Attached is the IBIS World Report on Commercial Banking please review the Report Snapshot and use MS Word to type-up a 1-2 page paper highlighting the key factors regarding the Industry. Please review

This report was provided to Trident University (2130812200) by IBISWorld on 21 February 2019 in accordance with their license agreement with IBISWorldWWW.IBISWORLD.COM Commercial Banking in the US December 2018 1 IBISWorld Industry Report 52211 Commercial Banking in the US December 2018 Anthony Gambardella To the bank: Industry volatility will decrease as the industry’s business model changes 2 About this Industry 2 Industry Definition 2 Main Activities 2 Similar Industries 3 Additional Resources 4 Industry at a Glance 5 Industry Performance 5 Executive Summary 5 Key External Drivers 7 Current Performance 10 Industry Outlook 12 Industry Life Cycle 14 Products and Markets 14 Supply Chain 14 Products and Services 16 Demand Determinants 17 Major Markets 18 International Trade 19 Business Locations 21 Competitive Landscape 21 Market Share Concentration 21 Key Success Factors 22 Cost Structure Benchmarks 23 Basis of Competition 24 Barriers to Entry 25 Industry Globalization 26 Major Companies 26 Wells Fargo & Company 27 JPMorgan Chase & Co.

28 Bank of America Corporation 29 Citigroup Inc.

30 Operating Conditions 30 Capital Intensity 31 Technology and Systems 32 Revenue Volatility 32 Regulation and Policy 34 Industry Assistance 35 Key Statistics 35 Industry Data 35 Annual Change 35 Key Ratios 36 Industry Financial Ratios 37 Jargon & Glossary | 1-800 -330 -3772 | info @ Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 2 The Commercial Banking industry comprises banks that provide financial services to retail and business clients in the form of commercial, industrial and consumer loans. Banks accept deposits from customers, which are used as sources of funding for loans.

Banks in this industry are regulated by the Office of the Comptroller of the Currency. The primary activities of this industry are Receiving deposits from customers Issuing consumer, commercial and industrial loans 52212 Savings Banks & Thrifts in the US This industry includes savings banks that accept deposits from customers and issue mortgage and real estate loans, as well as invest in high-grade securities.

52213 Credit Unions in the US This industry includes credit unions that accept members’ share deposits in cooperatives, which are organized to offer consumer loans to their members.

52219 Industrial Banks in the US This industry includes banks that accept deposits and lend funds to clients. This industry includes industrial banks or industrial loan companies and private banks (i.e. unincorporated banks).

52221 Credit Card Issuing in the US This industry includes businesses that provide credit by issuing credit cards with repayment of the funds being made on an installment basis. Interest is charged on the funds loaned.

52222 Auto Leasing, Loans & Sales Financing in the US This industry is made up of businesses that provide sales financing and leasing, which involves money being loaned to purchase goods though contractual sales agreements.

52229 Real Estate Loans & Collateralized Debt in the US This industry comprises a wide range of nondepository financial institutions extending credit or making cash loans (except credit cards and sales financing agreements).

52231 Loan Brokers in the US This industry includes operators that arrange loans by bringing borrowers and lenders together and then charging fees and commissions to their clients for the provision of these services. Industry Definition Main Activities Similar Industries About this Industry The major products and services in this industry are Commercial and industrial loans Credit card loans Depository services and other noninterest-income generating products Loans to individuals excluding credit cards Real estate loans Other Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 3 For additional information on this industry Office of the Comptroller of the Currency US Federal Deposit Insurance Corporation US Securities and Exchange Commission Additional Resources IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to About this Industry Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 4 % 7 3 4 5 6 24 10121416182022 Year Prime rate SOURCE: WWW.\fB\fSWORL\.D.CO\b 78OU5RC4 15 -10 -50 5 10 24 10 121416182022 Year Revenue Emp\foyment Revenue vs\b emp\foymen\pt growth Products and services se\.gmentation (2018) 31.\f%Real estate loans \b.6% Credit card loans 29.4% Depository services\. and other noninterest-income generating products 13.6% Commercial and industrial\. loans 11.1% Loans to individua\.ls excluding credit cards \f.\b%Other Key Statistics Snapshot Industry at a Glance Commercial Banking in 2018 Industry Structure Life Cycle Stage Mature Revenue Volatility Low Capital Intensity Low Industry Assistance High Concentration Level Low Regulation Level Heavy Technology Change Medium Barriers to Entry Medium Industry Globalization Low Competition Level High Revenue $695.6bn Profit $142.6bn Wages $218.8bn Businesses 4,917 Annual Growth 18–23 3.9% Annual Growth 13–18 5.1% Key External Drivers Prime rate Aggregate household debt Corporate profit Regulation for the Banking sector External competition for the Commercial Banking industry Market Share Wells Fargo & Company 10.9% JPMorgan Chase & Co. 8.8% Bank of America Corporation 6.5% p. 26 p. 5 FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 35 SOURCE: WWW.IBISWORLD.COM Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 5 Key External Drivers Prime rate The prime rate is the interest rate banks charge their largest and most-creditworthy corporate customers. Industry revenue comes from the spread between the federal funds rate and the prime rate, along with the interest rates that banks charge the rest of their customers. While a low prime rate usually boosts loan demand under nonrecessionary conditions, a higher prime rate causes banks to realize higher net interest income and revenue. The prime rate is expected to increase in 2018, representing a potential opportunity for the industry. Aggregate household debt Aggregate household debt includes all outstanding credit market debt consumers hold, including credit card debt, mortgages, personal loans and other debt.

Industry interest revenue increases when consumers choose to borrow more money from banks and hold higher debt levels.

Aggregate household debt is also highly correlated with consumer confidence, which affects the level of debt consumers choose to hold and has a strong positive influence on private consumption.

Aggregate household debt is expected to increase in 2018. Executive Summary The Commercial Banking industry is composed of banks regulated by the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC).

Banks generate the majority of their revenue by accepting customer deposits and then lending these deposits out to individuals and businesses at a certain interest rate, which is influenced by different factors, including the federal funds rate, the prime rate and the debtor’s creditworthiness. Industry revenue finally returned to growth in 2015 after declining in each year since 2008. Declining revenue over the first two years of the period is attributable to the effect that the subprime mortgage crisis had on the banking sector. Interest income increased 1.9% in 2015; this was the first such increase since 2009, which was aided by an increase in interest rates.

Overall, between 2013 and 2017, inflation-adjusted interest income generated by commercial banks only increased an annualized 5.0%. Growing interest income as a result of rising interest rates during the period has led industry revenue to increase an annualized 5.1% to $695.6 billion over the five years to 2018, including growth of 10.9% in 2018 alone, as the Federal Reserve continues its process of rate normalization through the gradual increase of the federal funds rate. Over the five years to 2023, government regulation and technology-driven competition are forecast to change the business model that commercial banks use.

During this period, industry revenue will be less volatile than over the previous five years. In addition, too-big-to-fail banks will grow deposits at a faster rate than smaller savings institutions, whose reputations were severely damaged due to the significant number of bank failures that occurred during the economic downturn.

Additionally, the Federal Reserve is expected to continue its process of interest rate normalization, which should lead operators to generate more on loans extended to businesses and individuals. As a result, revenue is expected to increase an annualized 3.9% to $844.2 billion over the five years to 2023. Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Government regulation and technology-driven competition are forecast to change the business model that commercial banks use Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 6 Key External Drivers continued Corporate profit Businesses are the largest customer group for commercial banks. Business sentiment and corporate profit determine demand for credit, the quality of lending portfolios and the level of financing transactions. An increase in corporate profit will positively affect commercial banks by boosting commercial loan demand and transaction fees. Corporate profit is expected to increase in 2018.

Regulation for the Banking sector The US banking system depends on consumers’ trust in banking institutions and the Commercial Banking industry is highly regulated. New legislation has been introduced that places limits on banking fees, places new regulatory oversight and forces banks to hold higher capital reserves. New oversight increases compliance costs, negatively affecting revenue and profit. Regulation is expected to remain high in 2018, posing a potential threat to the industry.

External competition for the Commercial Banking industry Competition is high in the banking industry and can come from thrifts, credit unions, government agencies, mortgage brokers and other nonbank organizations that offer financial services.

External competition for the Commercial Banking industry is expected to remain steady in 2018.

