FINANCIAL SECTOR COMPANY PRESENTATION

1
FINANCIAL SECTOR COMPANY PRESENTATION
13 March, 2003
Sam Hawkins Sunghoon Kim Shade Okusanya
2
OUTLINE

• Our Recommendation
• Buy
• Business Analysis
• Financial Analysis
• Valuation Analysis
• Rationale
• Conclusion

3
OUR RECOMMENDATION

• Market Weight (20.64) SIM Financial Sector with
  SP

Banks (Buy)
3.78
Insurance (Maintain)
4.01
Diversified Fin. Services (Trim Buy)
11.00
Real Estate (Maintain)
1.85
4
MAINTAIN WEIGHT
4.01
1.85
2.46
5
TRIM
4.00 (6.95)
1.00 (1.70)
5.00 (5.79)
6
BUY
1.00
1.32
7
TRIM (C, JPM, KRB)

• Rationale
• Banking as well as Diversified Financial industry
  remain healthy profitable despite the recent
  falloffs in their stocks.
• Citigroup, J.P.Morgan Chase, and MBNA remain
  strong and vibrant companies.
• We should use further weakness in the stocks of
  C, JPM, KRB to re-enter accumulating position.
• Capital One and Fifth Third represent a better
  opportunity for capital appreciation due to the
  current noise surrounding their stocks.

8
BUSINESS ANALYSIS

• Diversified Financial Services
• Holding company incorporated in 1995
• Capital One Bank
• Capital One FSB
• Capital One Services Inc. etc.
• Subsidiaries market financial products and
  services to consumers
• Primary business is consumer lending with focus
  on credit card lending
• One of top ten bank card issuers
• 59.7b managed loans
• 47.4m accounts

9
BUSINESS ANALYSIS

• Corporate Strategy
• Targeting specific consumer segments
• Tailoring products meet specific consumer needs
• Using an information technology based strategy
  (IBS) to leverage proprietary information
• Heavy investment in marketing (210.8m)

10
FINANCIAL ANALYSIS Income Statement
1999
2000
2001
2002 (_at_ 3rd Qtr.)
24.71
22.63
21.58
21.44
Operating Margin
29.70
28.70
25.70
19.40
Asset Turnover
26.07
27.01
24.29
22.52
ROE
8.17
9.27
8.91
8.50
Leverage
1.83
2.39
3.05
EPS
3.93
11
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to SP)
12
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to Financial Sector
13
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to Diversified
Financials
14
FINANCIAL ANALYSIS Cash Flow
1999
2000
2001
2002
 000
Free Cash Flow
 
(3,240)
(4,543)
(6,304)
(7,109)
Net User of Cash
(53,670)
(9,790)
470,531
25,802
Change in Cash Flow
15
VALUATION ANALYSIS
P/B
P/S
P/E
EPS
1.52
1.50
7.84
Capital One
3.93
Diversified Financials
1.22
2.59
23.50
3.17
1.93
17.79
12.70
Financial Sector
2.79
3.90
27.80
SP500
30.53
2001 EPS 2.91 2002 EPS Growth 35 2003 EPS
Growth Estimate 15
16
RATIONALE

• Strong business strategy
• Increased consumer confidence/spending
  increased sales for consumer finance companies
• Strong finances to support strategy
• Strong valuations relative to SP 500, Financial
  Sector and DFS

17
BUSINESS ANALYSIS

• Financial holding company and multi-bank holding
  company.
• engages primarily in commercial, retail and trust
  banking, electronic payment processing services
  and investment advisory services.
• Consolidated total assets, deposits shareholder
  equity of approximately 71 billion, 45.9
  billion and 7.6 billion.
• Significant subsidiaries
• The Fifth Third Company
• Fifth Third Leasing Company
• Midwest Payment Systems, Inc. (MPS)

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BUSINESS ANALYSIS
19
BUSINESS ANALYSIS
20
BUSINESS ANALYSIS
21
BUSINESS ANALYSIS - RECOGNITION

• Fifth Third Bancorp Named 1 Superregional Bank
  For the Second Consecutive Year by Fortune
  Magazine - Monday March 3, 111 pm ET
• CINCINNATI, March 3 /PRNewswire/ -- Fifth Third
  is the 1 Superregional Bank for the second
  consecutive year in Fortune magazine's 21st
  Annual "America's Most Admired Companies" Survey.
  
• Fortune's survey results were based on the views
  of 10,000 executives, directors and securities
  analysts who rated the companies in their own
  industries using eight criteria - Social
  Responsibility, Innovation, Long-term Investment
  Value, Use of Corporate Assets, Employee Talent,
  Financial Soundness, Quality of
  Products/Services, and Quality of Management.
• President CEO George A. Schaefer, Jr. offers,
  "Our 20,600 employees are committed to delivering
  the best possible financial products and
  services, building stronger neighborhoods through
  community development investments and providing
  consistent quality growth to our shareholders.
  One of the keys to consistent growth is Fifth
  Third's steadfast commitment to a strong,
  flexible balance sheet. The financial strength of
  our balance sheet was recently recognized by
  Moody's Investors Service with a senior debt
  rating of Aa2, a rating equaled or surpassed by
  only three other bank holding companies in the
  country. Being named the 1 Superregional bank
  for the second consecutive year by Fortune
  affirms these efforts."

22
FINANCIAL ANALYSIS Income Statement
1999
2000
2001
2002 (_at_ 3rd Qtr.)



Operating Margin
59.42
19.5
19.76
19.19
20.20
ROE
11.01
10.78
9.84
9.75
Leverage
1.65
1.97
1.86
EPS
2.76
23
FINANCIAL ANALYSIS
24
FINANCIAL ANALYSIS - 5/3 AS AN INVESTMENT
25
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to SP)
26
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to Financial Sector
27
FINANCIAL ANALYSIS Income Statement
Price/ROE/EPS/GRE Relative to Banks
28
FINANCIAL ANALYSIS Cash Flow
1999
2000
2001
2002
 000,000
Free Cash Flow
 
(2,836)
(4,120)
1,729
(5,073)
Net User of Cash
88
(185)
324
(201)
Change in Cash Flow
29
VALUATION ANALYSIS
P/B
P/S
P/E
EPS
3.52
6.76
17.62
Fifth Third
2.76
1.93
17.79
12.70
Financial Sector
2.79
3.90
27.80
SP500
30.53
2002 EPS 2.76 2002 EPS Percent Change
48.07 2003 EPS 5 Year Growth Est 15.10
30
RATIONALE

• 28 Years of Consecutive Earnings Growth
• Great buying opportunity (stock _at_ 52 wk low)
• Strong Capital Position (Recent Moodys Upgrade)
• Strong valuations compared to SP 500, Sector,
  and other well known regional banks
• Voted 1 Regional Bank for 2nd consecutive year

31
Valuation based on P/E
32
OUR RECOMENDATION

• Market Weight (20.64) SIM Financial Sector with
  SP

Banks (Buy)
3.78
Insurance (Maintain)
4.01
Diversified Fin. Services (Trim Buy)
11.00
Real Estate (Maintain)
1.85
33
OUR RECOMENDATION
MAINTAIN WEIGHT
4.01
1.85
2.46
34
OUR RECOMENDATION
TRIM
4.00
1.00
5.00
35
OUR RECOMENDATION
BUY
1.00
1.32
20.64
36
QUESTIONS