Financial Markets – Update, Outlook and Challenges

1. Financial Markets – Update, Outlook and Challenges John Augustine, CFA Chief Investment Strategist Fifth Third Bank April, 2010

2. Traverse City Grand Rapids Detroit Chicago Toledo Cleveland Pittsburgh Columbus Indianapolis Cincinnati Huntington Florence St. Louis Evansville Louisville Lexington Raleigh Nashville Charlotte Raleigh Atlanta Augusta Jacksonville Orlando Tampa Naples Naples Fifth Third Overview • $113 billion assets - #13 nationally* • 1,309 banking centers • 2,358 ATMs • 16 affiliates in 12 states • Fifth Third Bank has been dedicated to serving the needs families and businesses for more than 150 years • Top 10 Superregional Bank for 8 consecutive years** * As of 4Q09 ** Fortune magazine, March 16, 2009

3. Lines of Business Commercial Banking Branch Banking Consumer Lending Investment Advisors

4. Focus on Investment Advisors… *Reflects only Fifth Third Securities managed assets associated with Fifth Third Private Bank, and does not reflect all assets managed through Fifth Third Securities, a wholly owned subsidiary of Fifth Third Bank.

5. I. Surprisingly strong rebound…

6. Leading economic indicators show strongest global recovery in 25+ years… Source = Factset

7. Unemployment rate topped last October… Source = Factset

8. Consumer spending & saving increasing… Source = Factset

9. US corporate profits recovering… Source = Factset

10. Capital markets rebuilding… April 23, 2010 2 1 Source = Factset

11. II. So what happened?

12. Federal Government went all-in… Source = Factset

13. Interest rates stayed low… Source = Factset

14. Commodity prices dropped… Source = Factset

15. Inflation went below average… Source = Factset

16. Exports gained traction… Source = Factset

17. Domestically - things just fell too far… Source = Factset

18. II. What’s on our mind now?

19. Themes we see developing this year… 1. Economic growth could surprise to the upside. 2. Private sector risks falling, public sector risks rising. 3. US recovery is now leading in the developed world, but lagging the emerging world. 4. Stocks and corporate bonds should handily outperform Treasuries and cash. 5. Policymakers need to keep their focus on the 10’s. Keeping the Dow above 10,000. Keeping the unemployment rate below 10%. Moving the federal budget deficit back below 10% of GDP.

20. Challenges – Tensions are still very prevalent… • Government relationship with business & financial markets remains tense: • Regulatory policy – current focus on healthcare & financial sectors, broader issue of labor vs. capital vs. taxes • Fiscal policy – deficit spending & tax rates rising • Monetary policy – Fed methodically removing stimulus: selling its $1.4 trillion of excess bond holdings, then raising fed funds rate. • Corporate ownership – unwinding government ownership in autos, insurance, mortgages and banks • Main Street and S&P 500 companies continue to be at odds. • The latter benefits from global recovery and the former struggles with the high US unemployment rate.

21. Potential outcomes of government debt rising??? • Economic growth slows. • Commodity markets need to adjust downward. • Currency volatility increases. • Currencies are the stock price of countries. • Business formation slows. • Unemployment stays higher, longer. • Big companies get bigger…looking for growth. • Dividends rise, but eventual onslaught of the global trustbusters. • Tax rates rise. • Capital flows to lower tax rate countries. • Geopolitical risks rise. • Gold keeps its bid; Emerging Markets try to manage investment flows. • Sovereign bond-pickers market. • Bond-by-bond portfolio review.

22. S&P 500 earnings rising sharply… $107.82- 2012 $94.69- 2011 Source = Factset/Bloomberg

23. S&P 500 dividends rising again… Source = Factset

24. Current capital allocation themes… Invest LendDefend Money Markets Bank Deposits Gold TIPS Large cap domestic SMID domestic Overseas developed Overseas emerging Commodities REITs US Government/Agency Overseas Government Municipal High Grade Corporate Low Grade Corporate Preferred Stock

25. Solving Financial Complexity Initial Accounts Asset Allocation Financial Management Scope of Investor Focus Trust & Estate Planning Insurance Fixed Income Securities International Equities Investment Strategy Financial Planning Tax & Liability Management Alternative Assets Domestic Equities Checking Account 401k Plan Cash Savings Account IRA Account Investments Time

26. John Augustine, CFA Chief Investment Strategist Fifth Third Private Bank 513-534-3256 John.Augustine@53.com www.53.com

27. Are Not FDIC Insured Offer No Bank Guarantee May Lose Value Are Not Insured By Any Federal Government Agency Are Not A Deposit Important Information Dow Jones Industrial Average: The most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. S&P 500: Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. U.S. Treasury Bills: Direct debt obligations issued and backed by the “full faith and credit” of the United States government (i.e. timely payment of principal and interest is guaranteed) and are issued with maturities of three months to six months in denominations beginning at $1,000. GDP (Gross Domestic Product): The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. Treasury Bonds: Treasury bonds are debt instruments of the U.S. government issued in minimum denominations of $1000. Considered to be long term investments, Treasury bonds have maturities of 10 years or longer. Treasury bonds carry the lowest degree of risk and are the benchmark against which all other types of bonds are measured. Although their market value fluctuates, they are considered to be the safest of bonds due to the fact that they are secured by the full faith and credit of the U.S. government. MSCI Emerging Markets Index Fund (EEM): The iShares MSCI Emerging Markets Index Fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of publicly traded securities in emerging markets, as represented by the MSCI Emerging Markets Index. Russell 2000: The Russell 2000 Index measures the performance of the 2000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. MSCI EAFE (Europe, Australia and Far East): The MSCI EAFE index is a market-capitalization-weighted index of 21 non-U.S., industrialized country indexes, and is widely accepted as a benchmark for international stock performance. The S&P REIT: Tracks the performance of U.S. Real Estate Investment Trusts. The REIT Composite consists of 100 REIT’s chosen their liquidity and importance in representing a diversified real estate portfolio. Gold: Quoted as U.S. Dollars per Troy Ounce. The CRB/Reuters Futures Price Index: An equal-weighted geometric average of commodity price levels relative to the base year average price. Fifth Third Private Bank is a division of Fifth Third Bank offering banking, investment and insurance products and services. Fifth Third Bancorp provides access to investments and investment services through various subsidiaries. Investments and Investment Services: Insurance products made available through Fifth Third Insurance Agency, Inc.