Rahul Choudhry, Xiangyuan Li,

Jiachen Wang, Shunxian Zou

Company Presentation: Financials Company Presentation: Financials

Agenda

2. Lincoln Financial

J.P. Morgan Chase

1. Overview &

Recommendation

4. Summary

3. Wells Fargo

Bank of America

Sector Overview

www.themegallery.com Company name

Recall Sector Recommendation: HOLD

Company Holdings Recommendations

Company Current SIM Allocation

Buy/Sell Recommendation

Recommended SIM Allocation

2.63% Hold 2.63%

3.85% Sell 50 bps 3.35%

4.00% Hold 4.00%

2.40% Buy 50 bps 2.90%

Total 12.88% Hold 12.88%

www.themegallery.com Company name

Lincoln Financial Group

Business Overview

Stock information:

Current Stock Price: 20.56

Sector: Financial

Industry: Life Insurance

Market Cap: 5.87B

Shares outstanding: 301.67M

Average Daily Volume: 3.79M

Div yield: 1.50%

Beta: 2.42

Analyst recommendation:

Analyst rating: Hold

Target price: 24.37

Current weight:2.63%

Recommended Weight:2.63%

Lincoln Financial Group

Retirement Solutions

Annuities

Defined Contributions

Insurance solutions

Group Protection

Life Insurance

Business Overview

27%

10%

45%

18%

Sales Distribution By Segment (2011)

Annuities

Defined Contribution

Life Insurance

Group Protection

41%

11%

41%

7%

Earnings Distribution By Segment (2011)

Annuities

Defined Contribution

Life Insurance

Group Protection

Data Source: Bloomberg Terminal

• Strong operating fundamentals

• Significant capital flexibility

• Diversified products

Company strength

• High earnings exposure to interest rate sensitive products

• Sales are likely to remaining weak in 2012

Concerns

Stock Valuation

Relative to

Industry

High Low Median Current

P/Trailing E 1.3 0.42 0.89 0.73

P/Forward E 0.99 0.40 0.87 .79

P/B 1.1 0.4 0.8 0.6

P/S 1.7 0.5 1.2 0.9

P/CF 1.5 0.4 0.9 0.8

Valuation Analysis – Multiples,

industry

Data Source: Thomson Reuters Baseline

Valuation Analysis - Multiples

Data Source: Bloomberg Terminal

Relative to S&P

500

High Low Median Current

P/Trailing E 0.86 0.17 0.65 0.42

P/Forward E 0.83 0.14 0.61 0.43

P/B 0.6 0.2 0.4 0.2

P/S 1.4 0.2 1.0 0.5

P/CF 1.2 0.2 0.9 0.6

Valuation Analysis – Multiples, S&P 500

Data Source: Thomson Reuters Baseline

Multiples 70% weight =0.7*21.429 = $15 Current Price: $20.56

DCF Valuation 30% weight=0.3*31.24 = $9.37 Upside/Downside%: 18.53%

Final Target Price = $24.37 Recommendation: HOLD

Final Valuation

Data Source: Thomson Reuters Baseline

Your

Target

Price

WeightWeighted

Price

(F x G)

P/Forward

E13.2 1.8 10.4 5.8 6.9 4.21 29.05 0.1 2.905

P/S 2.2 0.2 1.3 0.6 0.8 36 28.8 0.1 2.88

P/B 1.8 0.2 1.2 0.5 0.7 45 31.5 0.4 12.6

P/EBITDA 35.1 1.66 6.59 2.55 5 5.78 28.9 0 0

P/CF 13.6 2 9.5 5.7 8.5 3.54 30.44 0.1 3.044

21.429

*Your

Target

E, S, B,

etc/Shar

e

Weighted Average Stock Price

Absolute

ValuationHigh Low Median Current

#Your

Target

Multiple

J.P. Morgan Chase

On May 10, 2012 JPM declared that the firm’s Chief Investment Office suffered $2B in trading losses.

Stock declined 20.2% ($40.74 $32.51) till date.

Significant attention from regulators. ‘Black Eye’ for JPM’s reputation in Risk

Management.

JPMorgan Chase & Co is a leading global financial services firm and one of the largest banking institutions in the United States, with operations worldwide.

2.3T in assets and $127.49 billion in stockholders’ equity.

