Richard K. Davis Chairman, President and CEO October 27, 2009

1. Richard K. Davis Chairman, President and CEO October 27, 2009

2. Right Brain

3. The Way Forward?

4. Banking Industry 2006 • Strong • Healthy • Vibrant

5. Banking Industry Today • Strong? • Healthy? • Vibrant?

6. You Might be an Banker if ... • Your 4th grade daughter asks you to cancel your appearance at her class’s career day • You’re afraid to go to Washington, D.C. • Your spouse tells everyone you’re a pizza delivery driver

7. The Economic Outlook GDP Unemployment Labor compensation Housing Automotive Economic growth Consumer spending Consumer confidence!?

8. Intersection: U.S. Economy Banking

9. Intersection: Global Economy U.S. Economy Banking

10. Catalyst? Banking!

11. Liquidity Crisis …to Credit Crisis …to Solvency Crisis

12. 2008 was different from any crisis in living memory % change in S&P market index (and related proxies for early years) by year 2007 2005 1994 1993 1992 1987 1984 1978 2009 Q3 1970 1960 2006 1956 2004 1948 1988 1947 1986 1923 1979 1916 1972 1912 1971 2000 1911 1968 1990 1906 1965 1981 1902 1964 1977 1899 1959 1969 1896 1952 1962 1895 1949 1953 1894 1944 2003 1946 1891 1926 1999 1940 1889 1921 1998 1939 1887 1919 1996 1934 1881 1918 1983 1932 1877 1905 1982 2001 1929 1875 1904 1976 1973 1914 1874 1898 1967 1913 1872 1997 1966 1897 1963 Current crisis 1957 1903 1871 1892 1961 1995 1941 1890 1870 1886 1951 1991 1887 1869 1989 1920 1878 1943 1883 1868 1917 1864 1942 1985 1910 1882 1867 1858 1925 1980 1893 1876 1866 1855 1924 1975 1861 1865 1955 1884 1850 1922 1860 1859 1873 1849 1915 1950 2002 1854 1853 1856 1848 1909 1945 1974 1841 1851 1844 1847 1901 1938 1958 1954 1930 1837 1845 1842 1838 1900 1936 1935 1933 1907 1831 1835 1840 1834 1880 1927 1928 1885 2008 1857 1828 1833 1836 1832 1852 1908 1863 1879 1931 1937 1839 1825 1827 1826 1829 1846 1830 1843 1862 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 12

13. The global financial crisis shrunk the world economy at a similar rate as the start of the Great Depression 13 SOURCE: Eichengreen and O’Rourke, 2009, Center for Economic and Policy Research

14. 0 U.S. government and others have taken unprecedented efforts to support the financial system • Maximum Notional amount $ Billions • Program • 10,985 • Guarantees of risky assets • Bear Stearns • 29 • 892 • Citi • 301 • Bank of America • 118 • FDIC Guarantee to GE • 139 • FHA Hope for Home Owners • 300 • Liquidity support – bank run protections • FDIC Liquidity Guarantees • 1,400 • 5,220 • Net Portfolio CP Funding • 1,800 • TAF • 900 • MMIFF • 540 • Key questions • TSL • 250 • Further intervention? • Exit strategy? • Primary Credit Discount • 93 • ABCP Liquidity • 62 • Primary Dealer and others • 47 • Bailouts – capital infusions • Securities Lending Overnight • 10 • 4,873 • Secondary Credit • 118 • TARP • 700 • TALF (ex TARP funding) • 1000 • P-PIP (ex TARP funding) • 900 • Credit easing by MBS purchase • 1250 • Agency debt/ treasury securities • 500 • Fannie/Freddie (ex TARP funding) • 400 • AIG (ex TARP funding) • 123 14

15. Base case 2009 ‘10 ‘11 ‘12 2013 The global macro outlook remains highly uncertain Scenario 1: Quick fix Rebound by end of 2009, sustained in 2010-11 Scenario 2: Battered, but resilient Prolonged stress through mid-2010, recovery begins 2011 Scenario 4: Double dip Shallow recovery followed by second downturn Scenario 3: Stalled globalization Moderate recession, followed by structurally slower global growth 2009 ‘10 ‘11 ‘12 2013 15

