Us banks regulation

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Us banks regulation

  1. 1. The Goldman Sachs Group, Inc. US Banks: Regulation May 2010 Large Cap: Attractive Regionals: Neutral Trust Banks: Neutral Consumer Finance: Neutral Richard Ramsden Goldman Sachs & Co. 212-357-9981 richard.ramsden@gs.com Alec Phillips Goldman Sachs & Co. 202-637-3746 alec.phillips@gs.com Brian Foran Goldman Sachs & Co. 212-855-9908 brian.foran@gs.com Daniel Harris Goldman Sachs & Co. 212-855-7512 daniel.harris@gs.com The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
  2. 2. Regulation 1. Stepping back – what’s really on the table – First tenant: limitations of scope, which would restrict the activities of banks (ie the Volcker rule, the Blanche Lincoln proposal) – Second tenant: alterations to existing practices and market structures (ie the derivatives proposals, the consumer protection agency) 2. An off-setting force – credit and liquidity – Must be weighed against credit availability and liquidity in secondary markets – This may moderate some of the worst case scenarios (eg momentum seems to be building to remove an outright prohibition on swaps dealing by banks ) Where we would position – We believe big banks have lagged enough to justify the legislative risk – Continue to favor JPM and BAC – Exchanges (CME, ICE, NDAQ and NYX) should benefit from the move to central clearing Goldman Sachs Global Investment Research 2
  3. 3. Overview of regulatory reform
  4. 4. The Senate’s proposal on one page Derivatives Reform Resolution Authority • Bank Prohibition: No institution that receives federal support may • Process: Modeled on FDIC resolution process; FDIC may take be a (1) swap dealer or (2) “major swap participant”. control of institution, sell assets or transfer to bridge firm. • Clearing and Execution: Central clearing of standardized contracts • Creditor Protections: (1) panel of 3 bankruptcy judges must agree and execution on exchange or alternative execution facility. with Treasury that company is in “default or danger of default.” (2) Creditors receive at least what they would in Chap. 7 bankruptcy. • Capital and Margin: Prudential requirements for large market participants; higher capital for non-standardized contracts. Initial and • Emergency Lending: Federal Reserve lending under Sec. 13 (3) variation margin required for all non-cleared contracts. limited to broadly available programs; FDIC may guarantee bank/BHC obligations, but requires 2/3 support of council + Fed. • End-user exemption: Smaller users that hedge “commercial risk” – not financial risk—exempt from clearing, execution, and margin reqs. • Reporting: Real-time price reporting for centrally cleared contracts Bank Tax (even if end user is exempt); aggregated delayed reporting for non- cleared swaps. Block trades subject to delayed reporting. • $50bn Fund: Financed through assessments on BHCs $50bn+ in assets, and systemic non-bank firms. Raised over 5-10 yr period. • Position Limits: CFTC may impose position limits. Add’l industry assessments if fund incurs losses. • Coverage: Covers commodity, rates, securities, and FX swaps. • Other tax proposals not included: President Obama’s “Financial Crisis Responsibility Fee” (15bps non-deposit liability tax); Boxer- Webb 50% bonus tax. Systemic Risk Regulation • Scope: Banks with $50bn+ assets; systemic important non-banks. Consumer Financial Protection • Prudential Requirements: Capital, leverage, liquidity requirements. • Bureau of Consumer Financial Protection: Housed within Federal Reserve, but director appointed by President, and Fed is • “Hotel California” Provision: BHCs $50bn+ assets that took TARP prohibited from intervening in Consumer Bureau actions. capital deemed systemically important if it drops BHC status. • Volcker Rule: BHCs may not engage in proprietary trading, may not • Scope: Takes primary jurisdiction over consumer financial products for institutions with $10bn+ in total assets, and non-banks that deal sponsor or invest in hedge or private equity funds; systemically in mortgages or are a large participant in other consumer markets. important non-banks may still operate in these areas, but with Does not regulate activities regulated by the SEC/CFTC. increased prudential requirements. • Concentration limits: No financial company may exceed 10% of • No State Preemption: Federal rules would set floor for regulation, but state laws could supersede federal if stronger. national financial liabilities through M&A. Goldman Sachs Global Investment Research 4
  5. 5. Summary of key proposals and potential impact to financial sub sectors Potential Sector Risk Big Regional Credit Smid Mkt Asset Area of reform What seems likely Points of greatest debate from here Banks Banks Cards Brokers Structure Mgrs 1. Section 106 - can banks own swaps dealers Derivatives Greater use of central clearing 2. Margin requirements ─ + 3. Central clearing vs. exchange trading 1. Sponsorship of hedge funds and private equity -- Volcker rule Less proprietary trading i.e. can banks put HF and PE into asset mgmt ─ + divisions 1. Rule making authority: CFPA vs. Fed New Consumer Financial Consumer Protection Protection Agency (CFPA) 2. National pre-emption vs. state by state lending ─ ─ ─ laws 1. Pre-funded money for any future crisis Some form of tax to fund any Bank tax & size limitations losses from TARP ─ 2. Legislative restrictions on size of banks Ability to wind down systemically 1. Impact on credit markets including potential Resolution Authority important firms ratings agency actions ─ MOST POTENTIAL OVERALL RISK --> NEGATIV LESS AT RISK MODEST E RISK POSITIVES Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 5
  6. 6. The reform debate from here House Senate Passes Financial Services Committee (Nov. 2009) Banking Committee Markup (March 2010) Passes House Floor 223-202 Ag. Committee Markup (Dec. 2009) (April 2010) Senate Floor (April/May 2010) Option 1: Conference Committee House-Senate Conference Committee (May/June 2010) House Passage of Conf. Senate Passage of Conf. Report (June 2010) Report (June 2010) Option 2: House Passage of Senate Bill House Passage of Senate Bill (May/June 2010) Goldman Sachs Global Investment Research 6
  7. 7. Derivatives and prop trading
  8. 8. RAFSA has two important proposals that impact market structure companies  The Volcker Rule (Section 619 or Title VII)  Would prohibit certain types of high risk activity  Proposal could reduce overall trading activity, potentially lower market liquidity, and impact fees generated by exchanges in the transaction parts of their business  Creating a safer derivatives market: there are three tenets to this proposal:  Central clearing of OTC derivatives: all OTC products would be required to be centrally cleared with requisite initial margin requirements for all products  Exchange trading as a price transparency mechanism would be required • Can be exchange traded or traded on an alternative swap execution facility (ASEF)  Allow for some customized bilateral contracts. Exceptions are fairly well defined: • One counterparty is not a swap/security dealer or MSP (major swap participant), the product does not meet the eligibility requirements of a clearing house • Margin may be waived in certain circumstances if one party is not a swap/security dealer or MSP, is using the swap to hedge under GAAP, and is not predominantly engaged in financial activities Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 8