% change 6 -6 -4 -2 0 2 4 23 11 1315171921 Year Aggregate househol\Pd debt SOURCE: WWW\fIBISWORL\b\fC\WOM % 7 3 4 5 6 24 10 121416182022 Year Pr\fme rate Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 7 Current Performance Revenue for the Commercial Banking industry is expected to increase at an annualized rate of 5.1% to $695.6 billion over the five years to 2018. Declining revenue over the first two years of the period is attributable to the effect that the subprime mortgage crisis had on the banking sector. Federal Deposit Insurance Corporation (FDIC) numbers indicate that huge mortgage loan losses reduced industry profit margins prior to the five-year period. As many as 63 banks failed between 2013 and 2017, while many smaller commercial banks were unprofitable on a yearly basis during the same period. Nevertheless, many commercial banks are starting to capitalize on mobile and online banking platforms, which have recently driven organic growth, especially for deposits. Commercial banks earn the majority of their revenue through the interest spread between customer deposits and loaned money. Banks accept deposits and place them in savings accounts, as well as in products like certificates of deposit, where funds cannot be withdrawn for a certain period. Banks pay interest to the depositor on this money and loan out these deposits at higher interest rates as mortgages, auto loans, personal loans or small business loans. Revenue is generally calculated as the spread between interest-bearing accounts and loans, combined with noninterest revenue, such as debit card fees and overdraft fees. The primary factors driving revenue growth are the prime rate (i.e.

the minimum bank loan interest rate) and retail and commercial loan demand, which are represented by aggregate household debt and corporate profit. % change 15 -10 -50 5 10 24 10 121416182022 Year Industry revenue SOURCE: WWW.I\fISWORL\ID.COM Return to growth After years of continuous declines, industry revenue finally picked up in 2015 as the US economy strengthened and the Federal Reserve increased interest rates. The industry’s return to growth was due to increased borrowing activity, with net loans and leases growing 2.5% in 2015. Often, before interest rates increase further, consumers and businesses will try to lock in lower rates on loans. This was evident in 2017 when total loans and leases increased 4.5%, despite the Federal Reserve raising the federal fund rate three times within the year. These borrowers did not mind borrowing funds at slightly higher interest rates in 2017 as a result of rate hikes by the Federal Reserve because they were still locking borrowing agreements well below the historic average. Furthermore, an increase in interest rates generates higher income for industry operators by increasing the spread between the rate the banks pay on deposits and the rates at which they lend money. An improving economy is also releasing pent-up demand for credit.

Auto loans are on the rise, and access to credit increased 7.8% in 2016. This was the highest year-over-year increase over the five years to 2018. A growing credit market is expected to boost the industry’s interest and noninterest income, as banks are anticipated to earn more revenue in fees due to a greater volume of Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 8 Growing deposits As the economy has grown and incomes have risen, an increasing number of consumers have been putting money into banks or government treasuries. According to the FDIC, industry deposits have grown at an annualized rate of 14.0% over the five years to 2018 to $14.1 trillion. While cash flow into banks has increased, there has also been a large decline in the outflow of funds in the form of loans. Nonetheless, signs of improvement have persisted in 2018, especially from the automobile sector.

An improving economy is releasing pent-up demand for credit loan origination. Partially as a result of these trends, IBISWorld expects revenue to increase 10.9% in 2018. Increased interest rates and strong equity market growth are also expected to positively affect industry revenue. Return to growth continued Refinancing opportunities There has recently been a considerable amount of refinancing activity, especially over the past three years, as interest rates have started to normalize. Refinancing a mortgage can have several benefits for homeowners, including the opportunity to cash out part of their home equity and lower their monthly mortgage payments.

Refinance requests have skyrocketed during the period, so much so that some banks have actually increased their credit requirements to slow down the flow of applicants. While refinancing helps homeowners, it also provides commercial banks with another source of revenue.

When a homeowner refinances a mortgage, the bank must go through a process similar to a mortgage origination, which requires the homeowner to pay a substantial fee to cover closing costs. The largest commercial banks have been meticulous about granting refinance requests. Typically, homeowners must have substantial equity in the house, good credit and a reliable source of income to receive refinancing. Many consumers have recently been unable to meet these requirements, which has prompted government institutions, such as Fannie Mae and Freddie Mac, to step up and help borrowers by backing their refinanced loans. A change in landscape The negative effects of the subprime mortgage crisis drastically changed the industry landscape, leading larger banks to acquire smaller banks. Over the five years to 2018, the number of industry establishments is anticipated to decline at an annualized rate of 0.8% to 79,217 locations. Nonetheless, the industry’s demand for labor has persisted as operators aim to attract top talent. Consequently, wages paid out by the industry are expected to grow at an annualized rate of 2.9% to $218.8 billion over the five years to 2018. According to the FDIC, 157 banks failed in 2010, followed by 92, 51, 24, 18, and eight bank failures in 2011, 2012, 2013, 2014, and 2015, respectively. Five banks failed in 2016 and an additional eight failed in 2017. This trend further indicates that the industry has been consolidating, with the biggest companies only growing larger. Furthermore, the Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 9 Government regulation In response to the subprime mortgage crisis, new government regulation has both helped and hurt the industry. In 2008, in an effort to increase consumer confidence, the FDIC’s board of directors voted to temporarily increase deposit insurance from $100,000 to $250,000 by December 2013. This increase came in response to the accelerating trend of consumers diversifying their deposits in multiple banks to qualify for the previous insurance limit of $100,000. While this effort did bolster consumer confidence thanks to higher guaranteed insurance, an increase in deposit insurance has put stress on smaller banks. Additionally, the Dodd-Frank Act, enacted in 2010, made the insured deposit limit of $250,000 a permanent amount that was previously set to expire at the end of 2013. The string of bank failures considerably damaged the FDIC Deposit Insurance Fund, which is just now starting to return to prerecessionary levels since hitting a historic low in 2009. The FDIC expects the fund to recover by the end of 2018. At the close of the first quarter of 2014, the fund had a 61.1% decline in comprehensive income compared with the first quarter of 2013, while the fund’s liquid assets amounted to $45.0 billion. Overall, increased government regulation has increased operational expenses for industry operators during the period.

This has resulted in industry profit declining from 21.7% of industry revenue in 2013 to 20.5% in 2018, despite strong revenue growth during the period. number of industry enterprises is expected to decrease at an annualized rate of 3.4% to 4,917 commercial banks over the five years to 2018. A change in landscape continued New government regulation has both helped and hurt the industry Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 10 Commercial banks gain on savings banks Personal savings and individual and business spending are also expected to increase over the next five years. As the credit market thaws and interest rate hikes continue, bank lending is anticipated to rise. With a greater volume of deposit inflows and lending outflows, industry revenue is forecast to grow at an annualized rate of 3.9% to $844.2 billion over the five years to 2023. Additionally, profit margins for commercial banks are also expected to increase from 20.5% of industry revenue in 2018 to 21.3% in 2023.

Rising interest rates will improve banks’ net interest margins, which will aid profit growth. Over the five years to 2023, commercial banks’ deposits will grow faster than smaller savings institutions.

Larger commercial banks will continue to use their range of products and services, such as wealth management, to attract retail depositors. Commercial banks such as Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company and Citigroup Inc. will also have more potential clients for these services due to the merger and acquisition activity that took place prior to the five-year period. Savings institutions will find it difficult to effectively compete and will be more susceptible to failure or acquisition. Industry Outlook Over the five years to 2023, operators in the Commercial Banking industry will experience different operating conditions than during the prior period. The economy will continue to grow, bolstering industry revenue and making growth much less volatile. Commercial banks will continue to benefit from government support, albeit with continued oversight. Too-big-to-fail banks will grow deposits at a faster rate than smaller savings institutions, whose reputations were damaged due to bank failures that occurred during the financial crisis. Over the five years to 2023, the industry landscape will also change significantly due to continued government oversight and competition from nontraditional financiers. Industry revenue will grow as the economy improves and the prime rate and demand for loans rise. Over the next five years, the unemployment level is projected to remain low and per capita disposable income is expected to grow.

Consequently, increased income and a relatively high personal savings rate will result in higher demand for the ability to invest cash into checking, savings and other cash accounts. This demand will enable banks to keep low interest payments on these accounts. However, the regulatory environment of this industry has the potential to change significantly over the next five years. At this time, the current administration has not clearly stated its intentions regarding regulation; however, the administration has hinted that it may dismantle large parts of the 2010 Dodd-Frank Reform Act.

IBISWorld makes its forecasts based on the current regulatory environment. As changes are made to Dodd-Frank, forecasts are subject to change.

Personal savings and individual and business spending are expected to increase Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 11 Technology and regulation If the Dodd-Frank Act remains intact, it is expected to continue to negatively affect the industry, cutting into profit margins through fee reductions, higher compliance costs and increased reserve requirements. Costs are expected to remain high as banks strive to meet regulations; however, banks are expected to pass on these rising costs to customers in the form of fees. Competition will intensify as new entrants target commercial banking.

Nontraditional competitors include some of the world’s largest corporations and the best-funded venture-backed startups.

These operators use new technology, such as online banking, which attracts customers to their new methods and business models. The continued evolution of mobile banking will have a dramatic effect on client growth and retention. Generation Y, which includes Americans aged 10 to 30, currently relies heavily on mobile phones for paying bills and making deposits, a trend that is expected to increase over the five years to 2023. Companies with well-developed mobile platforms will be able to attract more young adults, ensuring their future deposit growth and lending capabilities.

Finally, microfinance loans and prepaid debit cards, such as those that large companies like Walmart Inc. offer, enable customers to engage in banking activities outside of the traditional banking network, posing a potential threat to the industry. Increased competition and lower distribution costs due to technology will play significant roles in pressuring the industry to consolidate further. IBISWorld expects the number of industry establishments to decline at an annualized rate of 0.4% to 77,812 locations, while the number of banks will decrease an annualized 0.6% to 4,763 enterprises. Nonetheless, continuous revenue growth, coupled with rising demand, will increase the industry’s demand for employment. Therefore, employment is expected to grow at an annualized rate of 2.5% to 2.4 million workers over the five years to 2023, with most new jobs circulating around commercial banking technologies, online platform maintenance, data security and data management. As a result of the high- paying nature of these jobs, wages paid out by this industry are expected to increase at an annualized rate of 3.2% to $256.0 billion over the five years to 2023.

