S&P 500 Financials Stock Presentation

Skinner, Sureka, Yan 1

Recap: Sector Weighting

Financials are underweighted by 610 BPsSkinner, Sureka, Yan 2

Recommendation for Sector Increase SIM Holdings by 400BPs But, still keep it underweight relative to

S&P500 We are bullish for long run and bearish

for short run Real Estate-Avoid; Regional Banks-

trading at attractive multiples Regional Banks will benefit from long

term growth


Current Holdings in Financials


Stock % of sector

% of portfolio

Berkshire Hathaway Inc. (BRK/A)

24.1% 2.3%

Goldman Sachs Group Inc. (GS)

10.4% 1.0%

Hudson City Bancorp Inc. (HCBK)

17.5% 1.6%

JP Morgan Chase & Co. (JPM)

20.4% 1.9%

Visa Inc. (V) 27.7% 2.6%

Total 100% 9.4%

Recommendations

Purchase 250 bps of TCB Purchase 250 bps of GS (provided price

stays below 180) Sell Visa Hold position in BRK, HCBK and JPM Should bring us underweighting of

200bps*


* If we don’t sell V to fund

TCF Financial Corporation (NYSE:TCB) Financial Holding Company The Company’s businesses include retail and small

business banking, commercial banking, consumer lending, leasing and equipment finance, and inventory finance.

TCF Bank operates bank branches in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona.

The segments of the Company are banking, and leasing and equipment finance.

In August 2008, the Company announced the creation of a new subsidiary, TCF Inventory Finance, Inc.


http://stocks.us.reuters.com/stocks/fullDescription.asp?rpc=66&symbol=TCB

Goldman Sachs Group, Inc. (NYSE:GS)

Bank holding company and global investment banking, securities and investment management firm that provides services worldwide to corporations, financial institutions, governments and high-net-worth individuals.

Its activities are divided into three segments: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.


Visa Inc. (NYSE:V) Visa Inc. operates a retail electronic payments network.

The Company facilitates global commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses and government entities.

Primary customers are financial institutions, for which it provides product platforms encompassing consumer credit, debit, prepaid and commercial payments.

The Company owns a family of payment brands, including Visa, Visa Electron, PLUS and Interlink, which it licenses to its customers for use in their payment programs. It manages and promotes its brands through advertising, promotional and sponsorship initiatives, and by card usage and merchant acceptance.


TCB

Key driver of future profitability is credit loss provisions.

2008-17.6% Modeled at 25% in 2009 Decreasing by 5% each year and

reaches 5% steady state Historically has been below 2%


Other Important Factors

Company operates in the Midwest Poor lending environment exposure is in

Michigan Small exposure to Arizona Price was depressed from 2008 financial

crisis but didn’t experience the same increases in 2009 as large cap financials

Didn’t have a net loss in 2008 or 2009



TCF Financial (TCB)TerminalDiscount Rate = 11.0%Terminal Growth Rate = 3.0%

2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ERevenue 1,130,332 1,169,893 1,210,840 1,253,219 1,297,082 1,335,994 1,376,074 1,417,356 1,459,877 1,503,673

% Growth 3.5% 3.5% 3.5% 3.5% 3.0% 3.0% 3.0% 3.0% 3.0%EBT 113,033 175,484 242,168 313,305 389,125 400,798 412,822 425,207 437,963 451,102

EBT Margin 10.0% 15.0% 20.0% 25.0% 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%Taxes 41,822 64,929 89,602 115,923 143,976 148,295 152,744 157,327 162,046 166,908

Tax Rate 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0% 37.0%Net Income 71,211 110,555 152,566 197,382 245,148 252,503 260,078 267,880 275,917 284,194

% Growth 55.2% 38.0% 29.4% 24.2% 3.0% 3.0% 3.0% 3.0% 3.0%

D&A 67,081 69,429 71,859 75,193 77,825 80,160 82,564 85,041 87,593 90,220 % of Sales 5.9% 5.9% 5.9% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Capex 67,820 105,290 96,867 100,258 103,767 93,520 82,564 85,041 87,593 90,220 % of Sales 6.0% 9.0% 8.0% 8.0% 8.0% 7.0% 6.0% 6.0% 6.0% 6.0%

Free Cash Flows 70,472 74,694 127,558 172,318 219,207 239,143 260,078 267,880 275,917 284,194% Growth 6.0% 70.8% 35.1% 27.2% 9.1% 8.8% 3.0% 3.0% 3.0%

