Data from Exhibit 2
BNY
Mellon
State St
North Trust
Citi
BoA
JPMC
Net Interest Income
1,909
485
907
661
39,345
30,737
19,831
Fee and Other Income
4,890
4,027
4,550
1,954
44,255
26,438
34,702
Provision for Loan Losses
15
19
7,929
4,014
3,483
Salaries & Benefits
2,532
1,764
2,231
965
25,772
15,054
18,255
Other Operating Expenses
1,934
1,638
1,810
770
15,507
9,428
12,202
Income Taxes
796
433
487
303
9,078
8,015
3,732
Net Income
1,571
912
838
584
19,738
16,447
8,470
Total Loans
40,726
6,573
6,482
19,966
583,503
573,791
384,948
Allowance for Loan Losses
(411)
(63)
(18)
(125)
(9,782)
(8,045)
(7,090)
Investments
44,504
21,326
80,588
27,147
622,728
551,254
616,797
Other Assets
17,255
10,842
10,916
6,426
297,588
174,803
204,287
Total Assets
102,074
38,678
97,968
53,414
1,494,037
1,291,803
1,198,942
Deposits
64,424
26,074
59,646
38,520
592,595
634,670
554,991
Short-Term Borrowings
1,694
1,146
23,369
3,355
314,656
368,112
166,590
Long Term Debt
7,817
4,404
2,608
5,513
178,324
89,660
103,563
Other Liabilities
18,263
2,852
5,978
2,426
295,925
97,828
266,587
Total Shareholders Equity
9,876
4,202
6,367
3,601
111,412
101,262
107,072
Total Liabilities & Equity
102,074
38,678
97,968
53,415
1,492,912
1,291,532
1,198,803
Shares Outstanding (FYend) 771
415
334
218
4,980
4,000
3,487
Dividends per Share (FY
2005)
Earnings per Share
0.87
0.78
0.72
0.86
1.76
1.90
1.36
2.04
2.20
2.51
2.68
3.96
4.11
2.43
Shares Outstanding (9/30/06) 763
411
331
218
4,944
4,526
3,471
ROE
17%
22%
14%
18%
18%
17%
8%
Efficiency
66%
76%
74%
66%
55%
46%
60%
- Closing Price
35.26
39.10
62.40
58.43
49.67
53.57
46.96
- 52-wk Average
33.40
35.51
60.13
54.77
48.16
47.87
42.11
- Forward P/E
14
16
17
17
11
11
12
- Market Value of Equity
26,908
16,087
20,654
12,738
245,566
242,451
163,018
- 60-month Beta
1.41
1.27
1.16
1.23
1.19
0.52
1.59
BNY
Mellon
State St
North Trust
Citi
BoA
JPMC
Enterprise Value (V)
D/V (including Deposits)
100,843
73.32%
47,711
66.28%
106,277
80.57%
60,126
78.81%
1,331,141
81.55%
1,334,893
81.84%
988,162
83.50%
E/V
26.68%
33.72%
19.43%
21.19%
18.45%
18.16%
16.50%
Beta Debt
0.1
0.1
0.1
0.1
0.1
0.1
0.1
Beta Equity
1.41
1.27
1.16
1.23
1.19
0.52
1.59
Beta Assets
0.45
0.49
0.31
0.34
0.30
0.18
0.35
Common stock (9/30/06)
Beta calculations
Different Comparables
Avg Asset Beta (a)
BNY and Mellon
0.47
BNY and Mellon,value weighted
0.46
About the same. Use 0.46
All Banks (not preferred)
0.31
Very different
Calculation of Ka
Kf (30 year)
4.58%
Maket risk premium (MRP)
6.00%
Ka
7.36%
WACC (Less preferred alternative)
Tax Rate (t)
35.0%
Target D/V
70.0%
Kd
5.18%
WACC
6.09%
Value of Synergy calculations
Year-end
2007
2008
2009
2010
