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active in terms of M&A discussions, CBF continues to evaluate all opportunities that promise the best returns for shareholders. Interestingly, investor sentiment around CBF’s positioning within the M&A market shifted, 75% of respondents believing the pro forma institution is better positioned to act as an acquirer. (Note last year, 55% of respondents believed CBF would be a takeout candidate in the medium term. Chart 23: Do you think the pace of M&A activity will pick-up significantly Chart 24: Does the acquisition of CommunityOne better position CBF as in 2017 vs. 2016? an acquirer or a takeout candidate? 80% 70% 60% 50% 40% 30% 20% 10% 90% 80% 80% 75% 70% 60% 50% 40% 30% 20% 10% 0% Yes No Acquirer Takeout candidate 29% 20% 0% Source: BofA Merrill Lynch Global Research Source: BofA Merrill Lynch Global Research CBF expected to prudently grow in CRE as bank is underpenetrated. CFO Chris Marshall acknowledged that there exist signs of frothiness within the multi-family lending segment. That said, he noted there is still room to grow as peers pull back in response to regulatory oversight (3Q: 161% vs. 300% threshold). That said, management remains selective and has implemented a 25-30% concentration limit (3Q: 22%). Citigroup (C), B-1-7, Buy Markets revenue up YoY so far, down from robust 3Q. President and CEO of ICG Jamie Forese and CFO John Gerspach noted that at this current point in time, they expect a seasonal sequential decline in Markets revenue in 4Q, but revenues should be up YoY on back of stronger activity levels post the election. Moreover, banking activity is looking consistent with prior quarters. DTA impact from lower tax rates. Given the possibility of lower tax rates under the new administration, there have been many questions around what a potential tax cut could mean on C’s ability to re-capture some of its DTA. Management noted that the impact will depend on 1) the ultimate tax rate, 2) either a worldwide or territorial regime, and 3) the time it takes to reflect the new changes. A federal tax cut would directly impact the $21B timing related differences component of its DTA balance. Assuming a 20% decline in the federal tax rate, this would imply a $4B charge to the P&L (20% X $21B). That said, C has $7B of timing difference DTA that is not includable in its regulatory capital. As a result, that $4B impact would not have an impact on its CET1. In the event that there is a territorial regime, there is an element in its foreign subs equal to ~30% of the $21B that would lose its value at an accelerated rate. Assuming a 25% tax rate and territorial regime, management noted that there would be roughly $12B worth of DTA that would see some valuation adjustment and drive a $4B of reduction in its regulatory capital. Aiming to improve market share in Equities. Management noted that C currently ranks around 8-9th in the Equities business and while it is not looking to achieve a top 3 market share, it would like to improve to around 5-6th. Management noted that the revenue gap to reaching that ranking is ~$1B. While not all of that is Bankof America 2 2016 Future of Financials Conference | 17 November 2016 15 Merrill Lynch HOUSE_OVERSIGHT_014329