Banking in the Single Space Making the Vision a Reality

1. Banking in the Single SpaceMaking the Vision a Reality Presentation to the CAIB Conference November 13, 2007 Presented by Wendell MottleyManaging DirectorCredit Suisse,New York PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION THESE MATERIALS MAY NOT BE USED OR RELIED UPON FOR ANY PURPOSE OTHER THAN AS SPECIFICALLY CONTEMPLATED BY A WRITTEN AGREEMENT WITH CREDIT SUISSE.

2. 2001 – 2006 Peak at 8% yoy A Diversion – The Ugly Current Wall Street Reality & Implications • Global GDP & IP Growth Global growth should average 5.2% in 2007 and 5.1% in 2008. Sources:Datastream, Credit Suisse. Notes: IP = Industrial Production. rhs = Right hand side axis.

3. Red Sky in the Morning – Sailors Warning! • Global Imbalances • US Twin Deficits US Fiscal Deficit US Account Deficit 06 06

4. Worry as Chinese reserves poised to touch historic US$1 trillion level January 17, 2006 “BEIJING - China's foreign-exchange reserves rose to a record last year, almost matching Japan's as the world's largest, as a swelling trade surplus and money inflows betting on a currency revaluation boosted holdings. China's foreign exchange reserves hit US$818.9 billion at the end of December. It is almost level-pegging Japan's US$824 billion.” Bloomberg Concern about 'sovereign wealth funds' spreads to Washington August 20, 2006 “WASHINGTON - The size of Sovereign Wealth Funds is approximately $2.5 trillion in assets, which exceeds the sum invested by the world's hedge funds. Morgan Stanley projected that these investment funds could grow to a staggering $17.5 trillion in 10 years. At a time of global financial instability, the Bush administration has started to worry and has started is pressing the International Monetary Fund and the World Bank to examine the behavior of these funds.” Herald Tribune Red Sky in the Morning – Sailors Warning! (Con’t) • Global Imbalances

5. Red Sky in the Morning – Sailors Warning! • Asset Price Bubbles • Developed Country House Price Inflation US House Prices up 215% from 1996 – 2005. Source: Credit Suisse, Bloomberg.

6. ♪♫♪♪ Party Poopers – The Music ♪♫♪♫♪♫ StopsPlaying! • The Financial Panic: July / August / November 2007 • US House prices peak in 2005 • Marked acceleration in house price declines in 2007 • Sub Prime Mortgage default rate almost double to a record of ~13.4% in June from a year earlier • Loan offered at a rate above prime • Provided to individuals who usually do not qualify for prime rate loans Excesses & over exuberance of the housing boom were laid bare once they could not be clothed with the confident expectation of ever increasing house prices.

7. Under Estimated Consequences • The Black Death of Contagion • Scramble to Quit UK Bank

8. Housing Crisis Over? Not By A Long Shot! • As with every previous correction, the pendulum will over swing before steadying…

9. Demand for Housing Continues to Weaken Sources:Census, National Association of Realtors, Credit Suisse.

10. Pending Home Sales Plunged 12.2% in July Sources: National Association of Realtors, Credit Suisse.

11. Housing Inventory Still Rising New 1-Family Houses For Sale: Months Supply (SA, Ratio) NAR Months’ Supply of Total Existing Homes, United States (Units) Sources:Census, National Association of Realtors, Credit Suisse.

12. Putting Further Pressure on House Prices Sources:National Association of Realtors, OFHEO, Credit Suisse.

13. Massive Amounts of Mortgage Resets Coming Due In Short Term • LIBOR has surged above fed funds rate • Disquieting since big chunk of ARMS, especially Sub Prime, pegged to LIBOR Sources: Research and Factset.

14. More Contagion • Recently, contagion spread to jumbo mortgage markets and portions of the prime mortgage market putting further pressure on the housing sector adjustment Sources: Credit Suisse.

15. No Bottom Yet! • Therefore, Credit Suisse’s economics research has sharply lowered its residential investment forecast, and foresees no “zeroing out” in real residential investment through the end of 2008 Peak-to-trough decline of 33%. Larger than the 24% correction of the late ‘80s/early ‘90s; however, not as severe as the 45% decline of the early ‘80s. Sources: BEA, Credit Suisse.