  9. 9. Market Structure & Exchange stocks appear well positioned to benefit  Difficult to see how exchange and clearing stocks are not incremental beneficiaries  CME: currently trades and clears 99% of U.S. futures products on interest rates  NDAQ: acquired the International Derivatives Clearing Group (IDCG) in 2009, which is the only market participant to have announced it has an interest rate swap clearing platform ready for clients to test  Dealers/Brokers have less directional authority to drive clearing strategy than they have had in the past few years  ICE Trust is the dominant provider of clearing services in CDS clearing in the U.S.  Dealers were able to secure 49% of net profits from ICE Trust to support that platform  NYSE – sold 49% stake in its U.S. options business to attract flow  Beyond clearing, there could be positive impacts on transactions and associated exchange traded product  Clearing tends to have a higher profit stickiness given underlying liquidity pool  Other market structure names may benefit: GFIG, BGCP, MKTX, NITE Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 9
  10. 10. Sizing the OTC markets: $604 tn notional and multiple the size of exchange markets $800 Interest rate contracts Unallocated Credit default swaps Foreign exchange contracts Commodity contracts Equity-linked contracts • OTC markets have grown at a 24% CAGR OTC notional amount outstanding ($, trillions) $700 684 596 604 $600 516 592 since 1998 $500 $400 370 414 • Interest Rate swaps have grown the 297 $300 220 257 281 fastest at 26% and represent 72% of total $200 197 169 $100 72 80 81 88 94 95 99 111 127 141 • CDS swaps are now $25 tn • But exchange traded products turn over $0 1H98 2H98 1H99 2H99 1H00 2H00 1H01 2H01 1H02 2H02 1H03 2H03 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 much more rapidly 100 93.0x 92.0x 90 80 500 Interest rate and F/X OTC markets are multiple of exchange peers 70 450 437.2 60 6.5x 50 45.0x 400 40 350 30 21.2x 300 20 11.9x 10 4.5x 2.8x 0.6x 1.2x 1.1x 1.0x 250 0 200 Total FX FX Swaps FX Total FRAs IRS IR F/X Rate Equity Forward Options Options Futures Futures Futures 150 F/X OTC Interest Rate OTC Exchange Traded 100 67.1 48.8 157x 50 1.2x 6.6 5.8 0.3 - Interest Rate Equity Index F/X Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 10
  11. 11. CDS markets: $25 tn gross notional, but netting reduces risk roughly 90% $30 Index Single Name • The CDS markets remain quite robust, with $25.0 tn $25 90% Com pression over $25 tn in gross exposure from Gross to Net $20 CDS exposure • With compression and tear-ups, the amount of net exposure is $2.4 tn $15 • 77% of CDS is dealer to dealer and is likely to $10 move into the ICE Trust Clearing House $5 $2.4 tn • The average length of time to termination is $0 2.7 years Gross Net Dealer to $16 Cumulative Single Name Notional Outstanding ($ tn) Cumulative Notional % Outstanding 120% Client $14 100% 23% $12 80% $10 Average Years to Sw ap Term ination: 2.7 years $8 60% $6 40% $4 20% $2 Dealer to $0 0% Dealer 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 77% Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 11
  12. 12. We estimate $75 bn in CDS initial margin requirements for U.S. companies CDS Market Summary ($ in bn) • We estimate 40% of Dealer to Dealer Dealer to Client Client to Client Total outstanding CDS Single Name 12,167 2,735 24 14,927 contracts are in the U.S. Index 4,455 2,929 3 7,386 Tranched 2,568 130 0 2,698 • Initial margin Gross Exposure Outstanding 19,190 5,794 27 25,011 requirements are likely % of Total Single Name 49% 11% 0% 60% to be 5%-10% of net Index 18% 12% 0% 30% notional Tranched 10% 1% 0% 11% % of Total 77% 23% 0% 100% • We estimate dealers will Compression estimate need to contribute close Single Name 95% 75% 75% 91% Index 95% 75% 75% 87% to $20 bn, and clients Tranched 95% 75% 75% 94% $55 bn when all Estimated Compression 95% 75% 75% 90% contracts are loaded Net Exposure