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Financial Services Industry Profitability:Moderate Level Profitability
Tiburon ResearchSeptember 17, 2014
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 2
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 3
Financial Services Industry Profitability Have Evolved through Three Phases, Including their Early, Middle, & Recent Phases
Financial Services Industry ProfitabilityHistory
Early Phase
Approximate Dates:1956 - 1982
• --
1999 - 2014
Key Steps:
MiddlePhase
Financial Services Industry
ProfitabilityEmerged
1920 - 1955 2014
Financial Services Industry
ProfitabilityToday
RecentPhase
1983 - 1998
• -- • -- • --
Source: 3/29/11 Advisor Perspectives; 11/25/02 American Banker; 4/15/02 Fortune; 4/12/02 Wall Street Journal; 12/01 Money; 11/15/01 Schwab Conference Call (Lehman); Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 44
Source: Tiburon Research & Analysis
Financial Services Firms Strategic Initiatives
Financial Services Firms Strategic Initiatives
CEO focus: better integration & interconnection in critical functions such as risk management, compliance, finance, & technology
--
--
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 5
New Product Launch or Investment
Strategy26%
Technology Initiative (e.g., Adding Online
Advice or New Advisor Desktop)
25%
Business Line Restructuring or
Focus on New Channel
13%
Other Strategic Initiative
5%
Expand Core Business
23%
Expand Core Business
4%
Tiburon CEO Summit XXVI Attendees Said that a New Product Launch or Investment Strategy is the Top Strategic Initiative for their Firms in 2014
Tiburon CEO Summit XXVI AttendeesBy Top Strategic Initiative in 2014
Source: 3/10/14 Tiburon CEO Summit XXVI Content Survey Data; Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6
Source: 3/5/14 Tiburon CEO Summit XXVI Content Survey (Curtis); Tiburon Research & Analysis
Several Attendees Noted that they Intend to Use Technology to Enhance their Firm’s Efficiency
Tiburon CEO Summit XXVIContent Survey Feedback
Top Strategic Initiative in 2014
“Efficiency improvements using technology”
– Scott CurtisRaymond James Financial ServicesTiburon CEO Summit XXVI
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 7
Source: 3/5/14 Tiburon CEO Summit XXVI Content Survey (Christian); Tiburon Research & Analysis
Several Attendees Noted that they Intend to Improve their Firm’s Client Experience
Tiburon CEO Summit XXVIContent Survey Feedback
Top Strategic Initiative in 2014
“Improving the client experience”
– Kent ChristianWells Fargo Advisors Financial NetworkTiburon CEO Summit XXVI
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 8
68%
77%
106%
324%
259%
243%
199%
177%
118%
171%
Telecom Services
Utilities
Energy
Consumer Staples
Health Care
Materials
Information Technology
Industrials
Financials
Consumer Discretionary
Consumer Gains were Largest in the Standard & Poor’s 500’s Consumer Discretionary Sector at 324%
Consumer GainsBy Standard & Poor’s 500 Market Sector
Source: 3/8/14 Wall Street Journal (FactSet); Tiburon Research & Analysis
Consumer Gains?
Need S&P logo
Time period?