The average wage paid out by industry operators is also expected to increase to $108,503 in 2023, as industry operators compete to hire and retain top talent. An increase in the popularity and convenience of online and mobile banking is expected to fuel establishment declines. For example, in a recent investor presentation, Bank of America Corporation disclosed that since 2011, there has been a 115.0% growth in its active mobile banking accounts and a 12.0% decrease in its banking centers’ accounts. This trend will likely continue and be adopted by the industry at large.

Competition will intensify as new entrants target commercial banking Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 12 The industry offers well-defined products that have gained consumer acceptance Industry consolidation is increasing The number of employees is stabilizing Life Cycle Stage Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 13 Industry Life Cycle The Commercial Banking industry is in the mature phase of its life cycle, which is characterized by mergers and acquisitions, steady growth, more regulation, a smaller number of banks, market saturation and intense product competition. Over the 10 years to 2023, industry value added (IVA), which measures the industry’s contribution to the overall economy, is expected to grow at an annualized rate of 3.6%, compared with annualized growth of 2.2% expected for US GDP during the same period. Despite being mature, the industry continues to undergo restructuring in the wake of the subprime mortgage crisis.

This factor has enabled some major commercial banks to make large acquisitions, increasing industry consolidation. These acquisitions and the general trend toward consolidation of services within financial markets have brought an increasing number of activities under the commercial banking umbrella. Consequently, the lines between various banking activities are expected to continue to blur over the coming years. Rising consumer internet access has also given customers the ability to easily compare features and pricing across banking products, which has led to intense pricing competition on fairly standardized industry products, causing profit growth to remain strained. Despite greater competition, the increase in products offered and the rapid rise in the mobile and online banking platforms have caused usage rates to drive revenue; they will continue to provide year-over-year revenue growth over the five years to 2023. The maturity of the US Commercial Banking industry contrasts with the growth expected from opening financial services operations in emerging countries. However, some US banks are currently retreating from operations abroad to conserve scarce capital for the domestic market. Also, the European sovereign debt crisis has made many banks wary of their European operations.

Despite this, banks are expected to expand their networks in emerging economies in accordance with the economic recovery. Revenue growth in these countries is expected to be higher than in the US market over the next five years; such expansion will provide an additional stream of capital for US banking operations. These factors will also support more aggressive lending practices over the five years to 2023. This industry is Mature Industry Performance Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 14 Products and Services The Commercial Banking industry earns interest revenue from loan products and noninterest revenue from fees and other services. In 2018, 70.6% of industry revenue is expected to come from interest income from loans, while the remaining 29.4% will come from depository service fees and other noninterest sources such as gain on securities. Real estate loans This category includes all mortgage products for retail consumers, including loans secured by refinancing activity and lease financing and receivables. Real estate loans are expected to account for an estimated 31.8% of commercial banking revenue in 2018, which is a slight improvement since 2013. Products & Markets Supply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations KEY BUYING INDUSTRIES 11 Agriculture, Forestry, Fishing and Hunting in the US Establishments in the agricultural sector require financing from commercial banks. 21 Mining in the US Establishments in the mining sector require financing from commercial banks. 23 Construction in the US Construction industries often require financing and loans to pay for their building and construction activities. 51 Information in the US These industries are fairly capital intensive, which leads to higher demand for commercial loans. 99 Consumers in the US Consumers require commercial loans for real estate, vehicles, and other goods. Additionally, consumers use commercial banks for deposits. KEY SELLING INDUSTRIES 52111 Central Banking in the US Commercial banks often require liquidity and funding from the Federal Reserve. 53112 Commercial Leasing in the US Commercial banks require rental properties for many of their branch and retail networks. Supply Chain Products and services se\$gmentation (2018) Total $\f95.\f\bn 31.8%Real estate loans 5.\f%Credit card loans 29.4% Depository service\$s and other noninterest-income generating products 13.\f% Commercial and industria\$l loans 11.1% Loans to individua\$ls excluding credit cards 8.5%Other SOURCE: WWW.IBISWORL\f.COM Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 15 Products and Services continued Mortgage product offerings are for home purchasing and refinancing needs and have fixed or variable rates.

Commercial banks manage these mortgage portfolios for asset and liability management purposes, or they repackage and sell them to investors (i.e.

collateralized debt obligation and securitization) while retaining the relationship with the customer. The mortgage business includes the origination, fulfillment, sale and servicing of first mortgage loan products. Servicing activities primarily include collecting cash for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors and escrow payments to third parties. Servicing income includes ancillary income derived in connection with these activities, such as late fees. Mortgage products are typically available to customers through a commercial bank’s retail network, geographic branch centers and sales- account executives and sales-force personnel, who offer customers direct telephone and online assistance and access to products. Operators also serve customers through partnerships they may have with various mortgage brokers.

Depository services and related fees This product segment provides a comprehensive range of services and products to consumers and small businesses and accounts for an estimated 29.4% of commercial banking revenue in 2018. Banks provide a depository service to consumers by safely holding their money and paying out interest on deposits. Depository products include traditional savings accounts, money market deposit accounts, certificates of deposit, individual retirement accounts and regular and interest-accumulating checking accounts. Deposit products provide a relatively stable source of funding and liquidity for commercial banks. Banks earn interest revenue from investing deposits in assets through client lending and asset and liability management activities. Deposits also generate various account fees, such as insufficient-fund fees, overdraft charges and account-service fees. More than any other service, deposits are the lifeblood of lending for an organization.

Commercial banks pay interest on customer deposits and then lend these deposits to borrowers at a higher rate, profiting on the interest spread. This segment’s share of revenue increased over the past five years.

Loans to individuals In general, individual loans are the fastest-growing loan segment and include indirect consumer loans that enable operators in the commercial banking industry to offer financing through automotive, marine, motorcycle and recreational vehicle dealerships across the country. This segment represents the greatest opportunity for industry growth over the next five years as the economy recovers; but competition will be fierce, coming from nontraditional players like Walmart. It is expected to account for 11.1% of revenue in 2018. This segment’s share of revenue increased over the past five years.

Commercial and industrial loans Although the commercial client base is smaller than the individual consumer base, revenue from loans to commercial clients is anticipated to account for an estimated 13.6% of industry revenue in 2018, a definite improvement compared with 2013. This category is broadly termed business lending and includes lending to commercial, agricultural and industrial enterprises. Business lending includes a range of products and services that are primarily offered to customers via client- relationship teams and product partners Products & Markets Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 16 Demand Determinants A variety of factors affect demand for bank deposits, especially the real after-tax return on deposits relative to alternative investments and consumer confidence. Commercial banks set the after-tax return on deposits in accordance with the volatility of equity markets, as well as consumer confidence in the economy, which determines demand levels for savings, checking and money market accounts. In bull markets (markets that are expected to grow), there is low demand for savings-type products and banks have to raise rates to compete with the increased flow of funds into equity investments. Given their low-risk (albeit low-return) profile, commercial banks experience an increase in the flow of funds into bank deposits in bear markets.

Consumer confidence is also an important demand determinant for the level of deposits. The more people fear equity markets, the greater propensity they have to put money in the bank.

Loans Demand for loans is determined by the real after-tax cost of debt relative to the cost of equity. Demand for debt financing typically falls as the real cost of such financing increases. Commercial and industrial (C&I) loans depend on investment spending by businesses on equipment and other capital goods, as well as financing related to mergers and acquisitions. C&I loans tend to be cyclical and fall as general economic activity slows and increase when the economy recovers again. Commercial real estate loans are largely determined by investment in nonresidential structures, such as multifamily housing, construction and land development. Multifamily housing investments tend to be more volatile. Demand for consumer loans largely depends on consumer expenditure and, in particular, durable goods expenditure.

Demand for mortgage lending depends on conditions including mortgage rates, house price movements and employment levels.

Lending standards and the criteria for eligibility for a loan will also affect demand. The level of interest rates, which represents the cost to borrow, will also Products and Services continued associated with the banks. Products include commercial and corporate bank loans and commitment facilities that will cover business banking clients, middle- market commercial clients and large multinational corporate clients. Real estate lending products are generally issued to public and private developers, home builders and commercial real estate companies.

Credit card loans Credit card loans and associated fees are expected to generate 5.6% of revenue in 2018. Their share of revenue has remained relatively stable over the past five years because of virtually unchanged interest rates on purchases made.

Additionally, an increase in credit worthiness of borrowers and a decline in delinquencies has kept commercial banks from raising interest on credit card loans.

Other Other products include consumer-related business activities in this industry, including forms of insurance, some card services (though this area is primarily specific to the Credit Card Issuing industry, IBISWorld report 52221) and the allocation of interest income from loan activities not elsewhere classified. Also included are loans to various federal, state and local government agencies and loans between depository banks. IBISWorld estimates that this segment accounts for 8.5% of industry revenue in 2018 and has increased over the past five years.

Products & Markets Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 17 Major Markets Commercial bank customers include two major markets: retail customers and corporate clients. One-time transactions are categorized under other customers.

