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high growth peers. We place a 16x multiple on our 2017E EPS in line with SMID peers. Our DCF assumes a two-stage cost of capital of 10% and a terminal growth rate of 3%. Downside risks to our price objective are worse than expected decrease in oil prices, regulatory issues, deteriorating credit quality, and if M&A synergies do not materialize. Upside risks are sooner than expected recovery in the oil price, faster than expected rate hikes or better than expected improvement in the US economy. Invesco (IVZ) Our $36 price objective is based on a target P/E multiple of 14x our 2017E, which is above |VZ's historical valuation relative to the group given expectations for superior organic growth. Risks to our price objective are market depreciation and investment underperformance, as for all asset managers, along with volatile flows in IVZ's passive strategies, non-US currency and market risk. JPMorgan Chase & Co. (JPM) We use a three-factor valuation framework (P/E, P/TBV, DCF} to arrive at our $83 PO, assigning a 1.5x multiple to 2017E TBV and 13x multiple on 2017E EPS. We have weighted the P/E and P/TBV factors equally at 40%, and our DCF analysis by 20%. Near term, we view JPM's current market P/E multiple as overly discounted, but expect money center banks will likely continue to trade at a discount to the regionals. Our 11x multiple is a 2x discount to our median multiple as we believe in the near future, money centers will continue to trade at a discount to regional peers. Our DCF assumes a two- stage cost of capital of 10% and a terminal growth rate of 4%. Risks to our price objective are macro risks such as a longer than expected low interest rate environment and further regulation and scrutiny of the financials industry. Specific to JPM, risks are enhanced regulatory and capital standards as a Global SIFI, mortgage putback risk, material decline in investment banking/trading profitability, and increased litigation on matters such as private label securitization, foreclosures, etc. Key Corp (KEY) We use a three-factor valuation framework (P/E, P/TBV, DCF) to arrive at our $18 PO and assign a 1.4x multiple to 2017E TBV and 15x multiple on 2017E EPS, in-line with its peer group due to near median profitability and EPS growth. Our DCF assumes a two stage cost of capital of 13.4% and 10.9% and a terminal growth rate of 5% and Tier 1 common of 8% at termination. Downside risks to our PO are a prolonged low interest rate environment, greater than expected expenses, inability to maximize balance sheet efficiency, and the announcement of expensive deals. KKR & Co. (KKR) Our price objective (PO) for KKR is $17, which results in a target price-to-ENI (P/ENI or P/E) multiple of 10x our 2017 economic net income (ENI) estimate. Our price objective is based on our sum-of-the-parts (SOTP) analysis. Our SOTP analysis is based on the following components: a target multiple on fee related earnings (11x - discount to asset manager multiples given revenue mix), a discount to book value for the balance sheet investments and accrued carry given markets, and a discounted value on the performance fee upside over a cycle. Based on this method, we value the fee related earnings at $6/unit, the balance sheet (principal investments and accrued carry) at $9/unit, and the discounted value of future carry income and investment income at $2/unit, which equates to a total value of $17, in line with our price objective. Risks to our PO: a weak macro and capital markets backdrop, potential changes in tax laws related to carried interest and partnerships, regulatory and political risk, poor 70 2016 Future of Financials Conference | 17 November 2016 Bankof America 2 Merrill Lynch HOUSE_OVERSIGHT_014384