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 9
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 10
Financial Services Profitability can be Analyzed Many Ways
Source: 4/12/02 Wall Street Journal; 12/01 Money; 11/15/01 Schwab Conference Call (Lehman); Tiburon Research & Analysis
• --
Comments
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 11
Financial Services Industry ProfitabilitySegments
The Financial Services Industry Profitability can Specifically be Analyzed by Individual Segments, Including Retail Banks, Insurance Companies, Brokerage Firms, and Investment Management Firms
Source: Tiburon Research & Analysis
Financial Services Industry Profitability
Segments
Retail Banks Brokerage FirmsInvestment
Management FirmsInsurance Companies
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 12
Financial Services IndustryMarket Capitalization
($ Trillion)
Financial Services Industry has $2.7 Trillion Market Capitalization, With Retail Banks & Insurance Companies Accounting for $2.4 Trillion
Source: 4/1/11 Yahoo Finance Web Site; 4/1/11 Lightyear Capital Web Site; 4/1/11 Wikipedia Web Site; Tiburon Research & Analysis
$2.7$0.1$0.2
$1.0
$1.4
Retail Banks Insurance Companies Brokerage Firms InvestmentManagement Firms
Financial ServicesIndustry
New York Stock Exchange
market capitalization =
$13.4 trillion
Financial services = ~20%
of S&P 500 market
capitalization
Market capitalization = $13.4 trillion x
20%
Ratio used retail banks (50%),
insurance companies
(40%), brokerage firms
(9%), & asset managers (1%)
Another source said $59 trillion
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 13
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 14
Financial Services Industry Profitability can be Measured Many Ways
Source: 4/12/02 Wall Street Journal; 12/01 Money; 11/15/01 Schwab Conference Call (Lehman); Tiburon Research & Analysis
• --
Comments
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 15
Financial Services Industry Profitability Indicators
The Financial Services Industry Profitability can Specifically be Measured by Revenues & Net Profits
Source: Tiburon Research & Analysis
Financial Services Industry Profitability Indicators
Revenues Net Profits
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 16
$14.9 $15.0
$12.9 $13.0 $13.1
2006 2007 2008 2009 2010
Financial Services Industry Revenues
($ Trillions)
The Financial Services Industry Generates $13.1 Trillion Revenues, Down 10% Since 2006
Source: Tiburon Research & Analysis
$65.7 trillion (total household assets)
x 20%
Copied from Future of Advice
Needs update
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 17
$4.5 $4.5
$3.9 $3.9 $3.9
2006 2007 2008 2009 2010
Financial Services Industry Net Profits($ Billions)
The Financial Services Industry Earns $3.9 Trillion, Down 10% Since 2006
Revenues x 30%
$426.5 billion in 4Q/10
Source: 3/18/11 Wall Street Journal (US Department of Commerce); Tiburon Research & Analysis
Copied from Future of Advice
Needs update
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 18
Financial Services Industry Net Profits
As a Percentage of Corporate Net Profits
Financial Services Industry Earnings Have Traditionally Averaged About 25%-35% of All Corporate Profits, with 2010 Results Back in Familiar Territory
Source: 4/13/11 Hellman & Friedman Presentation (Thorpe); 3/18/11 Wall Street Journal (US Department of Commerce); Tiburon Research & Analysis
26%27%
22%23% 23%
20%
0%
-10%
20%
25%
30% 30%
28%
25%
28%
32%
1Q/07 2Q/07 3Q/07 4Q/07 1Q/08 2Q/08 3Q/08 1Q/09 2Q/09 3Q/09 4Q/09 1Q/10 2Q/10 3Q/10 4Q/10
4Q/08
Needs update
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 19
US Corporate ProfitsShare from the Finance Sector
The Finance Sector Accounted for 26% of US Corporate Profits in 2013
Source: 9/13 Business Week; Tiburon Research & Analysis
25%
5%
31%
25%
18%
27%26%
2007 2008 2009 2010 2011 2012 2013
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 20
Down Jones Industrial AverageBy Sector
Financials Make Up 17% of the Dow Jones Industrial Average
Source: 9/11/13 Wall Street Journal; Tiburon Research & Analysis
Information Technology
18%
Health Care13%Consumer
Discretionary12%
Energy11%
Industrials10%
Consumer Staples10%
Utilities3%
Telecom Services
2%Materials
4%
Financials17%
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 2121
Source: Tiburon Research & Analysis
Financial Services Firms Stock Prices, Valuation Levels, & Market Capitalizations
Financial Services Firms Stock Prices,Valuation Levels, & Market Capitalizations
Financial services firms are… 22% of the DJIA
FIG stocks are up Envestnet hit $1.0 billion market
capitalization Huge multiples on Fin Tech firms
ENV over 400!