Single Name 602 670 6 1,279 into ICE Trust Index 221 718 1 939 Tranched 127 32 0 159 • Today, there is $635 bn Net Exposure Outstanding 950 1,420 7 2,377 in net notional CDS in U.S. estimated Exposure 40% 40% 40% 40% ICE Trust U.S. ($367 bn) Net U.S. exposure (estimate) 380 568 3 951 Initial Margin required for U.S. firms (% of net, est) 5% 10% 10% 8% and EU ($268 bn) Initial Margin required for U.S. firms ($ bn, est) $19 $56 $0 $75 • There is likely an • ICE has indicated it expects $80-$100 mn in CDS clearing revenue in additional $45 bn in 2010, we estimate it will at least double over the next 1-2 years initial margin required among U.S. firms • This revenue is split with participating dealers Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 12
  13. 13. Interest Rate Swaps: the upcoming $437 tn opportunity Interest Rate Swaps by Currency: Total $437 tn • 35% of global interest rate swap products are U.S. CAD Other Swedish krona 1% 1% 4% based Swiss franc 1% • More than three-quarters are interest rate swaps, Sterling Euro plain vanilla and somewhat easy to standardize 7% 38% Yen 13% • Roughly 60% of product is dealer-to-dealer, with the remaining 40% up for client central clearing and thus impacted by U.S. regulatory changes US dollar 35% Interest Rate Swap Clearing Opportunity More bespoke structures Exotics Interest Rate Swaps by Derivative Type: Total: $437 tn w hose eligibility w ill Currently cleared 10% require further product Basis and X- 25% expansion currency 6% FRAs 30 yr + Options Options eligibility via 9% 11% product set expansion Interest rate sw aps 3% 78% Eligible to clear by Customer trades - focus on customer cpty and type clearing 27% Eligible w / smaller Forw ard rate 12% Backloading dealers - focus on agreements 11% increased program to Sw apclear 8% address Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 13
  14. 14. Client Clearing U.S. denominated swaps is the targeted Interest Rate product Total Global Interest Rate Swap • The interest rate swap market is the focus of Market: the next leg of clearing. It represents 72% of $437 tn the global OTC market • Dealer to Dealer transactions (52%) are cleared Dealer to Client at LCH SwapClear (25%): $109 tn • The clearing opportunity lies in plain vanilla client transactions USD • The initial opportunity to clear will be in USD Swaps: (35%): denominated swaps $39 tn • However, their could emerge global solutions following a successful U.S. Launch Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 14
  15. 15. Could be up to $570 bn in IRS initial margin requirements needed for USD swaps Interest Rate Margin Estimates for U.S. Clients ($ bn) • We estimate USD swaps Less than 1 Between 1-5 Duration Year Years Over 5 Years Total account for 35% of total Total Interest Rate OTC Global Market ($ bn) 159,143 128,301 149,754 437,198 global swaps. % of total 36% 29% 34% 100% • Initial margin U.S. denominated swaps, % of total 35% U.S. denominated swaps, in $ bn 56,118 45,242 52,807 154,167 requirements are likely to % of original interest rate swap notional value 35% 35% 35% 35% be 1%-5% of notional Transaction Type based on duration Dealer-to-Dealer 60% Dealer-to-Client 25% • We estimate clients may Non-Clearable (bespoke, option, basis) 15% need to post up to $570 Dealer-to-Client summary of notional exposure ($ bn) 14,029 11,311 13,202 38,542 bn in initial margin on % of original interest rate swap notional value 9% 9% 9% 9% swap positions for USD Estimated Compression (netting, tear-ups) 25% Net Exposure 10,522 8,483 9,901 28,906 swaps % of original interest rate swap notional value 7% 7% 7% 7% • The size of the client swap Initial Margin required for U.S. denominated Swaps (est) Initial Margin required for U.S. firms ($ bn, est) 1.0% $105 2.0% $170 3.0% $297 2.0% $572 market may decline meaningfully with higher costs/margin • NDAQ and CME have announced they would offer an interest rate swap product for clients; LCH SwapClear has also launched a client product • Today, there is a de minimis amount of margin • NDAQ’s IDCG indicated it would charge $1/$100K of notional value collected on client swaps cleared per contract outside hedge fund • Average duration is 5-7 years for most plain vanilla swaps clients Source: Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 15