Retail customers The retail customer market segment is expected to account for the largest part of a commercial bank’s customer base. Although these customers mainly deal in small transaction sizes, the sheer proportion of customer numbers makes this market segment more significant. IBISWorld estimates retail customers represent 50.8% of the commercial banking revenue in 2018, up slightly over the past five years due to increased borrowing as macroeconomic conditions improved. Consumer and retail customers provide a substantial amount of deposits for commercial banks, where account- keeping fees and investments made on the deposits make these customers highly profitable. Furthermore, with the high degree of competition in the Commercial Banking industry, the ability to attract and retain these customers is essential. If a commercial bank has a satisfied base of retail customers, it can then market various other products and services to customers at minimal cost. Enticing customers to branch out from their primary banking activities (deposits) and purchase mortgage products, fund management services, credit cards and other banking sectors offered by that specific company is another way commercial banks cross-sell products and bolster revenue.

Corporate clients Unlike retail customers, small businesses, corporations and institutional clients deal in a much larger scale of transaction value.

Although there may be fewer clients in this category, their dollar value of dealings is substantially larger. Corporate clients require large forms of business lending and they too deposit cash into commercial banking accounts. IBISWorld estimates that corporate clients account for 46.2% of the industry. Industry revenue from Demand Determinants continued affect demand for loans. Low interest rate levels encourage households and businesses to take on more debt because the relative cost of consumption through borrowing falls alongside interest rates. Major market segmentation (2018) Total $69\f.6bn \f0.\b%Retail customers 46.2% Corporate clients 3.0%Other clients SOURCE: WWW.IBISWORL\f.COM Products & Markets Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 18 International Trade There are no imports or exports in this industry. Major Markets continued consumer has grown at a slightly faster pace than corporations over the five years to 2018, leading this segment’s share of industry revenue to slightly decrease. Generally, larger corporations and institutional clients deal with commercial banks whose assets are greater than $1.0 billion. According to data from the FDIC, commercial banks with assets in excess of $1.0 billion had a greater exposure to commercial, industrial and credit card loans; however, commercial banking institutions with less than $1.0 billion in assets had a greater exposure to residential mortgages, commercial real estate and agriculture loans. Commercial banks in this industry also provide loans to and accept deposits from government institutions. Loans will vary across regions and government departments, but tend to be similar to other market segments. They can include various government-type loans as well as real estate lending, personal loans and auto loans.

Other clients Other customers hold a small market share and generally involve a one-time, niche-type transactional service. These customers can be involved in student loan services, retirement services, auto finance and other forms of commercial real estate. This segment accounts for 3.0% of the commercial banking revenue in 2018.

Products & Markets Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 19 Business Locations 2018 MO2.6 VT0.2 MA1.5 RI0.3 NJ2.7 DE0.3 NH0.3 CT1.0 MD1.9 DC0.3 1 53 7 2 6 4 8 9 Additional States (as marked on map) AZ1.5 CA8.8 NV0.6 OR1.2 WA2.0 MT0.4 NE1.1 MN1.8 IA1.6 OH4.2 VA3.1 FL6.2 KS1.5 CO1.8 UT0.7 ID0.6 TX7.4 OK1.4 NC3.2 AK0.2 WY0.2 TN2.5 KY1.9 GA3.1 IL5.0 ME0.4 ND0.4 WI2.0 MI3.0 PA4.0 WV0.7 SD0.5 NM0.5 AR1.5 MS1.3 AL1.8 SC1.6 LA1.6 HI0.2 IN2.3 NY5.3 5 6 7 8 3 2 1 4 9 SOURCE: WWW.IBISWORLD.COM Establishments (%) Less than 3% 3% to less than 10% 10% to less than 20% 20% or more Products & Markets West West West Rocky Mountains Plains Southwest Southeast New England Mid- Atlantic Great Lakes Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 20 Business Locations The geographic spread of commercial banking establishments across the United States is vast. Unlike many other industries, there is no single state that holds a large market share of establishments. The location trend of the industry closely follows population since banking is still predominantly done at the bank as opposed to online. However, as online banking becomes more popular, the geographic location of banks will become less important.

Southeast In terms of geographic spread by region, the Southeast has the largest proportion of establishments, estimated at 28.5% in 2018.

This region includes some major economic states, such as Florida (6.2% of establishments), North Carolina (3.2%) and Georgia (3.1%). Comprising 12 states, the Southeast is the largest region by size and population, which somewhat reflects the number of establishments there.

Great Lakes This region is expected to account for 16.5% of the industry establishments in 2018, which is slightly higher than the 14.5% of the population held by this region. However, this region includes Illinois, which is home to Chicago, arguably the second largest financial hub in the United States. Illinois is expected to account for 5.0% of industry establishments. Furthermore, this area is characterized by several small regional banks that serve local communities, which also increases the proportion of establishments held by this region.

Mid-Atlantic Although the Mid-Atlantic region is estimated to hold the third-largest percentage of establishments at 14.4%. The Mid-Atlantic region holds the largest financial state, New York, which is expected to be home to 5.3% of the total industry establishments in 2018. As the New York region headquarters the majority of the largest banking institutions, the subprime mortgage crisis severely affected this region. Many employees lost jobs in this region because large financial corporations cut costs to maintain their bottom lines. Despite this trend, the region continues to generate the greatest amount of income and will remain the financial hub of the United States into the future. Other major commercial banking areas throughout the United States include the West region (comprising 13.0% of establishments), with California accounting for an estimated 8.8% of total establishments in 2018. % 300 10 20 Southwest West Great Lakes \fid-\btlantic New England Plains Rocky \fountains Southeast Establishments Population Distribution o\f esta\ blishments vs. popul\ ation SOURCE: WWW.IBISWORL\kD.CO\f Products & Markets Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 21 Key Success Factors Having a good reputation A company’s reputation is crucial to attracting new customers and retaining existing customers. Also, the effects of the recession have made a company’s reputation even more important.

Membership of joint marketing/ distribution operations Revenue models for commercial banks are based on selling a multitude of bank products to customers.

Superior financial management and debt management Commercial banks need good processes for managing interest rates, foreign exchanges and operational risks because they must maintain a rigorous and conservative risk-management approach.

Customer perception of credit worthiness is also important. Ability to raise revenue from additional sources Commercial banks need to be able to cope with slower lending growth by increasing noninterest income. Banks may need to make an aggressive push to nontraditional products by providing other financial services.

Economies of scale Reducing unit cost is a key driver of profitability. This has increased as more banks reach economies of scale through increased merger and acquisition activity.

Easy access for clients Having a strong branch presence throughout the United States makes it easier and more appealing for customers to conduct business with a particular bank.

This creates more opportunities for banks to sell loans and other bank products. Market Share Concentration The subprime mortgage crisis has caused large-scale merger and acquisition activity in the banking sector. Within the commercial banking sector, four out of the top five commercial banks have either merged or acquired banks struggling with losses associated with the crisis. This activity resulted in an increase in market share concentration within the industry prior to the period. Over the five years to 2018, while consolidation in the Commercial Banking industry has continued, it has mostly been between mid-sized operators looking to spread increased operational expenses from increased regulation across their business. As a result, the top four operators, who’s operations are already vast in size, did not partake in massive mergers and acquisitions during the period. Ultimately, market share concentration amongst the four largest operators slightly decreased over the five years to 2018, as the lack of revenue growth from acquisitions led the four largest operators to grow at a slower pace than the industry as a whole. In 2018, the four largest operators are expected to account for 29.2% of industry revenue, corresponding to a low level of market share concentration. Furthermore, over the five years to 2023, market share concentration in the industry is expected to remain low. The four largest operators in the industry are not expected to make major pushes to increase their market share concentration though mergers, but rather try to organically grow their already mature commercial banking business organically.

Concentration amongst mid-sized operators is expected to continue during this period, as long as regulatory expenses from Dodd-Frank remain in place. Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization Level Concentration in this industry is Low IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 22 Cost Structure Benchmarks The global credit crunch has significantly altered the cost structure of the Commercial Banking industry, specifically in the loan and lease loss- provision segment.

Profit Operating profit is expected to account for 20.5% of revenue in 2018, representing a slight decline from the 21.7% it represented in 2013. While industry revenue has increases steadily over the five years to 2018 as a result higher interest rates due to continued rate hikes by the Federal Reserve, industry operators also experienced increased regulatory scrutiny from government agencies as well. The passage of Dodd-Frank has led industry operators to experience increased regulatory expense during the period to fully assure they are in compliance with federal banking laws. These regulatory changes are the primary cause for industry profit margins slight decline during the period.

Over the five years to 2023, profit margins are expected to slightly increase, as industry operators are better able to manage regulatory expenses, while also benefiting from increase rate hikes by the Federal Reserve. Overall, industry profit margins are expected to increase from 20.5% of industry revenue in 2018 to 21.3% in 2023.

Other expenses The other expenses category, the industry’s largest cost segment, has fallen slightly as a share of revenue over the past five years. This segment, making up 41.4% of the industry revenue in 2018, includes interest expenses, noninterest expenses, loan and lease loss provisions and miscellaneous costs. Miscellaneous expenses make up 10.5% of the industry’s cost structure and include general Sector vs. Industry Costs n P r o fi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other Average Costs of all Industries in sector (2018) Industry Costs (2018) 0 20 40 60 Percentage of revenue 80 10 0 SOURCE: WWW.IBISWORLD.COM 16.4 20.5 41.4 1.6 2.5 1.0 1.5 31.5 48.5 1.1 1.1 1.6 19.0 12.3 Competitive Landscape Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 23 Basis of Competition The Commercial Banking industry is highly competitive. Generally, the markets this industry serves involve competition with banks, thrifts, credit unions, government agencies, mortgage brokers and other nonbank organizations offering financial services. This industry competes with nonbank organizations, such as brokerage houses and commercial and manufacturing companies that offer financial services to facilitate their customers’ purchases.