Stock information Ticker: JPM

Sector/Industry: Financials/Money Center Banks

Stock Price(USD): 33.49

52 WEEK(USD): 27.85 – 56.49

Mkt Cap(USD): 127.49B

Avg Daily Volume: 41.30M

Beta: 1.26

Shares: 3.81B

1 YEAR

Analyst Opinion Average Recommendation: OVERWEIGHT

Number of Ratings: 37 (Buy 21, Overweight 6, Hold 9, Under 1

Sell 0)

Average Target Price (USD): 49.91

Price Target (USD): 50.61 (MEAN), 58 (HIGH), 37 (LOW)

5 YEAR

Source: http://quotes.wsj.com/JPM/interactive-chart#

-

20,000

40,000

60,000

80,000

100,000

120,000

2007 2008 2009 2010 2011

Corporate/Private

Equity

Asset management

Treasury and Security

Services

Commercial Banking

Card Services & Auto

Retail Financial Services

Investment Banking (10,000)

-

10,000

20,000

30,000

40,000

50,000

60,000

2007 2008 2009 2010 2011

26%

27% 19%

6%

8%

10%

4%

Managed Entity Sales (% of

Total) for 2011 Investment Banking

Retail Financial

Services

Card Services & Auto

Commercial Banking

Treasury and Security

Services

Asset management

Corporate/Private

Equity

28%

19% 30%

11%

5% 7%

0%

Managed Entity Earnings (% of

Total) 2011 Investment Banking

Retail Financial

Services

Card Services & Auto

Commercial Banking

Treasury and Security

Services

Asset management

Corporate/Private

Equity

Source: http://quotes.wsj.com/JPM/interactive-chart#

Fortress balance sheet with $2.3T in assetts. Largest among all the banks worldwide. Consistently passed the regulators stress tests.

Increased regulations that would limit the banks activities and hurt earnings.(Basel, Dodd Frank, Volcker). JPM’s gold standard image in risk mgmt tarnished after $2B trading losses.

Credit card sales volume increased by 11% in 2011. Total deposits of $1.1 T, an increment of 21% over 2010.

Euro-zone crisis. Exposure of $ 15B to the distressed nations in the Eurozone. Decline in M&A activity within Europe since mid 2011 due to uncertainty.

Highly diversified portfolio with variety of products and services under several lines of business.

High litigation costs. WaMu one of the largest subprime loans issuer. Bear Stearns was also heavily involved in MBS.

#1 ranked in Global Investment banking fees for 2011.

Operation Twist – Flattening of yield curve.

Global Player. Operates in 60 countries worldwide. Mitigates the risk.

Occupy Wall Street movement against bank bailouts, CEO compensation, poor economy & home foreclosures. JPM also in category of “Too Big to Fail” banks.

Terminal Discount Rate and FCF

Recommendation: Sell 50 basis points.

Wells Fargo

Business Overview

• American multinational diversified financial

services company

• Fourth largest bank by assets

• Largest bank by market capitalization

• Three business segments: Community Banking;

Wholesales Banking; Wealth, Brokerage and

Retirement

Stock Overview

Stock Information: (As of 5/20/2012)

Ticker: WFC

Sector: Financial

Industry: Money Center Bank

Market Cap: 164.41B

Current Stock price: 31.4

Current SIM Weight: 4.00%

Beta: 1.25

52 Week range: $22.58-$34.59

Source:

finance.yahoo.com

Pros and Cons

Positive signs:

• Strong performance on profit

• Acquisition of BNP Paribas

• Agreement to acquire Merlin Securities, LLC

• Good reputation on local community

Risks:

• possibly violating anti-discrimination laws in homeowner financing

• highly sensitive to interest rates

• The increased regulation and continuing litigation

• Poor economic growth or even recession

DCF Valuation

Conservative

Assumption

Relative Valuation

Relative to Industry High Low Median Current

P/Trailing E 1.3 0.16 1.1 0.96

P/Forward E 1.2 0.71 1.1 0.92

P/B 1.9 0.8 1.3 0.9

P/S 1.4 0.8 1 0.9

P/CF 1.2 0.4 1 1

Relative to S&P 500 High Low Median Current

P/Trailing E 1.2 0.58 0.82 0.85

P/Forward E 1.6 0.66 0.81 0.73

P/B 1.3 0.5 0.9 0.6

P/S 3.4 1.2 2.2 1.7

P/CF 1.7 0.7 0.9 1.1

Absolute Valuation High Low Median Current Target Multiple Target E, S, B,

etc/Share

Target

Price

(F x G)