Rich Repetto (Sandler O’Neil)
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 22
60%
75%
105%
320%
255%
240%
199%
177%
120%
175%
Telecoms Services
Utilities
Energy
Consumer Staples
Healthcare
Materials
Information Technology
Industrials
Financials
Consumer Discretionary
The Standard & Poor’s 500 Consumer Discretionary Sector Increased by 320% Since March 2009
Standard & Poor’s 500Performance
By Sector(March 2009 through March 2014)
Source: 3/13/14 Financial Times (Bloomberg) (Thomson Reuters Datastream); Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 23
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 24
The Leading Financial Services Institutions in Terms of Profitability can be Defined Many Ways
Source: Tiburon Research & Analysis
• --
Comments
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 25
Financial Services Industry Indicators
The Leading Financial Services Institutions in Terms of Profitability can be Specifically be Defined by…
Source: Tiburon Research & Analysis
Financial Services Industry Indicators
-- -- ----
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 26
Bank of America & Citigroup Have Large Market Capitalization But Relatively Low Price-to-Book Value Ratios
Market Capitalization Comparison
Source: 3/29/11 Advisor Perspective; Tiburon Research & Analysis
Market Capitalization
Low High
Small
Large
American Express
Price-to-Book Value Ratio
Citigroup
Bank of America
Corporation
Morgan Stanley
UBS
State Street Corporation
Northern Trust
Corporation
Wells Fargo
Corporation
JP Morgan Chase
Raymond James
Financial
Considered deep value
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 27
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 28
Financial Services Industry Profitability can be Segmented Many Ways
Source: Tiburon Research & Analysis
• --
Comments
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 29
Financial Services Industry Profitability can Specifically be Segmented to Include Retail Bank Profitability, Insurance Company Profitability, Brokerage Firm Profitability, & Investment Management Firm Profitability
Source: Tiburon Research & Analysis
Financial Services Industry ProfitabilityMarket Profitability
Retail Bank Profitability
Brokerage Firm Profitability
Investment Management Firm
Profitability
Insurance Company Profitability
Financial Services Industry ProfitabilityMarket Profitability
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 30
Retail Banks Have the Highest Revenues in the Financial Services Industry
Financial Services Industry Revenues
By Segment($ Billions)
Source: Tiburon Research & Analysis
Retial Banks InsuranceCompanies
Brokerage Firms InvestmentManagement
Firms
Needs data
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 31
Retail Banks Have the Highest Earnings in the Financial Services Industry
Financial Services Industry Earnings
By Segment($ Billions)
Source: Tiburon Research & Analysis
Retail Banks InsuranceCompanies
Brokerage Firms InvestmentManagement Firms
Needs data
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 32
5.3%
10.7%
6.8%
25.7%
Retail Banks InsuranceCompanies
Brokerage Firms InvestmentManagement
Firms
Investment Management Firms Have the Highest Return on Earnings at 25.7%, with Insurance Companies Next at 10.7%
Financial Services Industry Return on Earnings
By Segment
Source: 4/6/11 Yahoo Finance Web Site; Tiburon Research & Analysis
Average
Return on equity
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 33
7.7% 7.6%
8.6% 8.3%
Retail Banks InsuranceCompanies
Brokerage Firms InvestmentManagement
Firms
Brokerage Firms & Investment Management Firms Have the Largest Net Profit Margins at 8.6% & 8.3% Respectively
Financial Services Industry Net Profit Margin
By Segment
Source: 4/6/11 Yahoo Finance Web Site; Tiburon Research & Analysis
Average
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 34
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 35
• --
Comments
Retail Banks are Profitably
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 36
Retail Bank Profitability Key Issues
Retail Bank Profitability Have a Number of Key Issues, Including Macro Economic Pressure and Segment Competition
Source: Tiburon Research & Analysis
Retail Bank Profitability Key Issues
Marco Economic Pressures
Segment Competition
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 37
Retail Bank Stocks are Sensitive to Macro Economic Pressures
Source: 9/1/03 New York Times; 3/2/03 Fortune; Tiburon Research & Analysis
• --
Comments
Bank stocks fell 12% in 2002 compared to 23% for the
overall market
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 38
