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2009 Financial Institutions Conference

2009 Financial Institutions Conference. Armonk Conference Center, NY April 3, 2009. 0. Is the U.S. economy. Stabilizing Getting worse Improving. 0. Economic conditions will bottom. 2Q ‘09 3Q ‘09 4Q ’09 Early 2010 Late 2010 or 2011 Later. 0. Unemployment will peak at. 8.5% 9%

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2009 Financial Institutions Conference

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  1. 2009 Financial Institutions Conference Armonk Conference Center, NY April 3, 2009

  2. 0 Is the U.S. economy • Stabilizing • Getting worse • Improving

  3. 0 Economic conditions will bottom • 2Q ‘09 • 3Q ‘09 • 4Q ’09 • Early 2010 • Late 2010 or 2011 • Later

  4. 0 Unemployment will peak at • 8.5% • 9% • 9.5% • 10% • 10-12% • Higher than 12%

  5. 0 What’s the greater risk for the global economy in 2010? • Deflation • Stagflation • Recessflation • Inflation

  6. 0 How quickly will investors risk appetite improve – how soon will they be willing to increase weighting on bank credit risk? • This is already happening • Substantial recovery by mid-year 2009 • Gradual improvement by end of year • No improvement this year • No improvement next 2 years

  7. 0 By the end of 2009, the broad market equity indices will be • Unchanged • Significantly higher • Lower • Significantly lower

  8. 0 I expect U.S. Treasury 10 year yields to finish 2009 • More than 50 bps lower than their current level • More than 50% higher than their current yield • Within 50 bps above or below their current level

  9. 0 Between now and the end of 2009, the U.S. Treasury curve (10 year-2 year) will be • Unchanged • Steeper • Flatter

  10. SHORT DATED VOL:  Realized vol for the last 60 trading sessions is about 10.5 bps per day for the 7y swap, 3 months forward.  At some point over the balance of 2009, I expect to see realized vol: Increase to above 13.0 bps per day. Increase to between 11.5 and 13.0 bps per day. Remain range bound between 9.5 - 11.5 bps per day. Decrease to between 8.0 - 9.5 bps per day Decrease to below 8.0 bps per day 10

  11. LONG DATED VOL:  Implied vol for the 7y swap, 3y forward is about 6.5 bps per day.  At the end of 2009, I expect to see it: Increase to above 8.0 bps per day Increase to between 7.0 - 8.0 bps per day Remain between 6.0 - 7.0 bps per day Decrease to between 5.0 - 6.0 bps per day Decrease to below 5.0 bps per day 10

  12. 0 The biggest driver of yields over the remainder of 2009 will be • Policy rates • Quantitative easing • Treasury supply • Equity markets

  13. 0 Bull or Bear • A. Bull • B. bear

  14. 0 In 2009, is your bank securities portfolio • Going to grow • You’ll just replace the run-off • You’ll be shrinking the bond portfolio

  15. 0 Within the mortgage-backed securities space, your top purchase for the portfolio in 2009 will be: • Agency passthrus • CMO Floaters • Seasoned stripped 15 year • GNMA PACs • Front sequentials • Non-Agency CMOs • MBS Passthroughs • All of the above • None of the above

  16. 0 Within Agency space, your top bond choice in 2009 • Discount notes • Agency bullets • Callables • TLGP

  17. 0 In 2009, your bank will • Expand lending • Shrink lending • Hold it flat • Go out of business

  18. 10 The largest concentration of lending on my balance sheet is • Owner-occupied commercial real estate • Residential mortgage loans • Commercial and industrial loans • Consumer loans • Other

  19. 0 Your main objective from an asset liability management objective is to • Lengthen duration of my earning assets, relative to my liabilities • Term out my liabilities relative to my assets • Prepare for Fed tightening • Protect against bull flattener

  20. 0 The bulk of my floating-rate loan portfolio is tied to • Prime • Fed funds • 1-month LIBOR • 3-month LIBOR

  21. 0 I would describe the 1m versus 3m LIBOR basis risk of my bank as • Irrelevant • Miniscule • Significant • Very significant / extremely large

  22. 0 My bank’s experience during the financial crisis • Has gone closely along the lines in our contingency funding planning • Our contingency planning could use some revisions • We are ahead of the game and pleasantly surprised

  23. 0 Would you describe the government’s liquidity programs in the context of your bank’s funding strategies • Day-to-day funding • Strategic funding

  24. 0 The market for deposits has • Been more competitive in the past year • Been less competitive in the past year • Stayed the same

  25. 0 The top source of funding for my bank’s incremental loan growth in 2009 is • Deposits • TLGP • Advances • Repos • Federal Reserve

  26. 0 My bank is looking at participating (buying or issuing?) in the TALF program • Yes • No

  27. 0 Do you plan to sell loans to PPIP? • Yes • No

  28. 0 Will your bank consider munis this year? • Yes • No

  29. 10 Enter question text... • Yes • No

  30. 0 Enter question text... • Yes • No • Maybe

  31. 0 The most valued service Citi can do for your bank on the public side in 2009 is • Sell you bonds • Buy all your bonds at par • Buy just your toxic assets at par • Figure out a solution to your nonperforming loans that does not involve taking a loss • Repo funding • Hold next year’s bank conference in Florida

  32. 0 The stress test will demonstrate that my bank is • Adequately capitalized • Inadequately capitalized • Over-capitalized • So overcapitalized we want to give back all the TARP money

  33. 0 My bank is targeting X for a tangible common equity ratio post stress test • 3% • 4% • 5% • 6% • Higher

  34. 0 Bank analysts have adequate information on which to base investment recommendations on banks • Agree • Disagree

  35. 0 NIMS in 12 months will be • 20 bp higher • 10-20 bp higher • flat - 10 bp higher • 10 bp lower • 10-20 bp lower

  36. 10 Peak in loan loss provisions will be / was • 4Q 08 • 1Q 09

  37. 0 PEAK IN LOAN LOSS PROVISIONS WILL BE / WAS • 4Q 08 • 1Q 09 • 2Q 09 • 3Q 09 • 4Q 09 • 2010 • 2011

  38. 0 The FASB’s new proposal to revamp other-than-temporary impairment is a reasonable fix? • Agree • Disagree • What’s FASB?

  39. 0 IS IT OPERATIONAL • YES • NO

  40. 0 Existing hedge accounting rules pose a significant challenge to my bank’s asset-liability management • Agree • Disagree

  41. 10 The greatest threat to financial market stability is • Mark to market in illiquid markets • Leverage • Bad assets in accrual books • AIG • Tim and Ben • Defaults, foreclosure • Plunging real estate prices

  42. 10 Concerning the new Public-Private Investment Fund, my bank is likely to • Sell securities • Sell loans • Sell both • Limited or no participation

  43. Will the republicans ___ seats after the 2010 House races? Pick up Lose Hold the same 0

  44. 2009 Financial Institutions Conference Armonk Conference Center, NY April 3, 2009

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