16. November Melt Down – Phase (2) • Banks use models to price CDOs and Mortgage Backed Securities • Accountants, fearing Enron precedent force banks to mark to market • Markets a bottomless pit for these securities – serial write downs • Merrill + Bear + Citi massive write downs • Guillotine for Stan O’Neil, Chuck Prince: James Cayne? • Major banks need to shore up balance sheets  merge; sell assets

17. Predictions • Are we heading into recession? • Economics the Dismal Science • “U.S. recession possible this year” • Later clarification: “U.S. recession is possible, though not probable” • Actual Concerns… • Certainty of US slowdown • High probability of recession • US drags Japan and EEC

18. Crisis Of The US And Developed Countries • Decoupling • Rising EM contribution to global growth should help cushion the negative impact of the financial turmoil centered in the developed world. Sources:Datastream, Credit Suisse.

19. And What is Happening in the Caribbean? • We know enough to predict consequences in the Caribbean • North American and possibly European tourist arrivals down • More difficult access, wider spreads and shorter tenors for sovereign and corporate sub investment grade borrowers in International Capital Markets • Slower growth for most Caribbean countries, corporations and banks

20. Back to the Business at Hand Banking in the Single Space: Making the Vision a Reality

21. Competitive Environment in the Region • The Caribbean and Central America are composed of 28 countries with a combined population of more than 60 million and a combined GDP of more than US$300BN • 75% of the regional GDP is concentrated in seven countries: • Puerto Rico (29%) • Guatemala (12%) • Dominican Republic (10%) • Costa Rica (7%) • El Salvador (6%) • Panama (6%) and • Trinidad and Tobago (5%)

22. Competitive Environment in the Region (Cont’d ) • Commercial banks are the dominant financial institutions in the region, with finance companies, mortgage banks, national pension schemes, development banks, insurance companies, and credit unions having small shares • Financial penetration (loans / GDP) is relatively high in the Caribbean and Central America (average slightly above 40% compared to 26% for Latin America countries), except for Haiti (~15%) • Trinidad & Tobago’s financial penetration (loans/GDP) is 39% • Financial penetration is an important measure of the level of development of the financial sector of an economy

23. Competitive Environment in the Region (Cont’d ) • Some countries in the Caribbean have significant presence of offshore banks, offering financial services exclusively to non-residents. The major ones are the Bahamas, Bermuda, Cayman, the Netherlands Antilles, Barbados and the British Virgin Islands • The volume of assets in offshore financial institutions is of an order of magnitude greater than in the domestic financial system

24. Competitive Environment in the Region (Cont’d) • The banking sectors of most Caribbean countries are highly concentrated, with a small number of institutions and the majority of assets held by each country’s three or four largest banks • Only Haiti and the Dominican Republic have a dozen banks or more • Financial liberalization throughout the Caribbean in the 1990s was followed by a reduction in the number of banks • Locally owned banks were consolidated in the process of reform in some countries • U.K. and Canadian banks established in the Caribbean in the 1950s or earlier maintain a dominant position • U.S. and other international banking firms that established branches in the Caribbean in the past three decades have found themselves unable to attract high quality customers away from already established banks • Foreign banks account for the majority of assets in the Bahamas, Barbados, Belize and the Organization of Eastern Caribbean States, which includes St. Lucia, Antigua and Grenada

25. Competitive Environment in the Region (Cont’d) • Over the last decade there has been significant M&A activity in the region with more than 90 transactions: • In October 2007, RBC and RBTT announced a merger • 41 transactions where Caribbean institutions acquired other Caribbean institutions • 22 transactions where Non-Caribbean institutions acquired Caribbean institutions • 29 transactions where Caribbean institutions acquired Non-Caribbean institutions • The most acquisitive Caribbean institutions have been RBTT, Bank of Butterfield and Republic • In Central America there have been 30 acquisitions / mergers since 2000

26. Central America M&A Activity

27. Relative Rankings • Current rankings of the largest banks in the Caribbean • ($ in millions) 2006 After-Tax Profit 2006 Assets 2006 Equity Current Market Capitalization Source: Company financials, FDIC and SNL. Note: All information as of year end 2006, except for market capitalization that is as of October 29, 2007.

