General Body Meeting 02.10.11

1. General Body Meeting 02.10.11

2. Agenda • Announcements • News Updates • Junk Bond Fund Pitch • Financials Pitch

3. General Announcements • Monthly Portfolio Update • David Kim: sk852@cornell.edu • Thanks for MS GCM Event

4. News Updates

5. Egyptian Crisis • Impact of global food prices on Egypt • Politically, US is stuck with bad choices: • Repercussions of supporting democracy • Propping up Mubarak or some else • Middle East tourism concerns • Suez Canal • Oil prices • Unknown factor

6. Inflation Outlook • Headline vs. Core Inflation • CRB Index: +1.8% ytd • Impact of QE2 • Tie in to Tunisia & Egypt • Impact on Treasury Bonds • Inflation in Emerging Markets • China • India

7. Inflation (based on CPI)

8. Cisco Q2 Earnings • Announced yesterday • Expected EPS: 0.35 • Reported EPS: 0.37 (down 8% YoY) • Share price performance • After hours: -8.67% • Today (2:30pm): -13.62% (price: 19.04) • Red flags for investors • “Challenging economic environment” • “Moderate capital spending”

9. Cisco Q2 Earnings • Rising Competition • HP, Juniper Networks making plays to steal market share • Transition Period • Cisco preparing to innovate in nearly all product lines, transition to next generation technology • Preparing to capture increased outsourcing market, positioned to lead • Currently in a “long transition period”

10. Cisco Q2 Earnings • My take: sell-off is an overreaction • Cisco is position for long-term market leadership, weak performance now while transitioning • Earnings still exceeded expectations • Current negative sentiment focused on short-term results • Mood will shift more positive as current development begins to yield results

11. Junk Bond Fund Pitch Terence Hu

12. SPDR Barclays Capital High Yield Bond • Park $10,000 into JNK • ETF that invests in high yield bonds • Low management fee: 0.40% • Yield: 9.72% • Averaged maturity: 7.08 years • Duration: 4.47 years • 215 holdings • Return since inception (Nov 2007): 6.71%

13. Risks • Interest rate risk • Betting on Bernanke • Not too dependent on interest rate, more on credit risk • Credit risk • Diversified away • Higher credit quality

14. High yield and credit risk correlation

15. Past Year Performance

16. Comparison to S&P

17. Comparison to Treasury Price

18. Derek Creadore SiddhantTrivedi AleksandarZvorinji Margaret Szczerbicki John Troncoso

19. Company Overview

20. ExecutiveSummary

21. Background • BB&T is a bank holding company with operations in the south • operates 1,857 banking offices in North Carolina, Virginia, Florida, Georgia, Maryland, South Carolina, Alabama, Kentucky, West Virginia, Tennessee, Texas, Washington D.C., and Indiana • Mainly serves consumers and small, regional businesses • $136.5 billion in assets under management, making it the 14th largest bank in the U.S.

22. Thesis

23. Thesis • Improving performance from loan portfolios • Regional banks have managed to further distance themselves from the mortgage problem as compared to larger institutions • Well positioned for acquisitions • Better than expected growth in US and regions in which BB&T operates • Dominate market share in states that it operates

24. Industry Overview

25. Industry Analysis: Commercial Banking Commercial banking is a highly fragmented industry consisting of nearly nearly 9,000 commercial banks and savings institutions insured by the FDIC Commercial banks profit by capturing the margin between interest paid to depositors and higher rates charged to borrowers and charging fees for their services. New legislation to strengthen financial industry regulation has been put in place to protect consumers from banks. Additional reforms designed to protect the industry from institutions from taking on excess leverage are being put in place to reduce risk and regulate derivative financial products. The recovering economy and the new financial reforms serve to return confidence to the commercial banking group.

26. Top Competitors As of December 31, 2010

27. BBT vs. The Industry • Growth: Measures the growth of both the company's income statement and cash flow. On this factor, BBT has a growth score better than 30% of the stocks in the industry. • Total Return: Measures the historical price movement of the stock. The stock performance of this company has beaten 40% of the companies in the industry. • Efficiency: Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 50% of the companies in the industry. • Price Volatility: Measures the volatility of the company's stock price historically. The stock is less volatile than 40% of the stocks in the industry. • Solvency: Measures the solvency of the company based on several ratios. The company is more solvent than 50% of the companies in the industry. • Income: Measures dividend yield and payouts to shareholders. The company's dividend is higher than 80% of the companies we track.

