1. BK Sell pitch
Financials IG

2. Agenda Company Overview Why we bought Since purchase
Why we should sell
Conclusion

3. Company Overview Custodial Bank & Investment Management
Client base: financial institutions, corporations, government entities, endowments, & foundations
6 Continents: 36 Countries
16,000+ non-US employees
Non-US Revenue: 38% (4Q10)
Over $1T AUM

4. Business Model Investment Management: 26% Revenue
Asset Management
Wealth Management
Investment Services: 74% Revenue
Asset Servicing
Issuer Services
Clearing Services
Treasury Services

6. Some Key Numbers Market Cap: $35.96B ($33.4B) (Large Cap)
Shares Outstanding: 1.24B (1.2B)
Debt/Capital: 51.32% (52.3%)
ROE: 8.13% (9.8%)
Revenue: $13.875B ($8.28B)
Beta: 0.73 (0.66) (82% institutionally owned)
12/2011 EPS forecast: 2.54 (2.06 Current)
Credit Rating: AA-
Numbers in parenthesis are numbers from the buy pitch
ROE fell since the buy pitch
Revenues increased but $8B was too low for the record of company

7. Peer Comparison Failed to recover this Fall
BK is the worst performer since this Summer. It failed to make gains that its competitors made in September and October

8. Comparison with BLK Sustainable growth rate: 4.61% P/E: 13.07BK
BLK
Sustainable growth rate: 4.61%
P/E: 13.07
Mkt Cap: 35.96B
EPS: 2.28
Best PEG: 1.39
Last Price: $28.96
ROA: 1.08%
ROE: 8.13%
Sustainable growth rate: 5.11%
P/E: 16.96
Mkt Cap: 36.43B
EPS: 11.01
Best PEG: 0.74
Last Price: $189.98
ROA: 1.16%
ROE: 8.18%
Blackrock offers an array of equity, fixed income, multi-asset class, alternative investment and cash management products, as well as its BlackRock Solutions investment systems, risk management and advisory services

9. Income Statement Increasing SGA expenses when the revenues are stable
Only 3 percent increase in net income since the Euro crisis
This bank is recovering slowly

10. Income Statement- Annual
Deteriorating Net Income even before crisis.
Company couldn’t recover its profit margins of 2006 (nor revenues of 2008)
Note: Fee Revenue didn’t grow much compared to 2009 levels.

11. Operations and Capital
Assets under management grew by 5%
Fee revenue remained an important revenue source
Operations outside of US grew

12. From the buy pitch
The EPS estimate for 200 was 2.36, but the actual EPS is now 2.28

13. Financials
BK increased its 12M revenues to $14.39B this year. However fee revenues are still below 2008 levels
Assets under management grew 5%
Recovery of EPS was below what we expected when we made the buy pitch
Looking at the big picture, BK still didn’t recover as much as the buy pitch predicted
Its stock price underperformed its competitors BLK and STT
Analysts believe BK will remain accretive afterwards and agree with accretion schedule.

14. Why We bought..

15. Fee Based Service

16. Geographic Growth

17. Other reasons.. Macroeconomic trends S&P, Fed Funds rate DCF Valuation
Projected to be 33% undervalued

18. Review of Trade Bought at $28.76 on Feb. 19th, 2010
As of today’s market, $28.20
Loss of 2.02%

19. Chart: Since Purchase: -2.02%

20. Reasons to sell BK European Crisis Not out of the woods yet SRI
Overcharging on currency transactions
No real growth drivers
Original thesis has not played out
Sheer size
low beta
Foreclosure issue
How much still on the balance sheet?

21. Conclusion
Sell full position