  16. 16. How we think about the interest rate swap clearing opportunity: up to $400 mn annually Interest Rate Swap Clearing opportunity Summary Notes Total Global Interest Rate Swap Notional Outstanding $437,198,000,000,000 $437 tn U.S. Percentage of total 35% U.S. Dollar denominated IRS $154,167,000,000,000 Swap participant break-down Dealer to Dealer - plain vanilla 60% $92,500,200,000,000 Already within LCH SwapClear Clearing mechanism Dealer to Client - plain vanilla 25% $38,541,750,000,000 Target market opportunity Other (bespoke, option, basis, etc) 15% $23,125,050,000,000 Will require initial margin, not likely to be cleared Dealer to Client Notional $38,541,750,000,000 This is the sector CME, NDAQ are pursuing Number of 'one $ mn units' 38,541,750 Assumes full backloading, probably takes 4-7 years to reach this level Potential Clearing Revenues Cost per million Potential revenue $2 $77,083,500 $5 $192,708,750 $10 $385,417,500 This is IDCG's target pricing • The only part of the market up for competition is the dealer-to-client IRS market, about 25% of the total IRS market, or about $39 tn in notional • There is limited netting given client positions are bespoke • Potential revenue opportunity from clearing of $100-$400 mn over time, though this could take 4-7 years to achieve Source: Goldman Sachs Research Goldman Sachs Global Investment Research 16
  17. 17. Consumer protection
  18. 18. The CFPA is arguably the biggest concern but most has been accomplished via overdraft protection (Reg E) and credit card legislation (CARD Act) Reg E Impact CARD Act Impact Reg E Impact CARD Act Impact Pre-tax 2009 EPS Norm $BN Guidance % $BN Guidance % Impact DSC Impact EPS PNC $115MM after-tax impact in 2010 (half year impact) 0.35 1.0 37% COF Margin to decline to 15% from 17% currently $0.93 $5.00 19% USB $200MM-$300MM impact in 2010 0.25 1.0 26% DFS Margin to decline by 25-50 bps from 2009YE $0.30 $2.00 15% BAC about $2.0BN / quarter run rate vs $2.57BN currently 2.00 11.0 18% AXP Margin to decline to 9% from 10% currently $0.34 $3.15 11% KEY $50MM on an annualized basis 0.05 0.3 15% BAC $900MM after-tax annual impact $0.09 $2.40 4% STI reduction of 10-20% during the 2H of the year 0.13 0.8 15% JPM $500-$750MM net income reduction $0.15 $6.50 2% JPM $500MM +/- annualized after-tax impact 0.77 5.6 14% C $400-600MM pre-tax annual net impact $0.01 $0.45 2% WFC $500MM after-tax annualized impact 0.77 5.7 13% PNC $40MM after-tax annual impact $0.08 $6.50 1% FITB $20MM / quarter by 4Q09 0.08 0.6 13% USB $100MM pre-tax impact in 2010 $0.03 $2.85 1% BBT $70-$80MM pre-tax annual impact 0.08 0.7 11% WFC $235MM after-tax gross impact $0.05 $4.35 1% FNFG $5-6MM on annualized basis 0.01 0.05 10% Average 6% RF $70MM pre-tax annual net impact 0.07 1.2 6% *: EPS impact for COF, DFS, AXP are based on GS estimates. Average 16% Source: Company reports, Goldman Sachs Research Goldman Sachs Global Investment Research 18
  19. 19. Resolution Authority
