1 / 36

FINANCIAL SECTOR COMPANY PRESENTATION

FINANCIAL SECTOR COMPANY PRESENTATION 13 March, 2003 Sam Hawkins Sunghoon Kim Shade Okusanya OUTLINE Our Recommendation Buy Business Analysis Financial Analysis Valuation Analysis Rationale Conclusion OUR RECOMMENDATION Market Weight (20.64%) SIM Financial Sector with S&P

jacob
Download Presentation

FINANCIAL SECTOR COMPANY PRESENTATION

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  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 S&P 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 2002 (@ 3rd Qtr.) 2001 2000 1999 Operating Margin 21.44% 21.58% 22.63% 24.71% Asset Turnover 19.40% 25.70% 28.70% 29.70% ROE 22.52% 24.29% 27.01% 26.07% Leverage 8.50 8.91 9.27 8.17 EPS 3.05 2.39 1.83 3.93

  11. FINANCIAL ANALYSIS – Income Statement Price/ROE/EPS/GRE Relative to S&P)

  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 2002 2001 2000 1999  ’000 Free Cash Flow ($7,109) ($6,304) ($4,543) ($3,240) Net User of Cash Change in Cash Flow $25,802 $470,531 ($9,790) ($53,670)

  15. VALUATION ANALYSIS P/E P/S P/B EPS Capital One 7.84 1.50 1.52 3.93 Diversified Financials 23.50 2.59 1.22 3.17 Financial Sector 12.70 17.79 1.93 2.79 S&P500 27.80 3.90 30.53 2001EPS – 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 S&P 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)

  18. 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, 1:11 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 2002 (@ 3rd Qtr.) 2001 2000 1999 Operating Margin % % % 59.42% ROE 20.20% 19.19% 19.76% 19.5% Leverage 9.75 9.84 10.78 11.01 EPS 1.86 1.97 1.65 2.76

  23. FINANCIAL ANALYSIS

  24. FINANCIAL ANALYSIS - 5/3 AS AN INVESTMENT

  25. FINANCIAL ANALYSIS – Income Statement Price/ROE/EPS/GRE Relative to S&P)

  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 2002 2001 2000 1999  ’000,000 Free Cash Flow (5,073) $1,729 ($4,120) ($2,836) Net User of Cash Change in Cash Flow ($201) $324 ($185) $88

  29. VALUATION ANALYSIS P/E P/S P/B EPS Fifth Third 17.62 6.76 3.52 2.76 Financial Sector 12.70 17.79 1.93 2.79 S&P500 27.80 3.90 30.53 2002EPS – 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 @ 52 wk low) • Strong Capital Position (Recent Moody’s Upgrade) • Strong valuations compared to S&P 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 S&P 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

More Related