Financial Services Industry Profitability: Moderate Level Profitability Tiburon Research September 17, 2014

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 1  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 2 Tiburon CEO Summit XXVI Attendees Said that a New Product Launch or Investment Strategy is the Top Strategic Initiative for their Firms in 2014 Tiburon CEO Summit XXVI Attendees By Top Strategic Initiative in 2014 Source:3/10/14 Tiburon CEO Summit XXVI Content Survey Data; Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 3 Consumer Gains were Largest in the Standard & Poor’s 500’s Consumer Discretionary Sector at 324% Consumer Gains By Standard & Poor’s 500 Market Sector Source:3/8/14 Wall Street Journal (FactSet); Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 4  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 5 Financial Services Industry Profitability Segments The Financial Services Industry Profitability can Specifically be Analyzed by Individual Segments, Including Retail Banks, Insurance Companies, Brokerage Firms, and Investment Management Firms Source:Tiburon Research & Analysis Financial Services Industry Profitability Segments Retail BanksBrokerage Firms Investment Management Firms Insurance Companies

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 7 The Standard & Poor’s 500 Consumer Discretionary Sector Increased by 320% Since March 2009 Standard & Poor’s 500 Performance By Sector (March 2009 through March 2014) Source:3/13/14 Financial Times (Bloomberg) (Thomson Reuters Datastream); Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 8  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 9 Financial Services Industry Indicators The Leading Financial Services Institutions in Terms of Profitability can be Specifically be Defined by… Source:Tiburon Research & Analysis Financial Services Industry Indicators --

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 10  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 11 Brokerage Firms & Investment Management Firms Have the Largest Net Profit Margins at 8.6% & 8.3% Respectively Financial Services Industry Net Profit Margin By Segment Source:4/6/11 Yahoo Finance Web Site; Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 12  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 13 Retail Bank Profitability Key Issues Retail Bank Profitability Have a Number of Key Issues, Including Macro Economic Pressure and Segment Competition Source:Tiburon Research & Analysis Retail Bank Profitability Key Issues Marco Economic Pressures Segment Competition

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 14  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 15 Insurance Company Profitability Have a Number of Key Issues Source:Tiburon Research & Analysis Insurance Company Profitability Key Issues Insurance Company Profitability Key Issues --

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 16  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 17 Brokerage Firm Profitability Has a Number of Key Issues Source:Tiburon Research & Analysis Brokerage Firm Profitability Key Issues Brokerage Firm Profitability Key Issues --

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 18  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 19 Investment Management Firms Profitability Has a Number of Key Issues Source:Tiburon Research & Analysis Investment Management Firm Profitability Key Issues Investment Management Firm Profitability Key Issues --

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 20  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 21 The Fixed Income, Currencies, & Commodities Business Represents Up to One- Third of the Net Profits of Some Investment Banks, Including Goldman Sachs Group Investment Banks Net Profits Share from Fixed Income, Currencies, & Commodities Businesses Source: 9/24/13 Financial Times; Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 22 Almost All Investment Banks are Realizing Lower Revenues from their Fixed Income, Currencies, & Commodities Businesses, Including at Citigroup and Morgan Stanley, which Each Posted a 21% Decline Investment Banks Fixed Income, Currencies, & Commodities Businesses Quarterly Revenue Change Source: 9/25/13 Wall Street Journal; Tiburon Research & Analysis Citigroup Morgan Stanley Bank of America Corporation JP Morgan Chase & Company

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 23 Financial Services Firm Revenues Share from Wealth Management Wealth Management Fees Represent a Larger Portion of Revenue in 2012 at 11%, Almost Double that of 2008 Source: 10/1/13 CNN Money.Com Web Site; Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 24 Wealth & Asset Management Investment Banking & Trading Morgan Stanley Revenues By Business Morgan Stanley’s Revenue Sources Shifted After the Financial Crisis with a Reduction in Investment Banking & Trading from 70% to 50% of its Revenues, While Wealth & Asset Management Filled the Gap Source:2/25/14 Morgan Stanley 10Q Report; 9/10/13 Wall Street Journal; Tiburon Research & Analysis Other Businesses

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 25  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ Comments Retail Bank Profitability is Likely to Decline Source:Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 27  Evolution of Financial Services Industry Profitability –Market History –Market Definition –Key Valuation Measures –Leading Financial Services Industry Profitability  Market Segmentation –Retail Bank Profitability –Insurance Company Profitability –Brokerage Firm Profitability –Investment Management Firm Profitability  Financial Services Industry Profitability Future Predictions –Decrease in Retail Bank & Insurance Company Profitability –Increase in Brokerage Firm & Investment Management Profitability Outline

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 28 Trust Banks Share Buybacks are Expected to be 30% through March 2015 Expected Share Buybacks By Bank Type (Through March 2015) Source:3/17/14 Wall Street Journal (Goldman Sachs Group); Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 29 Trust Banks & Credit Card Firms Earnings per Share are Expected to be 5% through March 2015 Earnings per Share By Bank Type (Through March 2015) Source:3/17/14 Wall Street Journal (Goldman Sachs Group); Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 30 Financial Services Firm Revenues Share from Wealth Management Asset Management Fees Represent a Larger Portion of Revenue in 2012 at 11%, Almost Double that of 2008 Source: 10/1/13 CNN Money.Com Web Site; Tiburon Research & Analysis

– Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 31 Source:Tiburon Research & Analysis Tiburon Strategic Advisors Focus on corporate-level strategy -Serve senior executives only at financial services companies -Key services: market seminars, market research, & strategy consulting -Served over 400 corporate clients and completed over 1,700 projects since Host semi-annual CEO Summits, offer free weekly research releases, and offer free business benchmarking tools for all types of advisors Chip Roame background -McKinsey & Company -Charles Schwab & Company -Tiburon since 1998 Comments