28. Relative Rankings (Con’t) • By every measure, Puerto Rico’s Banco Popular is the largest bank • First Caribbean is consistently the largest non Puerto Rican Caribbean Bank • Measured by assets, Popular is almost 4x size of First Caribbean • Even by regional standards, far less international standards, Caribbean banks, especially outside Puerto Rico, are tiny

29. Banco Popular Overview Deposit Composition • Banco Popular is the leading financial institution in Puerto Rico • 189 local branches • Leading market share as of 3/31/07 • 23% in loans • 34% in deposits • Recent acquisitions • Citibank’s retail operations • Smith Barney Retail Brokerage • Total US$25.4BN Source: Company reports and website as of 6/30/07. Source: Company reports and website as of 6/30/07. Loan Portfolio Total Funding Composition • Total US$32.8BN • Total US$46.2BN Source: Company reports and website as of 6/30/07. Source: Company reports and website as of 6/30/07.

30. Banco Popular (Cont’d) Puerto Rico Operations United States Mainland Operations • Leading market share • 23% in loans • 34% in deposits • $24.6BN in assets • $1,536BN in deposits • 4,887 employees • Recent Acquisitions • Citibank’s retail operations • Smith Barney retail brokerage Non Banking Subsidiaries (6/30/07) • Popular Mortgage • $1,549MM in assets • 32 mortgage centers • 470 employees • Popular Auto • $1,778MM in assets • 14 branches • 341 employees • Popular Securities • $4.1BN AuM • 7 offices • 103 employees • Popular Life RE • Among the top 4 lenders under the Small Business Administration (SBA) Program • $20.6BN in assets • 44% of total corporate assets • Banco Popular North America • 144 branches in NY, CA, TX, NJ, FL and IL Non Banking Subsidiaries (6/30/07) • Popular Financial Holdings • $7.7BN in assets • 137 offices in 16 states • 932 employees • Popular Insurance U.S.A. • 36 employees • Popular Securities • 21 employees • Popular Equipment Finance • $319MM in assets • 14 offices in 13 states • 76 employees • Popular Finance • $234MM in assets • 44 offices, 7 mortgage centers and 1 credit sales center • 330 employees • Popular Insurance • Popular Asset Management • $3.6BN AuM • $507.3MM – Fixed Income • $222.2MM – Equity • $2,848MM – Bond Hedge Funds/Mutual Funds Source: Company reports and website as of 6/30/07. Source: Company reports and website as of 6/30/07. Significant U.S. presence with associated growth therefrom.

31. FirstCaribbean Overview Loans by Jurisdiction – 2006YE • Headquartered in Barbados, FirstCaribbean was created on October 11, 2002 through the merger of the Caribbean operations of CIBC and Barclays • FirstCaribbean was owned 45% by Barclays, 45% by CIBC with the remainder public, but a rights issue diluted Barclays and CIBC to 43.6% each • FirstCaribbean has 800,000 active accounts, 3,500 employees, 100 branches and 100 ABMs and operates in 17 regional markets, making it one of the largest financial institutions in the region • It has an "A minus/stable" credit rating by Standard and Poor’s • FirstCaribbean is structured into four key lines of business: • Retail Banking and Cards • Corporate Banking • International Banking • Capital Markets Total US$5,660MM Deposits by Jurisdiction – 2006YE Total US$10,673MM Source: Company reports and website. This Caribbean bank is shut out from booming Trinidad market.

32. Republic Bank Overview Balance Sheet • Republic is engaged in a wide range of banking, financial, and related activities in Trinidad & Tobago and in the Caribbean • The bank's predominant activities are retail and corporate banking services • Operations in Trinidad & Tobago are, by far, the most important, and account for~ 65.6% of total assets. Operations in Barbados are the second most important and account for 23.1% of total assets. Other operations include Guyana, Grenada, Dominican Republic, Cayman Islands, and St. Lucia. Offshore banking services are also offered through units in Cayman Islands and Barbados. • FINCOR is Republic’s most important subsidiary • Operates as a merchant bank, mortgage institution, finance house, and leasing corporation • Provides medium- and long-term financing and accepts medium- and long-term fixed deposits from the public, as well as call deposits from institutional investors • FINCOR also acts as an issuing house by managing, arranging, and underwriting issues of marketable securities (stocks, shares, and bonds) • (US$ in millions) Income Statement • (US$ in millions) Source: Company reports and website. A Caribbean bank, highly dependent on volatile T&T market. Shut out of Jamaica, Bahamas.