NPV Cash Flows 1,038,297 44.6% Terminal Value 3,659,001 NPV Terminal 1,288,643 55.4% Free Cash Yield 22.1%Projected Equity Value 2,326,940 Terminal P/E 12.9Free Cash Yield 4.6% Terminal EV/EBITDA 17.5

Current P/E 21.7 20.4 12.0 Projected P/E 33.0 31.2 18.2

Current EV/EBITDA 50.8 32.7 23.7 Projected EV/EBITDA 57.9 37.3 27.0

Shares Outstanding 128,800

Current Price 11.85$ Implied Price 18.07$ Upside/(Downside) 52.5%

Debt 4,550,000Cash 329,660

Cash/Share 2.56

% Upside Sensitivity Analysis

12Skinner, Sureka, Yan

52.5% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0%0.0% 88.0% 63.2% 43.6% 27.6% 14.5% 3.5%1.0% 104.6% 75.1% 52.3% 34.3% 19.6% 7.5%2.0% 126.8% 90.4% 63.3% 42.3% 25.7% 12.2%3.0% 157.8% 110.8% 77.4% 52.5% 33.2% 17.8%4.0% 204.4% 139.4% 96.2% 65.5% 42.5% 24.7%5.0% 282.0% 182.3% 122.5% 82.8% 54.5% 33.3%Te

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Discount Rate

TCB Ratio Analysis


Absolute Basis High Low Median Current

P/Forward E 23.7 7.7 13.7 23.0

P/B 4.9 1.3 3.5 1.3

P/S 5.3 1.4 3.6 1.8

ROE 27.1 10.0 22.7 10.6

Relative to Sector High Low Median Current

P/Forward E 1.3 .6 1.1 1.1

P/B 2.9 .8 1.7 1.2

P/S 2.2 .8 1.5 1.3

ROE 1.8 .7 1.4 .7

Goldman Sachs—Facts Currently holding 1,000 shares Last purchased at $146.01 Current Price $ 176.10 Target Price $ 218.82


Goldman Sachs—Earnings


Goldman Sachs – Key Driver Trading and Principal Investments

$10.03 Billion

FICC 5.99 Billion

Equities 2.78 Billion

Principle Investments 1.26 Billion


Goldman Sachs – Expenses Operating Expenses $7.58 Billion C & B 5.35 Billion Non-Compensation 2.23 Billion Provision for Taxes 32.2%


Goldman Sachs - Ratios


Absolute Basis High Low Median Current

P/Forward E 21.5 8.2 12.4 9.3

P/B 5.7 .7 2.1 1.6

P/S 3.6 .4 1.7 2.7

ROE 29.9 4.3 19.5 8.7

Relative to Sector High Low Median Current

P/Forward E 1.5 .5 .9 .5

P/B 1.8 .7 1.1 1.4

P/S 2.0 .4 .6 2.0

ROE 2.0 .3 1.1 .6


Goldman Sachs-DCFTerminal Discount Rate= 11.0%

Terminal FCF Growth= 3.0%

2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018ERevenue 47,090 46,453 48,550 50,097 51,600 53,148 54,742 56,385 58,076 59,818

% Growth (1.4%) 4.5% 3.2% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%EBT 16,482 16,166 16,798 17,108 17,492 17,911 18,393 18,889 19,455 20,039

% Growth (1.9%) 3.9% 1.8% 2.2% 2.4% 2.7% 2.7% 3.0% 3.0%Taxes 5,274 5,173 5,543 5,817 6,122 6,269 6,438 6,611 6,809 7,014

Tax Rate 32.0% 32.0% 33.0% 34.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%Net Income 10,398 10,184 10,446 10,482 10,561 10,833 11,147 11,469 11,837 12,216

% Growth (2.1%) 2.6% 0.3% 0.8% 2.6% 2.9% 2.9% 3.2% 3.2%

D&A 1,742 1,719 1,796 1,854 1,909 1,966 2,025 2,086 2,149 2,213% of Sales 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%

Capex 2,355 2,090 1,942 1,854 1,909 1,966 2,025 2,086 2,149 2,213% of Sales 5.0% 4.5% 4.0% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%

Free Cash Flow 9,786 9,812 10,300 10,482 10,561 10,833 11,147 11,469 11,837 12,216% Growth 0.3% 5.0% 1.8% 0.8% 2.6% 2.9% 2.9% 3.2% 3.2%

NPV Cash Flows 62,551 53.0%NPV Terminal 55,394 47.0% Terminal Value 157,287Projected Equity Value 117,945 Free Cash Yield 7.8%Free Cash Flow Yield 10.3% Terminal P/E 12.9

Terminal EV/EBITDA (10.8)Current P/E 9.2 9.4 9.1

Projected P/E 11.3 11.6 11.3Current EV/EBITDA (16.6) (17.0) (16.3)

Projected EV/EBITDA (15.4) (15.7) (15.1)

Shares Outstanding 539.0

Current Price 176.76$ Implied Equity Value/Share 218.82$ Upside/(Downside) to DCF 23.8%

VISA Inc.