Retail Bank Stocks Have Been Steady for a Number of Reasons, Including Falling Interest Rates, Surging Deposit Growth, & Booming Mortgage Loan Markets
Source: 9/1/03 New York Times; 3/2/03 Fortune; Tiburon Research & Analysis
Falling Interest Rates Surging Deposit GrowthBooming Mortgage Loan
Markets
Retail Banks ValuationsReasons for Steadiness
• -- • -- • --
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 39
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 40
• --
Comments
Insurance Companies are Profitable
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 41
Insurance Company Profitability Have a Number of Key Issues
Source: Tiburon Research & Analysis
Insurance Company Profitability Key Issues
Insurance Company Profitability Key Issues
-- --
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 42
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 43
• --
Comments
Brokerage Firms are Profitable
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 44
Brokerage Firm Profitability Has a Number of Key Issues
Source: Tiburon Research & Analysis
Brokerage Firm Profitability Key Issues
Brokerage Firm Profitability Key Issues
-- --
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 45
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 46
• --
Comments
Investment Management Firms are Profitable
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 47
Investment Management Firms Profitability Has a Number of Key Issues
Source: Tiburon Research & Analysis
Investment Management Firm Profitability Key Issues
Investment Management Firm Profitability
Key Issues
-- --
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 48
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 4949
Financial Services Industry ProfitabilityFuture Predictions
Financial Services Industry Profitability Future Predictions Include Decrease in Retail Bank & Insurance Company Profitability & Increase in Brokerage Firm & Investment Management Profitability
Source: Tiburon Research & Analysis
Financial Services Industry Profitability
Future Predictions
Decrease in Retail Bank & Insurance Company
Profitability
Increase in Brokerage Firm & Investment Management
Profitability
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 50
30%
25%
23%
22%
21%
20%
18%
14%
6%
Goldman Sachs Group
Deutsche Bank
Barclays
Credit Suisse Group
Jefferies Group
Citigroup
JP Morgan Chase & Company
Morgan Stanley
UBS
The Fixed Income, Currencies, & Commodities Business Represents Up to One-Third of the Net Profits of Some Investment Banks, Including Goldman Sachs Group
Investment BanksNet Profits
Share from Fixed Income, Currencies, & Commodities Businesses
Source: 9/24/13 Financial Times; Tiburon Research & Analysis
Tiburon CEO Summit XXV
Page
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 51
Almost All Investment Banks are Realizing Lower Revenues from their Fixed Income, Currencies, & Commodities Businesses, Including at Citigroup and Morgan Stanley, which Each Posted a 21% Decline
Investment BanksFixed Income, Currencies, & Commodities Businesses
Quarterly Revenue Change
Source: 9/25/13 Wall Street Journal; Tiburon Research & Analysis
-21%
-21%
-9%
-2%
Citigroup
Morgan Stanley
Bank of America Corporation
JP Morgan Chase & Company
Tiburon CEO Summit XXV
Page
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 52
6%
11%
2008 2012
Financial Services Firm RevenuesShare from Wealth Management
Wealth Management Fees Represent a Larger Portion of Revenue in 2012 at 11%, Almost Double that of 2008
Source: 10/1/13 CNN Money.Com Web Site; Tiburon Research & Analysis
Tiburon CEO Summit XXV
Page
Asset and/or wealth
management?
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 53
70%
50%
27%
50%
3% 0%
2006 2012
Wealth & Asset Management
Investment Banking & Trading
Morgan StanleyRevenues
By Business
Morgan Stanley’s Revenue Sources Shifted After the Financial Crisis with a Reduction in Investment Banking & Trading from 70% to 50% of its Revenues, While Wealth & Asset Management Filled the Gap
Source: 2/25/14 Morgan Stanley 10Q Report; 9/10/13 Wall Street Journal; Tiburon Research & Analysis
Other Businesses
2013 data?: 41%, 41%, &
12%?
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 5454
Source: 10/1/13 CNN Money.Com Web Site; 9/25/13 Wall Street Journal; 9/24/13 Financial Times; 9/10/13 Wall Street Journal; Tiburon Research & Analysis
Role of Wealth & Asset Management
Role of Wealth & Asset Management
The history Asset & wealth
management account for relatively small shares of revenues and net profits of most large financial services firms
The news FICC down Asset & wealth
management up
Tiburon CEO Summit XXV
Page
Move up to chapter one?
