First Citizens Bancshares, Inc. · NASDAQ:FCNCA

First Citizens Bancshares — Investor Presentation (September 2024)

31 slides from First Citizens Bancshares's investor presentation, Sep 20, 2024

  1. Slide 1: Monthly Market Update

    Brent Ciliano, SVP Chief Investment Officer Monthly Market Update Phillip Neuhart, SVP Director of Market and Recorded on September 20, 2024 Economic Research

  2. Slide 2: What are we going to cover?

    What are we going to cover? 1. Economic Update: Interest Rates | Inflation | Labor Market 2. Market Update: Equity Markets | Fixed Income | Potential Headwinds 3. Election Year: Current Environment | Historical Perspective | Market Considerations

  3. Slide 3: Economic Update

    Economic Update Interest Rates | Inflation | Labor Market

  4. Slide 4: The Economic Outlook Remains Upbeat

    The Economic Outlook Remains Upbeat 3.0% 2024 GDP Growth (Year-Over-Year Percent Change) Median Professional Forecast 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Mar 2022 Jul 2022 Nov 2022 Mar 2023 Jul 2023 Nov 2023 Mar 2024 Jul 2024 Source: Bloomberg 4

  5. Slide 5: Monetary Policy Appears Increasingly Restrictive as Inflation Falls

    Monetary Policy Appears Increasingly Restrictive as Inflation Falls Trend Inflation vs. Federal Funds Rate 8% Inflation Federal funds rate 7% Fed's 2% inflation target 6% 5% 4% 3% 2% 1% 0% -1% -2% 2000 2004 2008 2012 2016 2020 2024 Source: Bloomberg, First Citizens Wealth 5

  6. Slide 6: Markets Expect The Fed Will Cut Rates by 2.0% Further by Dec. 2025

    Markets Expect The Fed Will Cut Rates by 2.0% Further by Dec. 2025 6% Federal Funds Rate 5.38% 4.88% 5% Market-implied policy rates 4.12% 4% 3.45% 3.08% 2.92% 3% 2.87% 2% 1% 0% Before Today End-2024 March 2025 June 2025 Sept. 2025 End-2025 9/18/2024 Source: Bloomberg, First Citizens Wealth. Data as

  7. Slide 7: Equity Market Performance After Rate Cuts Depends on Economic Outcome

    Equity Market Performance After Rate Cuts Depends on Economic Outcome Average S&P 500 Return From Date of First Rate Cut, Since 1979 30% Economic recession did not follow rate cut** 25% Economic recession followed rate cut* 20% 15% 10% 5% 0% -5% -10% 0 20 40 60 80 100 120 140 160 180 200 220 240 260

  8. Slide 8: New Payroll Job Growth Is Slowing Roughly to Trend Pace

    New Payroll Job Growth Is Slowing Roughly to Trend Pace Payroll Job Growth 800 Thousands, three-month moving average 700 600 500 400 300 Estimated breakeven 200 rate 100 0 Feb '21 Aug '21 Feb '22 Aug '22 Feb '23 Aug '23 Feb '24 Aug '24 Source: Department of Labor, Bloomberg, Federal Reserve Bank of

  9. Slide 9: Job Openings – Once Abundant – Have Come Back to Earth

    Job Openings – Once Abundant – Have Come Back to Earth Number of Job Openings Available per Unemployed Worker 2.5 2.0 1.5 1.0 0.5 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Source: Labor Department, Bloomberg 9

  10. Slide 10: The Unemployment Rate Has Moved Up Despite Decent Job Growth

    The Unemployment Rate Has Moved Up Despite Decent Job Growth US Unemployment Rate 04/2020: 11% Percent 14.8% 10% 9% 8% Average since 1960: 5.9% 7% 6% Aug. 2024: 5% 4.2% 4% 3% 1960 1970 1980 1990 2000 2010 2020 Source: Department of Labor, Bloomberg 10