  20. 20. Capital levels are back to pre-crisis levels Capital ratios back to pre-crisis levels 50% of banks have >8% Tier 1 common 13.0% TCE / TA Tier 1 Common Tier 1 Common STT 15.9% 12.0% Tier 1 Ratio NTRS 12.8% BK 11.6% 11.0% ~11.0% COF 10.7% 50% above FHN 9.9% 8% CMA 9.6% 10.0% CYN 9.4% C 9.1% US Banks Capital Ratios JPM 9.1% 9.0% BBT 8.7% WAL 8.2% ~8.3% 8.0% MS 8.2% 8.0% STI 7.7% 7.0% BAC 7.6% PNC 7.6% KEY 7.5% 6.0% MI 7.5% ~5.8% 100% FNFG 7.5% above 6% RF 7.1% 5.0% USB 7.1% WFC 7.1% 4.0% ZION 7.0% FITB 7.0% HBAN 6.5% 3.0% 6.0% Simple Avg 8.8% 1Q91 2Q92 3Q93 4Q94 1Q96 2Q97 3Q98 4Q99 1Q01 2Q02 3Q03 4Q04 1Q06 2Q07 3Q08 4Q09 Weighted Avg 8.3% Source: Company reports, Goldman Sachs Research Goldman Sachs Global Investment Research 20
  21. 21. We are about ¾ of the way through losses and capital markets remain accommodative $1.8 tn through $2.1-2.6 tn of losses Capital markets remain open Low High 160 US Banks Common and Converts Issuance ($bn) Out- 140 Cumulative Cumulative standing 140 $ trillions Losses Loss Rate Losses Loss Rate Subprime 0.9 0.3 32% 0.3 38% 120 Option ARM 0.5 0.1 27% 0.2 33% Home Equity 1.1 0.1 13% 0.2 16% 100 Other (FHA, GNMA) 0.9 0.1 11% 0.1 14% Alt-A 2.2 0.2 11% 0.3 14% 80 64 Prime 5.7 0.3 5% 0.4 6% 60 52 Resi Mortgage 11.3 1.2 11% 1.5 13% 45 Commercial Real Estate 3.3 0.3 8% 0.3 10% 40 26 Cards 1.0 0.2 20% 0.2 23% 20 Auto 1.1 0.1 9% 0.2 14% 9 Commercial 6.8 0.4 5% 0.5 7% 0 Total 23.5 2.1 9% 2.6 11% 2H07 1H08 2H08 1H09 2H09 1H10 TD Losses Recognized as of 1Q10 $1.8TN Average Deal -49% -8% 5% 62% 34% 29% Performance Source: Company reports, Goldman Sachs Research Goldman Sachs Global Investment Research 21
  22. 22. Bank tax and size caps
  23. 23. Size caps would be a big deal but we’re not sure there is support to enact them Liabilities would increase through a boom, 2% GDP cap implies $2.7TN of shrinkage then need to fall in a bust 310 Non- Implied Implied $BN Assets Liabilities Deposits 2% of GDP 290 Deposits Decline shrinkage BAC 2330 2,103 976 1,127 285 842 36% 270 JPM 2130 1,971 925 1,046 285 761 36% 2% of Nominal GDP ($bn) C 2000 1,848 828 1,021 285 735 37% 250 MS 820 765 64 701 285 416 51% 230 WFC 1220 1,105 805 301 285 15 1% Total 8500 7794 3598 4,196 1,426 2,770 33% 210 190 170 150 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Company data, SNL, Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 23
  24. 24. Credit availability and liquidity
  25. 25. Less interest rate hedging = more volatile mortgage rates relative to 10yr UST Less hedging = more volatility 500bps Conforming Mortgage spread to 10yr Treasury 450bps Average +1SD 400bps -1SD Standard Deviation 350bps 1970 - 1989 70 1990 - Now 32 300bps 250bps 224bps 200bps 170bps 150bps 134bps 116bps 100bps 50bps 0bps Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Source: Federal Reserves, Freddie Mac, Goldman Sachs Research estimates. Goldman Sachs Global Investment Research 25
  26. 26. As private sector credit shrinks, loans are shifted to the government balance sheet Transfer of credit to government balance sheet most pronounced in resi mortgages % of US YoY % YoY $bn Credit Market Change Change Non-banks and securitization account for biggest piece of Non-banks + securitization 40% -12% -607 credit outstanding and credit shrinkage Bank loans 31% -7% -552 Private credit is being transferred to Government balance Government incl GSEs 29% +8% +495 sheet Total 100% -3% -664 500 100% US Resi Real Estate Credit - YoY Change, $bn Mortgage origination share - Fannie, Freddie, FHA 400 90% 300 80% 200 70% 100 60% 0 50% -100 40% -200 30% -300 20% -400 10% 0% -500 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 2Q09 3Q09 Gov't incl GSEs Bank Loans Non-banks + securitization Note: Loan shrinkage data cited here differs from similar data points cited on p14 and p24 as this data point is sourced from Federal Reserve- Flow of Funds data while p12 and p28 data points are derived from the Federal Reserve- H-8 data Source: Industry sources, Goldman Sachs Research. Goldman Sachs Global Investment Research 26
  27. 27. Banks – possible risks to normalized EPS

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