Additionally, these nonbank institutions experience fewer regulatory constraints and, thus, are able to have lower operating costs.

Operators in this industry will also compete against banks and thrifts owned by nonregulated diversified corporations and other entities that offer financial services Cost Structure Benchmarks continued administrative costs, data processing and technology and telecommunication fees.

Noninterest expense from deposits is also expected to account for 19.2% of industry revenue in 2018. Interest expense is expected to account for 11.9% of industry revenue in 2018.

Interest expense is determined by the amount, type and maturity of liabilities, market interest-rate conditions and competition in lending markets. For banks, the most significant item contributing to an interest expense is the interest charged on domestic deposits.

Banks rely heavily on customer deposits as a means of funding their interest payments to depositors; this reliance has somewhat shielded the industry from the increasing cost of funds through capital markets that other financial institutions have encountered. The credit crisis has raised the cost of acquiring funds through securitization and capital markets, causing investors who are reluctant to lend in turbulent times to exit the market. Banks that were active participants in capital markets were also affected by this trend.

Other types of funding that incur interest costs are deposits made by foreign investors, federal funds purchased, trading liabilities and subordinated notes and debentures.

Wages Labor costs are another significant expense item for commercial banks, estimated to account for 31.5% of industry revenue in 2018, decline from 35.0% of industry revenue in 2018. This decline has been a result of industry revenue outpacing wage growth during the period. The profitability of a commercial bank is directly related to the quality of service that their employees deliver to customers. A successful bank or branch requires well-trained, knowledgeable staff that can provide excellent customer service. This need is unlikely to change over the coming years; thus, wages will continue to make up a significant portion of banks’ expenses.

Despite industry operators continuing to hire highly skilled workers, especially those with technology backgrounds needed to provide mobile banking services, over the five years to 2023, wages share of revenue is expected to decline from 31.5% of industry revenue in 2018 to 30.3% in 2023. This will largely be a result of revenue growth continuing to outpace wage growth during the period.

Rent and utilities A key to succeeding in the industry is to have an easily accessible branch network that spans regions heavily populated with customers. With a focus on decreasing the capital intensity of the industry, banks continue to opt for leasing premises rather than owning them outright. Consequently, rent and utilities account for an estimated 1.6% of industry revenue in 2018. Level & Trend Competition in this industry is High and the trend is Increasing Competitive Landscape Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 24 Barriers to Entry An organization must receive prior approval from the Board of Governors of the Federal Reserve System to operate as a commercial bank in the United States. It is then subject to the supervision of and regular inspections by the Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and other federal and state regulatory agencies. Banks are restricted in their range of activities, including in acquisitions of other banks and in interstate banking activities.

Furthermore, commercial banks are subject to capital and operational requirements based on risk and leverage. Another barrier to entry is industry competition, which may deter new operators from entering. Large operators, such as Bank of America, Wells Fargo, JPMorgan Chase and Citigroup, are major players in the commercial banking industry; therefore, these companies have an increased advantage to secure customers. Major companies have many locations throughout the United States and offer a wide range of services, making it difficult for new entrants to compete.

However, as technology continues to advance, the geographic location of operators will matter less to consumers. Basis of Competition continued through alternative delivery channels, such as the internet. Competition is based on customer service, interest rates on loans and deposits, quality and variety of products and services, lending limits and customer convenience (e.g. locations of branches).

Despite the large decline in the number of commercial banks and the explosion in the number of ATMs, growth in the number of banking offices has continued, highlighting the need for convenient locations for customers. Transaction execution, innovation, technology, reputation and price are also factors on which operators compete in this industry. Competitive conditions are likely to continue to intensify as merger activity in the financial services industry produces larger, better-capitalized and more geographically diverse companies capable of offering a wider array of financial products and services at more competitive prices. Competition for retail deposits is also expected to intensify as banks seek to reduce their reliance on wholesale markets for funding. There are also new entrants joining in the competition. In 2008, both Goldman Sachs and Morgan Stanley converted from investment bank status into bank holding companies to increase their access to retail deposits. Additionally, as technology continues to progress, the importance of a depository institution and a financial intermediary for transferring funds may diminish.

Barriers to Entry checklist Competition High Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change Medium Regulation and Policy Heavy Industry Assistance High SOURCE: WWW.IBISWORLD.COM Level & Trend Barriers to Entry in this industry are Medium and Steady Competitive Landscape Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 25 Industry Globalization Commercial bank operations are predominantly focused in the United States, but banking is increasingly becoming global in nature. The deregulation of financial markets in a rising number of countries has facilitated this shift. Furthermore, to make it easier for international banking organizations to gain access to a specific country’s banking market, the industry has started unifying regulation. International capital standards, outlined in the Basel II Capital Accord, imply that very little adjustment to a bank’s operational and capital standard is required to enter banking markets of participating countries. All of the industry’s largest players have global operations and have offices set up in many countries. The subprime mortgage crisis caused several banks to reduce their level of participation in foreign markets, concentrating instead on their domestic operations and on regaining capital strength. According to the International Monetary Fund, cross-border assets, which are held on banks’ balance sheets as a proportion of total assets, fell in 2008, as cross-border lending declined at a faster rate than overall credit. This situation will likely reverse as the Commercial Banking industry recovers and banks continue expanding into foreign markets. Level & Trend Globalization in this industry is Low and the trend is Increasing Competitive Landscape Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 26 Player Performance Headquartered in San Francisco, Wells Fargo and Company (Wells Fargo) is a diversified financial services company that provides banking, insurance, investment, mortgage and consumer finance services. The company separates its businesses into three main segments:

community banking; wholesale banking; and wealth, brokerage and retirement.

Wells Fargo has about 9,000 retail branches, about 13,000 ATMs and an estimated 250,000 employees, serving more than 70.0 million customers. In 2017, the company generated $88.4 billion in sales globally. Community banking is the largest business segment, generating about 60.0% of company revenue. It serves small-business clients, retail customers and high-net-worth individuals. The company’s community banking segment provides a range of products, from home mortgages and debit cards to personal trusts. Commercial banking activities for wholesale banking are also included in Wells Fargo’s industry-specific revenue. The company announced its withdrawal from its eight joint ventures in mortgage lending in 2013 and 2014.

Wells Fargo’s decision to withdraw is due to the heavy and increasing regulations on mortgage joint ventures. As of 2013, these joint ventures accounted for 3.0% of the company’s mortgage production. In 2016, an account fraud scandal negatively affected Wells Fargo; from 2011 to 2016, the bank opened over 3.0 million checking and savings accounts and over 500,000 credit cards in clients’ names without their consent. As a result of this, the company has been forced to pay about $185.0 million in fines and is experiencing multiple civil and criminal suits over the coming years. In 2017, the bank admitted Major Companies Wells Fargo & Company | JPMorgan Chase & Co. Bank of America Corporation | Other Companies 73.8%Other Wells Fargo & Company 10.9% JPMorgan Chase & Co. 8.8% Bank of America Corporation 6.5% SOURCE: WWW.IBISWORLD.COM Major Players (Market Share) Wells Fargo & Company Market Share: 10.9% Wells Fargo & Company (US industry-specifi c segment) - fi nancial performance* Year Revenue ($ million) (% change)Operating Income ($ million) (% change) 2013 74,403.0 N/C30,992.0 N/C 2014 74,344.0 -0.131,828.0 2.7 2015 75,245.01.231,694.0 -0.4 2016 77,408.0 2.930,096.0 -5.0 2017 76,880.0-0.725,111.0 -16.6 2018 76,048.2 -1.124,359.5 -3.0 *Estimates SOURCE: ANNUAL REPORT AND IBISWORLD Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 27 Player Performance JPMorgan Chase and Co. (JPMorgan) is one of the largest financial institutions in the world. The company is the largest bank in the United States, with $2.5 trillion in assets. JPMorgan’s activities are organized into four business segments: consumer and community banking, corporate and investment banking, commercial banking and asset management. It operates in the United States with 5,130 branches and 18,699 ATMs. The most relevant business segments for this industry are consumer and community banking and commercial banking. On September 25, 2008, JPMorgan acquired Washington Mutual (WaMu) for $1.9 billion from the Federal Deposit Insurance Corp. The acquisition of WaMu gave JPMorgan its first significant presence in the West, which is expected to help boost revenue in the future. The bank’s card services operation is also one of the nation’s largest credit card issuers, with 64.5 million accounts and $128.0 billion in loans. Commercial banking is a small but strong component of JPMorgan’s business, with more than $181.5 billion in assets. This division provides a range of services to corporations, government agencies, nonprofits and other financial institutions.

Financial performance As a result of its strong financial position, JPMorgan was one of the first financial institutions able to repay its $25.0 billion in Troubled Asset Relief Program funds after the recession. Over the five years to 2018, JPMorgan’s industry-specific revenue is anticipated to increase at an annualized rate of 2.7% to $61.1 Player Performance continued that it charged over 100,000 customers additional mortgage fees that were not warranted. The bank then admitted in 2018 that it also charged over customers that they provided an auto loan to with additional car insurance that they did not consent to. This ultimately led some of the customers to have their vehicles foreclosed on. While fees from these scandals will only amount to a small portion of the company’s total revenue, the scandals have more meaningfully hurt consumes’ confidence in the bank and could have negative effects on future client retention and business generation.