33. Bank of Butterfield Overview Distribution of Revenues By Location • Based in Bermuda, Bank of Butterfield is a full-service banking company with banking and related operations in five foreign locations • Chartered in 1858, Butterfield is the oldest and second-largest bank (after Bank of Bermuda) on the island • The bank is listed on The Bermuda stock exchange and the Cayman Islands stock exchange • It has 3,900 shareholders, the majority of which are Bermudian Total US$416MM Source: Company reports and website as of December 2006. Distribution of Revenues Composition of Loan Portfolio Total US$416MM Total US$3,786MM Source: Company reports and website as of December 2006. Source: Company reports and website as of December 2006. A Caribbean bank, like Popular, diversified outside Caribbean. Shut out of Jamaica and T&T.

34. National Commercial Bank of Jamaica Segment Operating Revenue(1) Overview • Headquartered in Kingston, NCB is one of the two largest commercial banks in Jamaica (along with Bank of Nova Scotia Jamaica Ltd) • Only bank to offer full range of products to corporate and retail customers, also providing ancillary financial services such as capital markets, pension fund management, insurance and remittances • The Bank operates through a 47-branch network that has outlets island-wide and 154 ABM terminals, including 3 drive-throughs • Strong market position with 35.5% market share in deposits and 29.6% in loans • Its “root and branch” transformation aimed at enhancing and developing service delivery channels to optimize efficiency and improve customer service is substantially complete • LTM 3/31/2007 Operating Revenue: US$490MM (1) Percentage breakdown excludes inter-company eliminations. Segment Operating Profit(1) • LTM 3/31/2007 Operating Profit: US$128MM Source: Company reports and website as of December 2006. (1) Percentage breakdown excludes inter-company eliminations. A Caribbean bank, almost entirely dependent on vulnerable Jamaican economy.

35. Caribbean Banks – Strategic Direction • Banks operate in small over banked markets as judged by financial penetration • Banks operate in a low growth region except for T&T • Organic growth is difficult • The easy acquisitions have already happened

36. Caribbean Banks – Strategic Direction (Con’t) • Acquisition opportunities in Central America, Dominican Republic and Puerto Rico • However they come with high risk premia: • Language and cultural barriers • High capital hurdles – [bet the shop] • An alternative strategy: Mergers Among Equals

37. Royal Bank of Canada / RBTT Financial Holdings • On October 2nd, 2007, RBTT Financial Holdings Ltd. (“RBTT”) and Royal Bank of Canada (“RBC”) jointly announced an agreement to combine RBC’s Caribbean operations with RBTT through the acquisition of all the outstanding shares of RBTT for TT$40.00 per share and a total purchase price of US$2.2 billion payable in cash (60%) and RBC common shares (40%), subject to a collar (±10%) on the common share component • The TT$40.00 per share offer price represents: • 18% premium to the closing price prior to announcement • 27% premium to the average share price for the last twelve months • 67% premium to the price prior to speculation of a sale in the press • Transaction multiples: • LTM P/E: 14.2x • P/BV: 3.05x • With total assets of US$7.5 billion and shareholders’ equity of US$714 million, RBTT is the leading indigenous Caribbean bank, with branches located throughout the English-speaking Caribbean, Suriname, the Netherlands Antilles and Aruba • The transaction will create the largest banking footprint in the Caribbean and RBC’s expanded Caribbean operations will be headquartered in Trinidad and Tobago • Credit Suisse acted as exclusive financial advisor to RBTT and provided a fairness opinion RBTT Financial Holdings Ltd. has been acquired by Royal Bank of Canada US$2.2 billion Pending

38. The RBC Acquisition of RBTT (Con’t) • RBTT unsuccessful bid for Interfin in Costa Rica • Acquired by Scotia for $294 million • Benefits • Shareholders • Price at significant premium to current and future price • Investment participation in an international AA- rated financial services company – highly liquid • T&T • Facilitates T&T ambitions re financial center Energy market financings

39. Implications for Other Banks • Republic • Butterfield • First Caribbean • NCB What is next for Caribbean Banking?

40. Q&A

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