1. Financials Sector Presentation
MIKE RAINEY
MITCH SALSBERY
MIKE SHAVER
MADDIE SHIRK

2. Financials: Overview

3. Overview Industries: Banks Insurance 3.91T 1.33T Capital markets
Consumer Finance
251.54B
Diversified Financial Services
533.60B
Insurance
1.33T
Mortgage REITs
69.34B
Thrifts & Mortgage Finance
93.00B

4. Financials Overview Market Cap: 7.56T % of S&P 500: 14.01%
SPY 1 year: %
Financials 1YR: %

5. Largest Companies Berkshire Hathaway Citigroup 471.65B 170.284B
Goldman Sachs Group
JP Morgan Chase & Co
83.163B B
American Express
Bank of America Corporation
83.421B B
US Bancorp
Wells Fargo and Company
81.844B B

6. Diversified Financial Services
Performance
YTD
1 Year
3Year
5 Year
Financials
-1.71%
+12.99%
+35.61%
+71.86%
Banks
-2.18%
+15.34%
+35.58%
+80.88%
Capital Markets
+3.58%
+20.75%
+27.31%
+71.54%
Consumer Finance
-2.70%
+19.78%
+14.94%
+38.66%
Diversified Financial Services
-3.85%
+11.42%
+40.01%
+83.93%
Insurance
-5.01%
-1.04%
+22.34%
+53.26%
S&P 500 ® Index
+3.75%
+14.00%
+32.06%
+69.23%

7. 1 Year vs S&P500
5 Year vs S&P500
Financial Sector

8. Financials: Business Analysis

9. Business Cycle
Financials show top performance during growth and maturity phases
High interest rates improve outlook
As cycle progresses, financials lose due to lower spending

10. Porter’s 5 Forces Barrier to Entry Moderate
Difficult to raise necessary capital to gain entry
Highly supervised
Small banks able to offer more
Supplier Power
Policy has large impact
Customer can change very easily
Buyer Power
Buy and supplies capital
As rates increase, may increase power due to more competition for money
Substitution
Many small companies taking aim at segments
Increased competition and low rate products
Rivalry
High
Highly competitive
Small banks have different regulations
Fees a big topic
Similar products

11. Supply/Demand Consumers are people, companies, governments Drivers:
Interest rates
Inflation
Economic conditions
Government regulations
Overall financial sector is second largest

12. Financials: Economic Analysis

13. Factors of High Influence
Economic Conditions in US (S&P 500)
Interest Rates
Consumer Confidence
US Gross Domestic Product
Unemployment
Regulations, Policy and Taxes

14. A strong economy drives personal and business investing

15. Interest Rates Changes in interest rates drive how investors function
Increased rates are good for lenders

16. High confidence leads to more investing and purchasing
Consumer Confidence
High confidence leads to more investing and purchasing

17. Economic growth trends towards more lending and borrowing
GDP
Economic growth trends towards more lending and borrowing

18. Unemployment
A fully staffed workforce means increased business investment
Historically low rates raise questions on the trend’s outlook

19. Analysis and Projections
S&P = Financials
Interest rates = Financials
Consumer confidence = Financials
GDP = Financials
Unemployment = Financials

20. Financials: Financial Analysis

21. Financial Projections

22. Key Financial Overview – Income Statement

23. Key Financial Overview – Balance Sheet

24. Key Financial Overview – Balance Sheet

25. Key Financial Overview – Cash Flows

26. Key Drivers of Financial Performance
● Tax law changes
● Interest rates
● Frank Dodd executive action

27. Financials: Valuation Analysis

28. S&P 500 vs. S5FINL

29. S&P 500 vs. S5FINL

30. Sector Valuation

31. Industry Valuation

32. Portfolio Breakdown

33. Recommendation Recommendation is to remain “neutral”
Current position is overweight
Previously underperformed the S&P… BUT
Current relative multiples are lower than their median
Current S&P multiples are higher than their median
Expect the financial sector to outperform S&P moving forward