Fee-based products, especially
wealth management,
remain a focus for the
big banks
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 55
Tiburon CEO Summit XXVI Attendees Said that the Importance of Asset & Wealth Management to Financial Services Firms will Increase Over the Next Five Years
Up83%
Steady14%
Down3%
Tiburon CEO Summit XXVI AttendeesBy Importance of Asset & Wealth Management to Financial
Services Firms Over Next Five Years
Source: 3/23/14 Tiburon CEO Summit XXVI Content Survey Data; Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 56
Tiburon CEO Summit XXVI Attendees Said that Big Banks Will Not Divest Asset & Wealth Management Businesses in the Next Downturn
Tiburon CEO Summit XXVI AttendeesBy View Retail Banks’ Strategy in Next Market Downturn
No79%
Yes21%
Source: 3/30/14 Tiburon CEO Summit XXVI Content Survey Data; Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 57
Source: 3/30/14 Tiburon CEO Summit XXVI Content Survey (Wietz); Tiburon Research & Analysis
Several Tiburon CEO Summit XXVI Attendees Commented that Banks will Divest Non-Core Businesses in the Next Downturn
Tiburon CEO Summit XXVIContent Survey Feedback
View Retail Banks’ Strategy in Next Market Downturn
“Yes, banks will divest asset & wealth management businesses in the next downturn. Those are considered non-core and thus will be
the first to go”– Craig Wietz
First Rate Investment SystemsTiburon CEO Summit XXVI
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 58
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 5959
• --
Comments
Retail Bank Profitability is Likely to Decline
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 60
Evolution of Financial Services Industry Profitability– Market History– Market Definition– Key Valuation Measures– Leading Financial Services Industry Profitability
Market Segmentation– Retail Bank Profitability– Insurance Company Profitability– Brokerage Firm Profitability– Investment Management Firm Profitability
Financial Services Industry Profitability Future Predictions– Decrease in Retail Bank & Insurance Company Profitability– Increase in Brokerage Firm & Investment Management
Profitability
Outline
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6161
• --
Comments
Brokerage & Investment Management Firm Profitability is Likely to Increase
Source: Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 62
14%
16%
17%
19%
30%
Regional Banks
Credit Card Firms
All Stress TestBanks
Money CenterBanks
Trust Banks
Trust Banks Share Buybacks are Expected to be 30% through March 2015
Expected Share BuybacksBy Bank Type
(Through March 2015)
Source: 3/17/14 Wall Street Journal (Goldman Sachs Group); Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 63
2.4%
2.6%
3.2%
5.0%
5.0%
Money CenterBanks
Regional Banks
All Stress TestBanks
Credit Card Firms
Trust Banks
Trust Banks & Credit Card Firms Earnings per Share are Expected to be 5% through March 2015
Earnings per ShareBy Bank Type
(Through March 2015)
Source: 3/17/14 Wall Street Journal (Goldman Sachs Group); Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6464
Source: 9/24/13 Commonwealth Financial Network Email (Rooney); 9/24/13 Tiburon CEO Summit XXV Content Survey Data; 9/14/13 The Economist; 9/13 Business Week; Tiburon Research & Analysis
FIG Profitability
FIG Profitability
8.3% ROE Up moderately
Depends on interest rates 26% of corporate profits
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 65
Tiburon CEO Summit XXV Attendees Anticipate that Financial Services Firms Profitability Will Increase Over the Next Five Years
Source: 9/24/13 Tiburon CEO Summit XXV Content Survey Data; Tiburon Research & Analysis
Financial Services Firms Profitability Over Next Five YearsBy Tiburon CEO Summit XXV Attendee Vote
Up Hugely9%
Up Moderately77%
Stagnant14%
Down0%
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 66
Source: 9/24/13 Commonwealth Financial Network Email (Rooney); Tiburon Research & Analysis
Some Attendees Believe that Financial Services Firms Profitability Over the Next Five Years is Dependent on Short-Term Interest Rates
Financial Services Firms Profitability Over Next Five Years
“90% depends on if or when short-term rates go up”
– John Rooney Commonwealth Financial NetworkTiburon CEO Summit XXV
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6767
Source: 10/1/13 CNN Money.Com Web Site; 9/25/13 Wall Street Journal; 9/24/13 Financial Times; 9/10/13 Wall Street Journal; Tiburon Research & Analysis
Role of Wealth & Asset Management
Role of Wealth & Asset Management
The history Asset & wealth
management account for relatively small shares of revenues and net profits of most large financial services firms
The news FICC down Asset & wealth
management up
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 68
6%
11%
2008 2012
Financial Services Firm RevenuesShare from Wealth Management
Asset Management Fees Represent a Larger Portion of Revenue in 2012 at 11%, Almost Double that of 2008
Source: 10/1/13 CNN Money.Com Web Site; Tiburon Research & Analysis
14.09.17 – Financial Services Industry Profitability © Tiburon Strategic Advisors, LLC™ 6969
Source: Tiburon Research & Analysis
Tiburon Strategic Advisors
• Focus on corporate-level strategy- Serve senior executives only at financial
services companies- Key services: market seminars, market
research, & strategy consulting - Served over 400 corporate clients and
completed over 1,700 projects since 1998- Host semi-annual CEO Summits, offer free
weekly research releases, and offer free business benchmarking tools for all types of advisors
• Chip Roame background- McKinsey & Company- Charles Schwab & Company- Tiburon since 1998
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