Financial performance As with many of the other major players, Wells Fargo’s revenue growth has been bolstered by acquisitions. In 2008, Wells Fargo acquired Wachovia and, as a result, became the nation’s largest mortgage lender and the second-largest diversified services company, in terms of deposits, in the United States. The credit crisis negatively affected Wells Fargo, leading to declines in revenue and profit. Nevertheless, Wells Fargo’s declines were not as steep as other companies’ losses, and the company has not been forced to write down large losses on assets. Over the five years to 2023, Wells Fargo will be in a good position to pick up market share while its revenue and net income grow.

The recent rise in income is the result of its limited exposure to risky investments, which has prevented the company from recording large losses on fixed and other financial assets. Over the five years to 2018, Wells Fargo’s industry-specific revenue is expected to increase at an annualized rate of 0.4% to $76.0 billion.

IBISWorld estimates that Wells Fargo’s pretax income has declined at an annualized rate of 4.7% over the past five years, likely as a result of regulatory fines and expenses incurred from its recent scandal. JPMorgan Chase & Co. Market Share: 8.8% Major Companies Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 28 Player Performance Bank of America Corporation (BofA), headquartered in Charlotte, NC, is the second-largest holding-backed company in terms of revenue. After a 2009 reorganization following its merger with Merrill Lynch, the company now operates Player Performance continued billion. The bank endured its fair share of challenges early in the period, posting year-over-year declines in revenue from 2013 through 2015.

Nevertheless, the company’s industry- specific revenue returned to growth in 2016, increasing 3.2%. In each subsequent year, the company has experience industry revenue growth as a result of higher interest income stemming from higher interest rates.

Profitability also faltered from 2013 through 2015 due to unanticipated revenue declines and rising operating expenses. However, this trend too has reversed since 2015 with the company’s industry-relevant profit margins increasing every year. JPMorgan Chase & Co. (US industry-specifi c segment) - fi nancial performance* Year Revenue ($ million) (% change)Operating Income ($ million) (% change) 2013 53,629.0 N/C23,177.0 N/C 2014 51,250.0 -4.422,946.0 -1.0 2015 50,705.0-1.122,915.0 -0.1 2016 52,350.0 3.224,529.0 7.0 2017 55,090.05.225,701.0 4.8 2018 61,145.311.029,739.7 15.7 *Estimates SOURCE: ANNUAL REPORT AND IBISWORLD Bank of America Corporation Market Share: 6.5% Bank of America Corporation (US industry-specifi c segment) - fi nancial performance* Year Revenue ($ million) (% change)Operating Income ($ million) (% change) 2013 36,770.0 N/C10,497.0 N/C 2014 36,658.0 -0.310,264.0 -2.2 2015 38,126.0 4.010,609.0 3.4 2016 38,588.01.211,362.0 7.1 2017 41,818.08.413,209.0 16.3 2018 45,218.5 8.115,981.8 21.0 *Estimates SOURCE: ANNUAL REPORT AND IBISWORLD Major Companies Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 29 Other Company Performance Citigroup Inc. (Citigroup) has the world’s largest financial services network. Based on deposits, Citibank is the fourth-largest retail bank in the United States.

Citigroup operates four business segments: global consumer banking, institutional clients group, corporate and Citi Holdings. The global consumer banking segment is most relevant to this industry and includes the retail bank of Citigroup’s global branch network, branded Citibank. Additionally, revenue from local consumer lending under the Citi Holdings segment is relevant to this industry. The company incurred huge losses during the economic crisis and was rescued by a massive US government bailout in 2008. Since the government took an ownership stake in the company, it demanded that Citigroup downsize. As a result, the company reorganized its primary banking businesses into Citicorp, while the rest of its businesses were placed in Citi Holdings, which will be sold in the future. Citigroup’s downfall was due to its enormous exposure to collateralized debt obligations. The company used risk models to examine mortgages in particular areas, but it never included the possibility of a national housing downturn. In 2018, the company is expected to generate $20.5 billion in industry-specific revenue. Player Performance continued through five business segments:

consumer and business banking, consumer real estate services, global banking, global markets and global wealth and investment management. The company’s retail banking operations count 53.0 million customers across all 50 states, with about 4,500 banking centers, about 16,000 ATMs and an estimated 209,00 employees. In 2017, the company generated $87.4 billion in total revenue globally. BofA conducts commercial and retail banking activities primarily through its consumer and business banking segment and its consumer real estate services segment. Report estimates also include corporate lending through its global banking division. Deposit products include traditional savings accounts, money market savings accounts, certificates of deposit and individual retirement accounts, checking accounts and debit cards. Deposits provide a stable source of funding and liquidity. The company earns net interest revenue from investing this liability in interest-earning assets. The bank also generates revenue through various account fees, such as insufficient fund fees, overdraft charges, account service fees and interchange fees from debit cards. Loan payments from businesses, credit cards and home loans make up the largest share of commercial banking revenue.

Financial performance Over the five years to 2018, BofA’s industry-specific revenue is expected to increase an annualized 4.2% to $45.2 billion. Retail deposits grew over the past five years as investors pulled their money from capital markets and sought the safety of checking and savings accounts.

Flat-lined corporate and retail loan demand offset losses from massive home loan defaults and declining asset values in the housing market. Overall, as the economy continues to grow and home loans continue to rise, revenue is expected to grow 8.1% in 2018. Citigroup Inc. Market Share: 3.0% Major Companies Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 30 Capital Intensity The Commercial Banking industry is highly competitive, requiring banks to continually achieve cost savings and other efficiencies to maintain customer satisfaction and retain their business.

This requires investment in an extensive branch and ATM network to have a presence in regions that are conveniently located near a bank’s customer base. Beyond this, banks must invest heavily in technology and communication infrastructure, which is necessary to remain competitive in today’s dynamic environment. These and other investments impose capital investment requirements on banks, which are represented by depreciation.

The Commercial Banking industry is expected spend $0.03 on capital for every dollar spent on labor in 2018, increasing slightly from $0.02 in 2013. Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital Intensity 0.5 0.0 0.1 0.2 0.3 0.4 SOURCE: WWW.IBISWO\LRL\f.COM \fott\bd lin\b shows a hig\Lh l\bv\bl of capital int\L\bnsity Capital units per \ labor unit Comm\brcial Banking Financ\b and Insuranc\b Economy Level The level of capital intensity is Low Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 31 Technology and Systems Commercial banks operate in an increasingly competitive environment as merger and acquisition (M&A) activity continues to define the industry.

M&A activity produces larger, better- capitalized companies capable of offering a wider array of financial products and services at more competitive prices. The technological advances and the growth of e-commerce have made it possible for many nondepository institutions to offer products and services that were traditionally banking products.

Financial institutions are also competing with technology companies in providing electronic and internet-based financial solutions. In addition, technology has significantly changed the Commercial Banking industry by lowering the cost of storing, processing and accessing data through the growth of low-cost communications equipment. Technology will continue to contribute to significant changes in retail payments systems and financial services distribution channels, bank risk management and data assessment. More than ever, banks are being forced to develop new technology to retain and persuade customers to continue to use their services. Over the past two years, banks have been focusing on improving the ease and timeliness of banking procedures through the development of banking apps for smartphones. In 2011, JPMorgan introduced QuickDeposit and QuickPay, which enable their customers to cash checks and transfer funds between unaffiliated accounts on their smartphones. The technology greatly reduces JPMorgan’s day-to-day operating costs, thus increasing profit.

Notably, banks like JPMorgan do not profit directly off these activities, but rather indirectly through strategically assessed account fees. Major players Bank of America and Wells Fargo also offer mobile banking applications that enable customers to conduct all of their banking needs, most notably bill payments. Mobile banking effectively decreases operating costs while replacing revenue from the check cashing and money transmission segments of this industry. Since the increasing need for technological empowerment and continuous improvement of equipment, new pricing structures and distribution channels have emerged. It is expected that these developments will encourage customers to adapt to these new, low-cost distribution channels instead of more costly alternatives. Access to the internet, restricted internal intranets and the increasingly secure transmission of information is expected to accelerate the use of networks as a means to reduce costs. Capital Intensity continued In an attempt to reduce capital intensity, banks have opted to rent and lease premises as opposed to owning them outright. This trend has caused some institutions to sell property where branches were located and to rent new locations. As a result, the Commercial Banking industry in the United States has a moderate level of capital intensity. Labor continues to be the biggest investment that banks have to make due to the heavy reliance on human capital in the industry’s activities. The provision of banking services requires staff that are well educated, professional and able to deliver services to clients in a satisfactory manner. The investment in branch networks is further driving up the investment in labor. With each additional branch, banks must hire employees to serve the customers that they acquire and retain. Level The level of technology change is Medium Operating Conditions Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 32 Regulation and Policy Federal Reserve System The Federal Reserve is the federal supervisor and regulator for all US banks and bank holding companies, including financial holding companies formed under the authority of the Gramm-Leach- Bliley Act of 1999, and of state-chartered commercial banks that are members of the Federal Reserve System. In overseeing these organizations, the Federal Reserve seeks to promote the organizations’ sound operation and compliance with laws and regulations. The Federal Reserve exercises important regulatory influence over entry into the US banking system and the structure of the system through its administration of the Bank Holding Company Act, the Bank Merger Act (with regard to state member banks), the Change in Bank Control Act (with regard to bank holding companies and state member banks) and the International Banking Act. In carrying out its responsibilities, the Federal Reserve coordinates its supervisory activities with other federal banking agencies, state agencies, functional regulators and the bank regulatory agencies of other nations.

