Proposal for Gordan GekkoBanking & Investments

Eric Hasty Prajakta Patil

Rachel Robins Muyang(Robb) Su

Agenda

1. G.G Banking & Investment Overview

2. Recommendation

3. Implementation

4. Timeline

5. Governance Structure

6. Financial Analysis

7. Risk Mitigation

8. Scenario Analysis

Page 3

LEADERin the industry

OPERATIONALwithin time and budget

constraints

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Enter the commercial

banking market

How can G.G integrate

net interest margin into

the current revenue

stream?

DIVERSIFICATIONIn business

Search for business

opportunities to expand

revenue stream and

increase profitability

Recommendations TimelineImplementation RiskFinancial ScenarioOverview

Overview

Governance

Page 4

Enter the Direct Banking Space

RecommendationsTimeline Implement Risk Cost/Benefit Future SolutionsBackground

License

Core

Banking

Platform

Convert to

Direct Bank

Acquire an

Existing

Bank

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Expect Net

Interest Margin

near 2% with

deployment

Conservative Net

Present Value

estimation of

$28MM after 10

years

Example Target:

BNB Hana Bank

► Source: FDIC SDI

Recommendations TimelineImplementation RiskFinancial Scenario Overview Governance

Page 5

Operational Model – SaaS model with Cloud Deployment

Private

Cloud

Deployment

►Scalable

►Flexible

►Shared

access

Software

as a

Service

►Adaptable

►Cost

effective

►Fast

deployment

Reduced Cost of

►Human

Resources

►IT infrastructure

►Upgrades and

Maintenance

Recommendations TimelineImplementation RiskFinancial Scenario Overview Governance

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Page 6

Knowing the Customers for Online Banking

Who They Are:

Mid-market customers among

heaviest users

Source: EY Global Commercial Banking

Survey 2014

How to Reach Them:

Advertising with Email and Direct Mail and New

Customer Promotions

What They Want:

Recommendations TimelineImplementation RiskFinancial Scenario Overview Governance

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Page 7

Timeline

Phase 1

Marketing &

Deployment

System

Implementation

Vendor Selection

and Licensing

Acquisition &

Restructuring

Phase 2 Phase 3 Phase 4

Timing

Key tasks

24 weeks

►Acquire

Brick and

Mortar Bank

►Convert to

direct Bank

2 weeks

►Vendor

selection

►Contract

finalization &

SLA

4 weeks

►Customization

►Implementation

4 weeks

►Marketing

►Deployment and

operationalization

Recommendations TimelineImplementation RiskFinancial Scenario Overview Governance

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Page 8

Project Governance Structure

Strategy

Committee

Triad

Co-Leads

Integration

Lead

Project Co-Lead

Change ManagementDirector of

Quality Management

Project Co-Lead

Business ProcessVice President

of Operations

Project Co-Lead

TechnologyDirector of

Information

Systems

Triad Co- Leads

Project team

Recommendations TimelineImplementation RiskFinancial ScenarioOverview Governance

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Page 9

Financial Budget

77.00%

2.56%

8.90%

11.55%

BankAcquisition

CoreBankingSystem

Marketing

Professional Services

Professional Services 38,953,850

Bank Acquisition 259,691,000

Bank Assets 259,691,000

Core Banking System 8,620,000

Implementation 3,000,000

License Fee, recurring 2,600,000

Customization 220,000

Third Party Services & Hardware 2,000,000

Other Software Licensing 800,000

Marketing 30,000,000

Advertising 20,000,000

Promotions 10,000,000

Total Cost of Project 337,264,850

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Recommendations TimelineImplementation RiskFinancial ScenarioOverview Governance

Page 10

Risk Mitigation

Priority Evaluation

Low -

Medium -High -

Low -

Medium -

High -

Low -

Medium -

High -

Financial Impact

Possib

ility

Mitigation Strategy:

Expand the search criteria of target banks

Mitigation Strategy:

Invest in internal control systems and engage IT auditing professionals

► Unsuccessful Acquisition

► Lack of Customer Confidence

► Cyber SecurityIssues

Financial Impact

Possib

ility

Financial Impact

Possib

ility

Mitigation Strategy:

Align the marketing strategies with brand equity of G.G.

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Recommendations TimelineImplementation RiskFinancial ScenarioOverview Governance

Page 11

Scenario Analysis

Net Present Value Likelihood

Baseline Scenario $28,054,915 High

Best Case $181,148,630 Moderate

Worst Case ($283,622,808) Low

28 August 2015 Proposal for Gordon Gekko Banking & Investments

Recommendations TimelineImplementation RiskFinancial ScenarioOverview Governance

Thank you for your time!

Questions?

Page 13

Appendix A – Vendor selection and operational model

Excellent

Good

Satisfactory

Poor

Very poor

SaaS

Disaster

management

Risk Management

and Best practices

Fast DeploymentCost efficiencyOperational Model

In-Premise

Temenos T24

Ease of

integration

Addresses

regulations

Vertical SaaSVendor

Primatics Financial

EVOLV

Security and

Controls

► On premise vs SaaS Cost

Page 14

Appendix B- G.G Banking & Investments Holding company governance structure

Board of Directors

C-Suite

Vice Presidents

Directors

Triad Co- Leads

Page 15

Appendix C-Online banking customer satisfaction

Page 16

Appendix D- Direct bank vs Brick and Mortar bank

Page 17

Appendix E - Percentage of customers that switch bank based on pricing

Page 18

Appendix F - Direct vs Brick and Mortar Bank

Page 19

Appendix G - Getting a Distressed Bank Online

1. Loans: Assess loan portfolio. Banks fail most commonly because they

failed capital requirements not because of defaulting loans. Keep loans

that are performing.

1. Deposits: These drive commercial loan growth and interest margins.

1. Team: Have loan and deposit specialists. Talent is everything.

1. Cross sell: Look for opportunities to cross sell banking products. A good

relationship can open the door to get a mortgage in addition to a

commercial loan.

Page 20

Appendix H – Worst Scenario Analysis

$337,264,850 Project Budget

$155,814,600 Assets Sold at 60% of Book Value*

$77,573,850 Project Expenses

$76,631,489 Discounted Value

$22,989,447 Tax Provision

$53,642,042 Recoverable After Tax

($283,622,808) Loss

* http://www.investopedia.com/articles/bonds/08/distressed-debt-hedge-fund.asp

Page 21

Appendix I - Costs of Core Banking System Deployment

https://www.capgemini.com/resource-file-access/resource/pdf/core_banking_transformation_measuring_the_value.pdf

Average Cost Maximum Cost

Implementation $3.5 $20

License Fee $2.6 $13

Customization $2.2 $13

Third-Party Services $0.6 $2

Other Software License Fees $0.2 $0.8

(in millions)

Page 22

Appendix J - Salary Expense & FTE Calculation from Comparable Institutions

$95,000 Approximate Spend per FTE *

150 Conservative Staffing Estimate

$14,250,000 Initial Annual Salary & Compensation

* http://www.ally.com/files/sections/investor/pdf/2014-10k.pdf

* http://www.aboutschwab.com/images/uploads/inline/Schwab_2014_Annual_Report_complete.pdf

Page 23

Appendix K – Financial Projection