world; Biggest life insurance company in the U.S.
Provide insurance, annuities, employee benefits and asset management
Operate in more than 40 countries, including U.S., Japan, Latin America, Asia, Europe and the Middle East

16. MetLife Risks Advantages & Drivers
Sustained low interest rates. The low interest rate will hurt MetLife’s margins and returns compared to its peers.
Poor results in the international business. Weak operating results, unfavorable macro trends and fiscal policy pose risks are main risks to poor performance in the business.
Spin-off of Brighthouse are worse than assumed. If transaction costs are greater than assumed,$130 million in 2018 and $195 million in 2019, there could be downside risk to EPS and ROE estimates.
Non-medical health contributes most in total revenue and will keep growing in the future.
The group benefits business will expand in Latin American and Asia which will increase total revenue.
Key drivers such as median age of population, disposable income per capita and interest rate have optimistic trend.

17. MetLife Valuation DCF Model Revenue growth rate: 2.4%
Long term growth rate: 2.0%
Target price: $46.75
Relative Method
P/E: $44.16
P/B: $61.13
P/S: $50.05
P/CF: $57.60

18. Recommendation Hold MetLife Weight average project price: $ 50.52
10.08% upside from current price

19. Wells Fargo
Stock performance from 3/31/2017 to 3/30/2018
WFC: - 6.8% vs JPM: 23.5% vs C: 11.6% vs
BOA: 25.6% vs S5FINL: 15.1%
Overview
Founded in 1852 and headquartered in San Francisco
Three segment: Community Banking, Wholesale Banking, and Wealth and Investment Management
Third largest bank in U.S. in terms of asset and market cap
Sales scandal (e.g., opened 2 million deposit and credit card accounts that consumers may not have authorized.

20. Macro environment & Driver
Increase in interest rate: federal funds rate target range increased by a quarter point to 1.5%-1.75%. Many believe interest rate will be increased two more times this year.
Tax cut: Wells Fargo effective tax rate dropped from 31% to 18%.
Tax expense: $10,075 million in 2016 vs $4,928 million in 2017.
Cost cutting: shut down 200 branches last year, focusing on digital banking to reduce operating cost and improve efficiency.
Expectation of financial deregulation.

21. Financial analysis
Income statement projection

22. Valuation WFC vs S5FINL WFC vs peer firms
lowest P/E ratio. Second lowest P/B and
P/S ratio
Relative valuation
Target price: $61.5

23. Valuation
DCF model ( 11.5% wacc and 3% terminal growth rate)

24. Recommendations Catalysts Risks
Increase in interest rate Not sure how company’s reputation will
About 20% price upside potential based on valuation be affected by sales scandal.
Tax benefit
Cost cutting plan ( $4 billion by the end of 2019) Uncertainty coming from Federal Reserve’s
Replacement of board member in order to restore asset penalty
public confidence (more downloads of bank’s app)
Substantially underperformed the financial sector and Higher borrowing costs due to downgraded
peer firms since last year, might resulted from investors by rating agency such as S&P
overreaction.
Overall, I recommend Wells Fargo as a BUY.

25. Citigroup 46% 50% 4% Growth Drivers -- Existing Home Sales
46% % %
Growth Drivers --
Existing Home Sales
Consumer Spending
Market Volatility
Stock Drivers --
Stock Buyback driving EPS
Low Topline Growth
Good Earnings

26. Valuation & Recommendation
HOLD

27. Growth Comparison

28. Efficiency Ratio Comparison

29. Stock Recommendation

30. Questions?

31. Appendix