Bank Holding Company Act Under the Bank Holding Company Act, a corporation or similar organization must obtain the Federal Reserve’s approval before forming a bank holding company through the acquisition of one or more Revenue Volatility IBISWorld estimates that industry revenue has exhibited a low to low level of volatility over the five years to 2018.

Volatility primarily depends on any aggregate changes in the origination of customer and business loans and the spread between interest rates offered to consumers and garnered by these loan products. The current level of revenue volatility is in-line with the industry’s historic norms. Despite quicker revenue growth in the latter portion of the period due to higher interest rates, the industry gradually worked up to that level of revenue growth during the period, limiting overall volatility. Over the five years to 2023, industry revenue volatility is expected to remain low as well.

Industry operators are expected to see stable revenue growth in line with the Federal Reserve’s gradual process of interest rate normalization. Level The level of volatility is Low Level & Trend The level of Regulation is Heavy and the trend is Increasing Operating Conditions Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 33 Regulation and Policy continued banks in the United States. Once formed, a bank holding company must receive Federal Reserve approval before acquiring or establishing additional banks. Bank holding companies generally only engage in activities that the Board of Governors of the Federal Reserve System has determined to be closely related to banking. Since 1996, this act has provided an expedited prior notice procedure for certain permissible nonbanking activities and for acquisitions of small banks and nonbank entities.

Bank Merger Act The Bank Merger Act requires that the appropriate federal banking agency acts on all proposals involving the merger of insured depository. If the surviving bank is a state member bank the Federal Reserve has primary jurisdiction. Before acting on a merger proposal, the Federal Reserve considers financial and managerial resources of the applicant, the future prospects of the existing and combined institutions, the convenience and need of the community to be served and the competitive effects of the proposed merger.

Change in Bank Control Act The Change in Bank Control Act requires individuals seeking control of a US bank or bank holding company to obtain approval from the appropriate federal banking agency before completing the transaction. The Federal Reserve is responsible for reviewing changes in the control of state member banks and bank holding companies. In its review, the Federal Reserve considers the financial position, competence, experience and integrity of the acquiring party; the effect of the proposed change on the financial condition of the bank or bank holding company being acquired; the effect of the proposed change on competition in any relevant market; the completeness of information submitted by the acquiring person; and whether the proposed change would have an adverse effect on the federal deposit insurance funds.

The Dodd-Frank Wall Street Reform and Consumer Protection Act Signed into law in 2010, the Dodd-Frank Act implements financial regulatory reform upon nearly every aspect of the financial services industry. Once the act was passed, the Financial Stability Oversight Council was created to oversee and coordinate the efforts of the primary US financial regulatory agencies in establishing regulations to address financial stability concerns. Of specific importance to the Commercial Banking industry, Dodd- Frank included the Consumer Financial Protection Act of 2010, which targets banks, card issuers and card network operators with new increased regulations.

The regulations focus mainly on enforcing consumer rights and increasing the security of financial information. As a result, industry participants are forced to develop and implement new technologies that adhere to the regulations, which, in turn, increase costs. To keep up with an ever- changing complex set of compliance issues, many companies had to increase their work forces. Overall, these regulations decrease profit as they increase compliance costs. The Dodd-Frank Act also gave the FDIC greater discretion to manage the Deposit Insurance Fund, which backs commercial banks’ deposits.

The legislation raised the minimum reserve ratio that a commercial bank must have to 1.35%. Additionally, Dodd-Frank increases transparency and puts limits on proprietary trading, which hurts both profit and revenue for the industry.

Volcker Rule The Volcker Rule is a part of the Dodd- Frank Act that limits commercial banks’ investments. Fully in effect since July 2015, the rule bans proprietary trading by commercial banks, which is when a bank Operating Conditions Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 34 Industry Assistance The Commercial Banking industry does not receive any protection by way of direct or indirect tariffs. However, given the instability that the global financial crisis brought upon the financial sector in the United States, the government has stepped in to stabilize conditions through the introduction of the Troubled Asset Relief Program (TARP). TARP enables the US Treasury Department to purchase assets and equity from those financial institutions deemed too important to fail to strengthen the financial sector; it permits the purchase of up to $475.0 billion of troubled assets.

The Treasury was given $250.0 billion immediately following the creation of the fund as the Emergency Economic Stabilization Act of 2008. An additional $100.0 billion was distributed later, followed by a final distribution of $125.0 billion at Congress’ discretion. Under TARP, the Treasury is permitted to purchase illiquid, difficult- to-value assets from banks and other financial institutions. The Treasury purchased assets, which included collateralized debt obligations sold in the booming market prior to the subprime mortgage crisis, obligations that resulted in widespread foreclosures on the underlying loans. By buying these troubled assets, TARP is intended to improve the liquidity of these assets to enable participating companies to stabilize their balance sheets, strengthen their capital and avoid further losses.

Ultimately, TARP was established to stabilize the financial sector and free up capital markets by encouraging banks to resume their lending activity to levels seen before the financial crisis, both to each other and to consumers and businesses. Bank of America and Citibank received $45.0 billion in TARP support, while Wells Fargo and JP Morgan Chase received $25.0 billion. Furthermore, the institutions that opted to receive government assistance under TARP are required to issue equity warrants or equity debt securities to the Treasury as consideration for the arrangement, a practice beneficial for both taxpayers and institutions. The Treasury’s ownership stakes enable it to profit from the company regaining financial strength when it sells its equity in the company. The financial institutions benefit from the financial support provided because it gives them the capital strength to improve their balance sheets and return to profitability. Regulation and Policy continued makes speculative bets with its own money. The rule also limits bank ownership in hedge funds and private equity funds to 3.0% of its tier 1 capital.

