Banking industry M&A positioning for major banks as of May 28 2012.

1. The Banking Industry Chessboard
We revisited the global banking industry nine months after our
August, 2011, review. Some improvement among Italian banks,
some recapitalizations, and a few more underperformers. Despite
all the hype, there are a large and growing number of solid banks
out there. Still, banking is the only global industry with serious
issues across a majority of industry firms. Here is what we think
of some of the top players in terms of their role in the near term.

2. Top Banks and their Current M&A Status
Management Acquisition
Acquirer Performer Change Target Distressed
Wells Fargo State Street HSBC JP Morgan Chase National Bank of Greece
Royal Bank of Canada Huntington Nordea Citigroup Banco Popolare
Toronto-Dom inion New York Com m unity Skandinaviska Enskilda Bank of Am erica SNS Reaal
ITAU Unibanco Bank of China Bank Millennium Mitsubishi UFJ Sparebanken Vest
Westpac Akbank Fifth Third Bancorp Banco Santander
US Bancorp Turkiye Sinai Kalkinm a Com erica Goldm an Sachs
Bank of Nova Scotia Yapi ve Kredi Bankasi People's United UBS
Sberbank Rossii Nom os-Bank Royal Bank of Scotland
Standard Chartered St Galler Kantonalbank Barclays
Banco Bradesco Turkiye Vakiflar Bankasi Mizuho Financial

3. Banks that materially improved
• Wells Fargo & Co upgraded from Performer to Acquirer. Acquired a number of firms, including
certain North American assets from Acquisition Target BNP Paribas, and assets from Distressed
Bank of Ireland. Settled regulatory cases.
• Swedbank AB upgraded from Management Change to Acquirer (not in chart). CEO Michael Wolf
appointed Goran Bronner new CFO two days after our August report. Evidently, a big leap forward.
• Allied Irish Banks PLC upgraded from Distressed to Acquirer (not in chart). David Duffy appointed
new CEO 22 November 2011. A big change.
• Royal Bank of Scotland Group PLC upgraded from Distressed to Acquisition Target. Assets sales and
job cuts, restructuring lead to improved capital structure. John Hourican appointed 2012 to Chief
Executive - Markets and International Banking. Still a nationalized problem bank.
• Intesa SanPaolo SpA upgraded from Distressed to Acquisition Target. Enrico Tommaso Cucchiani
was appointed new CEO on November 24, as Corrado Passera was appointed minister of the Monti
government. More than asset sales, which were limited, the bank was helped by the appointment
of the new government and its stabilizing influence on markets.
• Banca Monte dei Paschi e Siena SpA upgraded from Distressed to Acquisition Target. On May 3,
2012, Fabrizio Viola was appointed new CEO. The bank raised capital of 8.2% of the firm, most
recently 4% to the Aleotti family. Asset sales, restructuring also added to positive developments.
• Bank of Ireland PLC upgraded from Distressed to Acquisition Target. Limited asset sales. Andrew
Keating appointed Group CFO and Executive Director 2012.
• Banca Popolare di Milano Scarl upgraded from Distressed to Acquisition Target. Piero Montani was
appointed CEO on January 10, 2012. Capital was raised in acquired subsidiary Banca di Legnano
(good defensive move). Bonds were converted to shares. Capital increase via rights issue. Limited
sales of non-banking assets.

4. Banks that materially deteriorated
• HSBC Holdings PLC downgraded from Performer to Management Change. Bad news for Stuart
Gulliver, the CEO taking over from January 1, 2011. Facing current FDIC lawsuit on subprime
mortgages and settled charges relating to Madoff swindle, the bank image lost its shine. Sold
certain assets in Latin America and Upstate NY.
• Nordea Bank AB downgraded from Performer to Management Change. Christian Clausen would
look like an unlikely man to replace, holding top fiduciary offices in the European and Swedish
banking industries, but the regulatory fines suffered by the bank and more debt than performance
makes this a more risky share than 9 months ago. CFO and CRO may be at risk.
• JP Morgan Chase & Co downgraded from Management Change to Acquisition Target. The firm has
changed almost most executives, except the CEO and the Board of Directors. With recent trading
losses, shareholders may rethink the Board of Directors, unless it fires the CEO, James Dimon. Sued
by the FDIC over subprime mortgages, investigated by the FBI and the CFTC for trading losses, and
investigated by SEC for its financial reporting, while losing $38 bn in market value in little more than
a month spells trouble. Predictably, several class action suits were launched in the wake of these
signs of something materially wrong in the bank operations.
• Goldman Sachs Group Inc. downgraded from Management Change to Acquisition Target. The firm
is named as defendant in a number of cases ranging from bribery of foreign officials to subprime
mortgages. Lloyd Blankfein has run the company in a period where the firm has lost its glamour,
and most recently caught betting against the market maker of the facebook IPO. The firm is buying
and selling assets as if nothing was wrong, and shedding some employees, but none of the
important ones, needed to change the course in shareholder eyes.

5. Banks that materially deteriorated
• UBS AG downgraded from Management Change to Acquisition Target. Sergio Ermotti was
appointed Interim CEO on September 24, 2011, a position made permanent in November of the
same year. He was appointed following a $2.3bn trading loss incurred by a “rogue trader”. The
parallell to JP Morgan Chase is quite strong. Why would banks try a Hail Mary pass? Because it s
management is already under pressure, as demonstrated by our ratings.
• Credit Suisse Group AG downgraded from Management Change to Acquisition Target (not in
graphic). Sued over subprime mortgages by Stichting Pensioenfonds ABP. Fined by the FSA for
system failures in its private banking unit. Settled tax probe with German authorities. Sued for
allegedly depressing the LIBOR rates in conspiracy with other banks. CEO Brady Dougan is just
sinking in deeper, exposing the bank shareholder value and his own job.
• Bank of New York Mellon Corp. downgraded from Management Change to Acquisition Target (not
in graphic). The firm has excelled in being sued by the US and NY for overcharging state and other
pension funds on foreign exchange fees for a decade. CEO Gerald Hassell took over in 2011 and
certainly inherited issues, but the bank shareholders are not seeing the improvements expected, so
far.
• DNB ASA downgraded from Performer to Acquisition Target (not in graphic). CEO Rune Bjerke did
not appoint a Chief Risk Officer separate from the CFO. He oversaw trivia like changing the name of
the bank, and borrowed more money. Alas, a double downgrade, as Bjerke and team fail to create
value.
• Espirito Santo Financial Group SA downgraded from Performer to Acquisition Target (not in
graphic). A recent capital increase of 400 million EUR helped the bank from getting into serious
trouble, while remaining an acquisition target. Gherardo Laffineur Petracchini, the CEO appointed
in 2008 when the shares traded around EUR 24, now faces shareholder despair at share price near
EUR 5.

6. Trond Johannessen
Director
Phimark BV
+31 620 59 1015
trond@phimark.com