16. Estimated cumulative • Losses • Losses written • off through July 2009 More pain to come – $1.5 trillion of an estimated $2.6 trillion in global credit losses on U.S. assets has been recognized Scenario 2: ‘Battered, but resilient’ - Estimated cumulative U.S. loan losses and mark-downs USD billions, global losses on U.S.-issued assets • 240 • ~2,640 • 130 • 200 • 400 • ~60% or $600B borne by banks • Of this, ~70% or $400B borne by 19 SCAP banks • 390 • 380 • 900 • Residential real estate • CRE • Consumer credit cards • Other consumer loans • HY Bonds • LL Loans • Other business debt • Total • Total outstandings 11,140 3,480 840 1,680 680 590 6,410 24,820 • Loss as % of outstanding 8% 11% 46% 24% 29% 22% ~4% 11% • % of losses recognized1 ~90% ~40% ~25% ~40% ~60% ~60% ~45% ~60% 1 Total write-offs as of July, 2009 16

17. Future outlook for banking is linked to the macro economy and the regulatory and political environment • Key drivers of change • Key sources of uncertainty • Macro • economy • What will be the depth and shape of the global recession and recovery? • What is the magnitude of balance sheet write-offs yet to come? • When will the global capital markets and credit markets recover? • To what extent will consumers and corporates continue to deleverage? • Re-regulation and political environment • How will regulators intervene? • How will the political environment impact the industry? 17

18. Banking – next 3-5 years • + • ? • – Beyond the current uncertainty, banking will re-emerge as an attractive space • ESTIMATES • Profitability will return to 2006 levels by 2013 • Bank estimated pre-tax profits (after provision for losses) • Still attractive • Economic recovery • Normalized loan provisions • Shrinking of shadow banking • Widening credit spreads • More safety/ soundness • $48B • $45-47B • New headwinds • Impact of regulations • Larger capital requirements • Countercyclical provisions • Higher deposit insurance • Lower EPS due to dilution • ($2B) • 2006 • 2008 • 2012-2013E • ROA • 1.4% • (0.5%) • ~1.3% • (after tax) • Valuation uncertainty • Higher PE due to lower risk • 13% • (0.5%) • 11-12% • ROE • (after tax) 18

19. Industry structure in the next 3 years • Banks will largely focus on traditional less-risk businesses • Regulators will be more strict • Failure / consolidation of mid-tier and smaller banks • Deposits/ savings/ investments will grow faster, and credit will grow slower (as households save and deleverage) • Smaller, more vanilla securitization market; rise of on-balance sheet banking • Rise of boutiques, especially in talent-driven businesses (M&A advisory, proprietary trading, etc.) • Monolines/ credit unions/ ILCs will remain • Crisis will accelerate the shift of economic growth to developing markets 19

20. Proposed Financial Regulatory Changes • New Financial Consumer Agency • Systemic Oversight Council • Resolution Mechanism for Large Institutions • Regulatory Consolidation and Restructuring • Stress Testing Requirements (liquidity / capital / economic) • “Living Will”

21. Intersection: Global Economy U.S. Economy Banking

22. Banking’s Role in the Economic Expansion The Next Phase: • Recovery? • Expansion? • Adjustment?

23. The Banking System Purpose To bear risk and allocate capital But: (in recent years) The outcome was to have created risk (risk sharing) (risk creation)

24. The Banking System Purpose To bear risk and allocate capital And: (going forward) The outcome is to create growth (risk sharing) (create leverage)

25. Intersection: Banking Leadership

26. Now is the Time for Leadership!

27. Management vs Leadership

28. Management “The secret of successful managing is to keep the five guys who hate you away from the five guys who haven’t made up their minds yet.” - Casey Stengel

29. Leadership “The best leader is the one who has sense enough to pick good people to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.” - Theodore Roosevelt

30. Balance “Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.” - Stephen R. Covey

31. Move the Ladder!

32. The Way Forward?

33. Richard K. Davis Chairman, President and CEO October 27, 2009