The Volcker Rule is interpreted and enforced by five regulatory agencies, which has made it difficult for operators to comply with the rule in its entirety. In 2016, some larger banks put in a request for a five-year delay on the rule to get out of illiquid investments. As a result, the Board of Governors of the Federal Reserve extended the deadline for commercial banks to comply with the rule to July 21, 2017. The rule is expected to damage bank profitability moving forward. Level & Trend The level of Industry Assistance is High and the trend is Decreasing Operating Conditions Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 35 Key Statistics Revenue ($m) Industry Value Added ($m) Establish - ments Enterprises Employment (People) Exports Imports Wages ($m) Domestic Demand Prime rate (%) 2010 640,280.9 256,662.9 82,096 6,506 1,922,697 -- -- 178,866.0 N/A 3.3 2011 592,230.2 287,632.7 82,680 6,263 1,952,190 -- -- 184,326.0 N/A 3.3 2012 563,515.9 304,733.3 83,071 6,061 1,961,358 -- -- 190,629.8 N/A 3.3 2013 541,904.8 311,845.7 82,266 5,836 1,924,790 -- -- 189,804.2 N/A 3.3 2014 535,139.9 306,790.1 81,544 5,596 1,910,759 -- -- 188,878.1 N/A 3.3 2015 542,662.4 318,593.7 81,119 5,330 1,904,845 -- -- 190,384.9 N/A 3.3 2016 576,134.7 327,891.6 79,696 5,102 1,923,661 -- -- 194,019.2 N/A 3.5 2017 627,113.5 333,519.4 78,774 4,909 1,951,089 -- -- 201,196.3 N/A 4.2 2018 695,636.8 368,233.2 79,217 4,917 2,084,875 -- -- 218,828.4 N/A 5.0 2019 762,045.4 401,588.5 78,818 4,877 2,201,363 -- -- 234,876.9 N/A 5.8 2020 775,937.6 408,721.0 78,597 4,850 2,230,503 -- -- 238,648.7 N/A 6.0 2021 796,058.9 418,857.2 78,354 4,820 2,266,501 -- -- 243,586.5 N/A 6.2 2022 819,338.6 430,798.5 78,102 4,793 2,312,737 -- -- 249,698.8 N/A 6.4 2023 844,153.7 443,523.5 77,812 4,763 2,359,206 -- -- 255,981.2 N/A 6.6 2024 872,306.4 457,815.5 77,599 4,741 2,413,732 -- -- 263,275.3 N/A 6.8 Sector Rank 3/31 1/31 5/31 16/31 1/31 N/A N/A 1/31 N/A N/A Economy Rank 8/694 3/694 95/694 360/694 11/694 N/A N/A 3/694 N/A N/A IVA/Revenue (%) Imports/Demand (%) Exports/Revenue (%) Revenue per Employee ($’000) Wages/Revenue (%) Employees per Est. Average Wage ($) Share of the Economy (%) 2010 40.09 N/A N/A 333.01 27.94 23.42 93,028.70 1.65 2011 48.57 N/A N/A 303.37 31.12 23.61 94,420.11 1.82 2012 54.08 N/A N/A 287.31 33.83 23.61 97,192.76 1.88 2013 57.55 N/A N/A 281.54 35.03 23.40 98,610.34 1.89 2014 57.33 N/A N/A 280.07 35.30 23.43 98,849.78 1.82 2015 58.71 N/A N/A 284.89 35.08 23.48 99,947.71 1.83 2016 56.91 N/A N/A 299.50 33.68 24.14 100,859.35 1.86 2017 53.18 N/A N/A 321.42 32.08 24.77 103,120.00 1.85 2018 52.93 N/A N/A 333.66 31.46 26.32 104,959.96 1.98 2019 52.70 N/A N/A 346.17 30.82 27.93 106,696.12 2.11 2020 52.67 N/A N/A 347.88 30.76 28.38 106,993.22 2.11 2021 52.62 N/A N/A 351.23 30.60 28.93 107,472.49 2.12 2022 52.58 N/A N/A 354.27 30.48 29.61 107,966.79 2.14 2023 52.54 N/A N/A 357.81 30.32 30.32 108,503.12 2.18 2024 52.48 N/A N/A 361.39 30.18 31.11 109,073.96 2.21 Sector Rank 8/31 N/A N/A 27/31 6/31 9/31 13/31 1/31 Economy Rank 105/694 N/A N/A 308/694 155/694 196/694 43/694 3/694 Figures are in inflation-adjusted 2018 dollars. Rank refers to 2018 data. Revenue (%) Industry Value Added (%) Establish - ments (%) Enterprises (%) Employment (%) Exports (%) Imports (%) Wages (%) Domestic Demand (%) Prime rate (%) 2011 -7.5 12.1 0.7 -3.7 1.5 N/A N/A 3.1 N/A 0.0 2012 -4.8 5.9 0.5 -3.2 0.5 N/A N/A 3.4 N/A 0.0 2013 -3.8 2.3 -1.0 -3.7 -1.9 N/A N/A -0.4 N/A 0.0 2014 -1.2 -1.6 -0.9 -4.1 -0.7 N/A N/A -0.5 N/A 0.0 2015 1.4 3.8 -0.5 -4.8 -0.3 N/A N/A 0.8 N/A 0.0 2016 6.2 2.9 -1.8 -4.3 1.0 N/A N/A 1.9 N/A 6.1 2017 8.8 1.7 -1.2 -3.8 1.4 N/A N/A 3.7 N/A 20.0 2018 10.9 10.4 0.6 0.2 6.9 N/A N/A 8.8 N/A 19.0 2019 9.5 9.1 -0.5 -0.8 5.6 N/A N/A 7.3 N/A 16.0 2020 1.8 1.8 -0.3 -0.6 1.3 N/A N/A 1.6 N/A 3.4 2021 2.6 2.5 -0.3 -0.6 1.6 N/A N/A 2.1 N/A 3.3 2022 2.9 2.9 -0.3 -0.6 2.0 N/A N/A 2.5 N/A 3.2 2023 3.0 3.0 -0.4 -0.6 2.0 N/A N/A 2.5 N/A 3.1 2024 3.3 3.2 -0.3 -0.5 2.3 N/A N/A 2.8 N/A 3.0 Sector Rank 1/31 1/31 26/31 26/31 1/31 N/A N/A 1/31 N/A N/A Economy Rank 9/694 12/694 540/694 566/694 21/694 N/A N/A 13/694 N/A N/A Annual Change Key Ratios Industry Data SOURCE: WWW.IBISWORLD.COM Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 36 Apr 2016 - Mar 2017 by company revenue Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m) Liquidity Ratios Current Ratio 1.4 1.4 1.3 1.4 1.6 1.3 1.2 Quick Ratio 1.2 1.3 1.2 1.2 1.4 1.1 0.8 Sales / Receivables (Trade Receivables Turnover) 8.7 4.0 8.9 8.4 4.2 10.4 13.5 Days’ Receivables 42.0 91.3 41.0 43.5 86.9 35.1 27.0 Cost of Sales / Inventory (Inventory Turnover) n/a n/a n/a n/a n/a n/a n/a Days’ Inventory n/a n/a n/a n/a n/a n/a n/a Cost of Sales / Payables (Payables Turnover) n/a n/a n/a n/a n/a n/a n/a Days’ Payables n/a n/a n/a n/a n/a n/a n/a Sales / Working Capital 2.1 1.8 2.4 2.5 1.6 3.4 5.7 Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest 3.4 3.2 3.7 3.5 3.5 3.4 3.9 Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.8 3.5 5.6 3.4 4.6 3.4 2.3 Leverage Ratios Fixed Assets / Net Worth n/a n/a n/a n/a n/a n/a 0.1 Debt / Net Worth 2.7 2.9 3.3 3.1 2.4 4.0 5.0 Tangible Net Worth 31.8 31.2 27.9 29.4 33.0 26.2 20.5 Operating Ratios Profit before Taxes / Net Worth, % 21.6 17.5 21.0 20.7 16.7 23.8 38.9 Profit before Taxes / Total Assets, % 5.1 4.2 4.7 5.1 4.1 5.7 7.6 Sales / Net Fixed Assets 51.8 46.3 57.2 69.8 92.8 61.6 47.3 Sales / Total Assets (Asset Turnover) 0.4 0.3 0.4 0.4 0.3 0.5 0.6 Cash Flow & Debt Service Ratios (% of sales) Cash from Trading n/a n/a n/a n/a n/a n/a n/a Cash after Operations 31.7 12.8 16.0 18.0 25.1 14.4 13.6 Net Cash after Operations 30.9 11.2 13.9 17.7 24.7 13.6 10.6 Cash after Debt Amortization 7.2 -5.0 -0.2 2.8 2.9 2.4 4.4 Debt Service P&I Coverage 3.1 0.8 1.1 1.9 1.6 2.4 1.9 Interest Coverage (Operating Cash) 4.1 1.2 1.8 2.9 2.5 3.4 3.4 Assets, % Cash & Equivalents 15.4 14.9 14.9 14.9 16.4 12.6 13.4 Trade Receivables (net) 37.2 40.7 37.1 36.6 38.2 35.8 30.5 Inventory 13.6 12.7 13.1 13.1 8.5 19.4 17.6 All Other Current Assets 7.5 8.2 10.5 11.6 8.7 14.0 19.4 Total Current Assets 73.6 76.5 75.6 76.1 71.8 81.9 80.8 Fixed Assets (net) 6.4 7.0 6.4 6.1 7.4 4.3 4.9 Intangibles (net) 2.6 2.2 2.3 2.6 2.1 2.8 4.5 All Other Non-Current Assets 17.3 14.2 15.7 15.2 18.7 11.0 9.7 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 43,045.3 49,879.2 58,190.6 56,133.3 11,625.4 26,301.0 18,206.9 Liabilities, % Notes Payable-Short Term 33.2 36.4 35.9 35.4 30.8 41.8 39.2 Current Maturities L/T/D 2.1 1.9 2.5 2.5 2.3 2.9 2.7 Trade Payables 2.5 2.4 4.3 3.9 2.1 5.2 9.1 Income Taxes Payable 0.2 0.2 0.2 0.2 0.1 0.2 0.5 All Other Current Liabilities 9.2 8.3 8.1 8.5 8.1 7.7 13.3 Total Current Liabilities 47.3 49.1 51.1 50.4 43.4 57.7 64.7 Long Term Debt 11.2 10.6 12.6 11.0 13.4 8.5 6.6 Deferred Taxes 0.2 0.1 0.2 0.2 n/a 0.4 0.3 All Other Non-Current Liabilities 7.0 6.8 5.9 6.4 8.2 4.4 3.5 Net Worth 34.4 33.4 30.2 32.0 35.1 29.0 25.0 Total Liabilities & Net Worth ($m) 43,045.3 49,879.2 58,190.6 56,133.3 11,625.4 26,301.0 18,206.9 Maximum Number of Statements Used 1,162 1,242 1,286 1,196 671 399 126 Industry Financial Ratios Source: RMA Annual Statement Studies, RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects.

Note : For a full description of the ratios refer to the Key Statistics chapter online. Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 37 BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad. IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services. Industry Jargon IBISWorld Glossary GENERATION Y The demographic of Americans generally aged 10 to 30.

LOAN AND LEASE LOSS PROVISION An amount set aside as an allowance for bad debts (i.e. debts where the customer defaults or where the terms of the loan need to be renegotiated).

LOAN DEFAULT When a customer fails to pay back money received through a loan to the bank.

SUBPRIME MORTGAGE A type of mortgage made out to borrowers with lower credit ratings. Lending institutions often charge higher interest on subprime mortgages to compensate themselves for carrying more risk. WARRANT A type of security that entitles the holder to purchase stock in the issuing company at a specified price.

WRITE-DOWN A deliberate reduction in the value of an asset to reflect its current market value.

Jargon & Glossary Provided to: Trident University (2130812200) | 21 February 2019WWW.IBISWORLD.COM Commercial Banking in the US December 2018 38 NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure. IBISWorld Glossary continued Jargon & Glossary Disclaimer This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use by its authorized licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. In the event that the purchaser uses or quotes from the material in this publication – in papers, reports, or opinions prepared for any other person – it is agreed that it will be sourced to: IBISWorld Inc. At IBISWorld we know that industry intelligence is more than assembling facts It is combining data with analysis to answer the questions that successful businesses ask Identify high growth, emerging & shrinking markets Arm yourself with the latest industry intelligence Assess competitive threats from existing & new entrants Benchmark your performance against the competition Make speedy market-ready, profit-maximizing decisions Who is IBISWorld?

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