Financial Sector Overview

1
Financial Sector Overview

• American Express
• American International
• Citigroup
• Merrill Lynch
• Morgan Stanley

2
Financial Sector

• Since rate cut
• Regained confidence in the sector
• Yield Curve steepened so more profitability
• Biggest gainers

3
American Express

• Industry Analysis
• Credit Services-Dependent on business Cycle
• Confidence after rate cut
• Fundamental Valuation
• Slightly overvalued
• Relative Value
• Slightly Overvalued

4
Valuation

• Relative Value for American Express

5
Valuation

• Fundamental Valuation (DDM Constant Growth) for
  American Express
• Actual Price59.28
• G12
• K14
• Plowback82.1
• DDM D0(1G)/(K-G)56.00

6
American International Group

• Industry Analysis
• Property and Casualty Insurance
• Regained confidence
• Relative Value
• Slightly overvalued
• Fundamental Value
• Overvalued

7
Citigroup

• Industry Analysis
• Money Center Banks
• Greatly benefited by rate cut
• Relative Value
• Undervalued
• Fundamental Value
• Undervalued

8
Merrill Lynch

• Analysis
• Investment Broker National
• Cut several jobs at First Franklin
• Relative Value
• Way undervalued-Ratios low compared to industry
• Fundamental Value
• Slightly undervalued

9
Morgan Stanley

• Analysis
• Investment Brokerage-National
• Relative Value
• Very Undervalued-Ratios
• Fundamental Value
• Slightly undervalued

10
Conclusion

• Many investors have gone back to the normal
  weighted portfolios for Financial
• Stay where we are at this time
• Keep an eye on Morgan Stanley
• Financial sector will recover with the rest of
  the market

11
Financial Sector vs. SP

• 5 days

12
Financial Sector Vs. SP

• 3 months