105
350
595
700
692
337
61
After Tax Cost Savings
68
228
387
455
Terminal Value
8652
450
219
40
Annual cost savings realized
One- time charges
Tax rate
35%
LT Growth Rate
2%
2006
Value Created:
Present Value of FCF
916
Present Value of TV
6512
Total
7428
Cost of Integration:
After tax Charges
Present Value of FCF
641
Value of Synergies
6787
Wachovia
Wells Fargo
Remarks
13,681
18,504
12,219
14,431
249
2,383
9,671
10,455
3,733
5,873
3,033
3,877
6,643
7,671
259,015
310,837
(2,724)
(3,871)
186,551
104,281
77,913
70,494
520,755
481,741
324,894
314,450
70,779
35,016
40,145
68,544
34,476
23,071
47,561
40,335
517,855
481,416
1,557
1,678
1.94
2.00
4.27
4.57
1,589
3,367
14%
20%
52%
53%
55.80
36.18
54.60
33.03
11
13
88,694
121,826
0.77
0.38
Wachovia
Wells Fargo
Remarks
524,512
83.09%
539,836
77.43%
Deposits+ST borrowings+LT debt+MV of equity
16.91%
22.57%
0.1
0.1
0.77
0.38
0.21
0.16
Assumed (closer to zero because deposits are insured by Govt hence almost riskfree)
a = d*[D/V] + e*[E/V]
30 year rate in December 2006 (from Exhibit 19)
Assumed
Ka = Kf + a*MRP
Assumed
Assumed, Midway between BNY and Mellon
Kd = Kf + d*MRP
WACC = Ka t*(D/V)*Kd
Remarks
Given Exhibit 13
Given Exhibit 13
Assumption
Annual cost savings * (1 - t)
FCF*(1+g) /(Ka - g)
Discounted @Ka
Discounted @Ka
One-time charges * (1 - t)
Discounted @Ka
Given:
PB =
PT =
NB =
NT =
EPSB =
EPST =
V =
CV =
t=
Xall-stock =
C$% (%age Cash Paid) =
Interest on cash (pre-tax) =KD =
Corporate tax, Tc =
Calculated:
%Ball-stock =
%Tall-stock =
PERB =
PERT =
VB =
VT =
VN =
C=
C$ (Value of Cash Paid) =
Xcash-N-stock =
%Bcash-N-stock =
%Tcash-N-stock =
40.05
35.48
412
752
0.65
0.64
7428
641
0
0.9434
40%
5.20%
38.00%
For All-Share deal
For Cash-and-Share Deal
Pre -tax cost
36.74%
63.26%
61.62
55.44
16500.60
26680.96
49968.56
28412.94 For All-Cash deal
11365.18 For Cash-and-Share Deal
0.5660 For Cash-and-Share Deal
49.18%
50.82%
Deal NPVbuyer =
Deal NPVseller =
Wealth Transfer (WT) =
Acquisition Premium (AP) =
Acquisition Premium per Target share (AP/share) =
Downside Protection (DP) =
No-premium Ratio (Xno-premium) =
Zero NPV Ratio (Xbreakeven) =
No Dilution Ratio (Xmax) =
= NB/(NB + Xall-stock *NT)
= (Xall-stock *NT) / (NB + Xall-stock *NT)
= PB / EPSB
= PT / EPST
= PB*NB
= PT*NT
= VB + VT + V - CV
= Xall-stock *PB*NT
= C$% *C
= [(C - C$)/NT]/PB
= NB/(NB + Xcash-N-stock *NT)
= (Xcash-N-stock *NT) / (NB + Xcash-N-stock *NT)
All-Share Deal
1857.14
4929.86
636.31
1731.98
2.30
-1005.84
0.8859
1.1112
0.9846
All-Cash Deal
5055.02
1731.98
1731.98
1731.98
2.30
Infinite
NA
NA
NA
Cash-and-Share Deal
2486.28
4300.72
851.87
1731.98
2.30
-1676.39
0.5085
0.7339
0.2350