P/Forward E 24.1 8.1 13.1 9.8 10 3.08 30.8

P/S 4.4 0.9 3.3 2.1 2.74 15.4 42.2

P/B 3.3 0.8 2.6 1.3 1.5 24.64 36.96

P/EBITDA 10.92 4.13 5.93 5.95 5.9 4.5 26.55

P/CF 13.1 5.1 10 9.9 10.5 3.08 32.34

Overall Valuation

Valuation Methods Current Target Weight

P/Forward E 30.8 0.1

P/S 42.2 0.1

P/B 36.96 0.4

P/EBITDA 26.55 0.1

P/CF 32.34 0.1

DCF 39.69 0.2

Weighted Target 35.91

Analyst Consensus

My Target: 35.91

Current Price: 31.4

Upside Potential:

14.36%

Price Target Summary

Mean Target: 38.18

Median Target: 38

High Target: 43

Low Target: 32

Source: 4-

traders.com

Technical Analysis

Source:

finance.yahoo.com

Recommendation

• Unit Cost: $29.49

• Current Price: $31.4

• Target Price: $35.91

• % of SIM: 4.00%

Bank of America

Stock Overview

General Information

• Ticker: BAC

• Industry: Div. Financial Services

• Market Cap: 76 Billion

• Beta: 1.96

• Current Price: $7.02

Analyst Opinion

• Highest Target: $14.50

• Lowest Target: $6.20

• Median Target: $10.00

Stock Overview

-20

-10

0

10

20

30

Consumer &BusinessBanking

ConsumerReal Estate

Services

GlobalBanking

GlobalMarkets

GlobalWealth &

InvestmentManagement

All Other

2011 Segment Revenue & Net Income (in billions)

Revenue Net Income

Business Overview

Strengths

Strong Investment Banking

Leading Consumer Banking

Weaknesses

Litigation Expenses

Non-performing Assets

Opportunities

Recovering U.S. Economy

Significant Cost Cutting

Threats

Regulation & Europe Crisis

Tightening Yield Spreads

Fundamentals Growth Estimates

Financial Analysis

DCF Analysis

Multiple Analysis

Multiples High Low Median Current Target Price

P/Forward E 83.0 6.0 11.0 8.6 10 6.71

P/S 3.8 0.3 2.9 0.8 1.6 14.58

P/B 2.8 0.1 1.7 0.35 0.6 11.90

P/CF 43.5 2.7 10.3 5.0 7.5 10.53

Measure Weight

DCF 15%

P/Forward E 15%

P/S 15%

P/B 40%

P/CF 15%

Target Price $11.26

Upside Potential: 60.41%

Comparable Analysis

Multiples Bank of America

Wells Fargo

J.P. Morgan

Industry Sector

P/Trailing E 6.4 10.7 7.4 7.2 10.6

P/Forward E 8.6 9.2 7.3 7.2 10.0

P/B 0.35 1.2 0.7 0.5 0.9

P/S 0.8 2.0 1.3 1.0 1.4

P/CF 5.0 9.2 5.7 5.5 8.5

Comparable Analysis

5.2

9.8

10.1

12.5

29.9

0 5 10 15 20 25 30 35

Goldman Sachs

Bank of America

Morgan Stanley

J.P.Morgan

Wells Fargo

European Exposure (Hedging Incorporated) (in billions)

Comparable Analysis

15.13%

15.60%

17.10% 17.40% 17.49%

14%

15%

16%

17%

18%

Wells Fargo J.P.Morgan Goldman Sachs Morgan Stanley Bank ofAmerica

Total Capital Ratio

Econ. & Tech. Analysis

Recommendation

Recommendation:

Buy 50 basis points

Increase weight from 2.40% to 2.90%

Catalyst

Recovering U.S. Economy

Significant Cost Cutting

Risks

Regulation & Europe Crisis

Tightening Yield Spreads

Company Holdings Recommendations

Company Current SIM Allocation

Buy/Sell Recommendation

Recommended SIM Allocation

2.63% Hold 2.63%

3.85% Sell 50 bps 3.35%

4.00% Hold 4.00%

2.40% Buy 50 bps 2.90%

Total 12.88% Sell 40 bps 12.88%

www.themegallery.com Company name

Q & A

Any Questions?