Visa Inc. is currently 27.7% with respect to sector and 2.6% with respect to SIM portfolio.

We would like to sell VisaWhy?... Approaching its fair value of $81.40


Visa Inc. DCF Inc. DCF


Terminal Discount Rate = 10.5%10/19/2009 Terminal FCF Growth = 3.0%

Year 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Revenue 6,911 7,879 8,903 10,149 11,672 13,306 15,168 17,140 19,368 21,886 24,731 % Grow th 14.0% 13.0% 14.0% 15.0% 14.0% 14.0% 13.0% 13.0% 13.0% 13.0%

EBT 4,000 4,483 5,062 5,481 6,069 6,919 7,736 8,741 9,684 10,943 12,366 EBT Margin 57.9% 56.9% 56.9% 54.0% 52.0% 52.0% 51.0% 51.0% 50.0% 50.0% 50.0%

Interest - - - - - - - - - - - Interest % of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Taxes 1,648 1,704 1,873 2,028 2,185 2,491 2,785 3,147 3,486 3,940 4,452 Tax Rate 41.2% 38.0% 37.0% 37.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0% 36.0%

Net Income 2,353 2,780 3,189 3,453 3,884 4,428 4,951 5,595 6,198 7,004 7,914 % Grow th 18.1% 14.7% 8.3% 12.5% 14.0% 11.8% 13.0% 10.8% 13.0% 13.0%

Add Depreciation/Amort 226 394 445 406 467 466 531 600 678 766 866 % of Sales 3.3% 5.0% 5.0% 4.0% 4.0% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%

Plus/(minus) Changes WC 63 83 (27) (30) (35) (40) (46) (51) (58) (66) (74) % of Sales 0.9% 1.1% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3% -0.3%

Subtract Cap Ex 310 315 267 304 315 359 379 429 484 547 618 Capex % of sales 4.5% 4.0% 3.0% 3.0% 2.7% 2.7% 2.5% 2.5% 2.5% 2.5% 2.5%

Free Cash Flow 2,332 2,941 3,341 3,524 4,001 4,495 5,057 5,715 6,333 7,157 8,087 % Grow th 26.1% 13.6% 5.5% 13.5% 12.3% 12.5% 13.0% 10.8% 13.0% 13.0%

NPV of Cash Flows 27,783 40%NPV of terminal value 40,921 60% Terminal Value 111,064 Projected Equity Value 68,704 100%Free Cash Flow Yield 3.45% Free Cash Yield 7.28%

Current P/E 28.7 24.3 21.2 Terminal P/E 14.0 Projected P/E 29.2 24.7 21.5 Current EV/EBITDA 14.8 12.8 11.4 Terminal EV/EBITDA 8.0 Projected EV/EBITDA 15.1 13.1 11.6

Shares Outstanding 844.0

Current Price 80.00$ Implied equity value/share 81.40$ Upside/(Downside) to DCF 1.8%

Debt 55 Cash 4,979 Cash/share 5.90

Visa Inc. Ratios


Relative to Industry

High Low Median Current

P/Trailing E 2.1 1.4 1.8 1.5P/Forward E 2.3 1.4 1.6 1.5P/B 1.1 .7 .8 .8P/S 8.7 5.8 7.3 7.5P/CF 8.4 1.5 1.8 1.7EntValue/EBITDA 16.2 10.0 13.1 10

Relative to S&P 500

High Low Median Current

P/Trailing E 2.1 1.3 1.7 1.4P/Forward E 2.5 1.2 1.6 1.3P/B 1.8 1.0 1.3 1.3P/S 11.3 8.4 9.4 10.8P/CF 8.5 1.4 1.8 1.6EntValue/EBITDA 16.2 10.0 13.1 10.0

Recommendations Summary

Company Current Weights (bps)

Buy/Sell/Hold Proposed Weights (bps)

Berkshire Hathaway Inc.

230 HOLD 230

Goldman Sachs Group Inc.

100 BUY 350

Hudson City Bancorp Inc.

160 HOLD 160

JP Morgan Chase & Co.

190 HOLD 190

TCF Financial Corporation

- BUY 250

Visa Inc. 260 Sell 0

Total 940 1340


* If needed to fund purchases otherwise Hold.

Questions?


S&P 500 Financials Stock Presentation

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