28. Company and Subsidiaries

29. Businesses • Branch Banking and Trust Company (Branch Bank) • BB&T Financial • Scott & Stringfellow, LLC • Regional Acceptance Corporation • BB&T Asset Management, Inc

30. Branch Banking and Trust Company • BB&T’s commercial banking subsidiary • Conducts business operations through this subsidiary • Provides range of banking and trust services for retail and commercial clients • 1,857 offices

31. BB&T Financial • Federal savings bank • Formed to help improve operating efficiency of business activities for subsidiaries at a national level • Issue BB&T credit cards and merchant services

32. Scott and Stringfellow, LLC • Full-service brokerage and investment banking subsidiary • Services in retail brokerage, equity and debt underwriting, corporate finance and equity research • Public finance department providing investment banking, financial advisory services, debt underwriting

33. Regional Acceptance Corporation • Indirect financing for new and used automobiles—finance consumer purchases of used motor vehicles and make direct loans to consumers • Branch offices in 15 states

34. BB&T Asset Management, Inc. • Offer investment management strategies • Currently hold $18.7 billion in discretionary assets • Serve corporations, institutions, endowments, foundations, employee benefit/retirement plans, government entities, wealthy families and individuals • Meet needs of clients through domestic/international equity, alternative investment products/strategies, and fixed income investing

35. Business Overview

36. Geographic Presence

37. Business Lines

38. Products Offered • Retail clients: bankcard lending, consumer finance, home mortgage lending, insurance, brokerage services, small business lending, and private banking services • Commercial Clients: asset management, capital markets services, commercial finance, institutional trust services, insurance, international banking services, leasing, and venture capital services

39. Revenue by Division

40. SWOT Analysis

41. Strengths • High quality banking: As a high quality bank, we expect BBT to remain an acquirer as the industry consolidates. • Favorable shift in deposit and loan composition: BB&T has been able to successfully shift the deposit and loan compositions toward more profitable and less risky compositions. • Position: BB&T has a strong market and capital position and is well positioned for acquisitions.

42. Weaknesses • Subprime loans/Bad mortgages: Bad mortgage problems connected to credit markets will cause continued pain for lenders and subprime loan help from banks significantly hurt profits. • Challenging growth target: BB&T will be challenged to achieve its loan, deposit, and noninterest income growth target. Covered loans declined by nearly 23% during 2010

43. Opportunities • Strong loan growth: 2011 should benefit from strong loan growth, especially commercial and industrial loans. Prime residential mortgages were the fastest growing loans with a 10% quarter on quarter. In addition, auto loans, credit cards and deposits grew solidly. • High purchase accounting accretion: Net interest margin should benefit from high purchase accounting accretion. • Cross selling products and services

44. Opportunities (2) • Bureau of Labor Statistics (BLS) announced that the US unemployment rate dropped to 9% in January from 9.4% in December • Improving employment numbers will hopefully, in time, lead to a boost in loan growth across the banking sector

45. Threats • Housing crisis: The housing crisis will lower BB&T’s assets and equity, and makes it harder to do business in the market. Lower equity lowers the amount of money that can be loaned and consecutively limits the ability of the company to generate additional income from loans. A major source of past revenue and profits will decrease and lead to a decrease in future cash flow and stock value. • Credit card crisis: Adverse impact of the likely credit card crisis in the United States.

46. Financials

47. Financial Drivers for 2011(managements’ view) • Loans: Management expects faster pace of growth in non-real estate loan portfolios with continued declines in commercial real estate (overall growth of 3-5% in loans held for investment) • Deposits: up 1-3% in total, with double digit growth in transaction account deposits • Net charge-offs: Trending down throughout 2011, through 1.5% late in year

48. Overall Loan Growth Source: Company Filings

49. Net Interest Margin • NIM: examines how successful a firm's investmentdecisions are compared to its debt situations • Difference between interest bank gives to lenders and interest income the bank makes of investing the $

50. BBT vs. The Industry: Valuations