  11. Slide 11: Consumer Expenditures Are Holding Up, Led by Services Spending

    Consumer Expenditures Are Holding Up, Led by Services Spending Personal Consumption Expenditures (Percent change, year-over-year) 25% PCE (Goods) 20% Goods spending: PCE (Services) +43% in Apr. 2021 15% 10% +6.8% 5% 0% +2.0% -5% -10% -15% -20% 2018 2019 2020 2021 2022 2023 2024 Source: Department of

  12. Slide 12: Forecasters Expect US – and Global – Growth Rates to Remain Healthy

    Forecasters Expect US – and Global – Growth Rates to Remain Healthy World Economic Outlook Consensus Real Economic Growth Estimates 2024 Estimate as of: 2025 Estimate Dec-23 Sep-24 Sep-24 World 2.6% 3.1% 3.1% United States 1.3% 2.5% 1.7% Euro Area 0.5% 0.7% 1.3% United Kingdom 0.3% 1.1% 1.4% Japan 0

  13. Slide 13: Market Update

    Market Update Equity Markets | Fixed Income | Potential Headwinds

  14. Slide 14: Global Markets Year-to-Date

    Global Markets Year-to-Date YTD US Equity Returns Total Return by Asset Class As of 09/18/2024 20% YTD 2024 (09/18/2024) Value Blend Growth 18% 16% Large 14% 15.4% 20.1% 22.5% 12% 10% 8% Mid 12.9% 12.4% 10.3% 6% 4% 2% Small 0% 8.8% 9.9% 11.1% U.S. Equities Intl. Developed Emerging Aggregate Municipa

  15. Slide 15: Stocks Have Hovered Near All-Time Highs

    Stocks Have Hovered Near All-Time Highs S&P 500 Index 6,000 5,500 5,000 4,500 +36% 4,000 +57% 3,500 Jan 2022 Jul 2022 Jan 2023 Jul 2023 Jan 2024 Jul 2024 Source: Bloomberg. Data as of 9/18/2024. 15

  16. Slide 16: Large-Cap Outperformance Has Faded Since July

    Large-Cap Outperformance Has Faded Since July Total Return Since July 1 160 S&P 500 Performance Index: Jan. 1, 2023 = 100 +46% Magnificent Seven -0.61% 150 Market cap weighted Equal weighted S&P 500 Market-Cap Weighted +3.2% 140 130 +24% S&P 500 Equal Weighted +7.3% 120 S&P 500 Midcap 400 +5.2% 110

  17. Slide 17: Market Valuation Below Extremes but Above Average

    Market Valuation Below Extremes but Above Average S&P 500 Next Twelve Months Price-to-Earnings Ratio 28X 24X 20X +1 Standard Deviation 16X Average 12X -1 Standard Deviation 8X 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 Source: Bloomberg, Strategas. Data as of 8/31/2024. 17

  18. Slide 18: P/E Ratios Suggest There Is Room For Broadening

    P/E Ratios Suggest There Is Room For Broadening Cap. Weight Price-to-Forward Earnings Top 10 45x Top 11-500 45x 40x 40x 35x 35x 30x 30x 25x 25x 20x 20x 15x 15x 10x 10x 5x 5x 2000 2004 2008 2012 2016 2020 2024 Source: Trivariate Research, As of 9/17/2024. 18

  19. Slide 19: Corporate Earnings

    Corporate Earnings Estimated Next 12-Month S&P 500 Operating Margin ▪ 2024 estimated growth is 10.2% 18% 17.4% 17% ▪ 2025 estimated growth is 15.4% 16% 15% ▪ Average growth since 1950 is 7.6% 14% 13% 2012 2014 2016 2018 2020 2022 2024 Source: FactSet, Bloomberg, Strategas. Data as of 9/13/2024. 19

  20. Slide 20: S&P 500 Price Target

    S&P 500 Price Target Next Twelve-Month S&P 500 Price Target Percent Change from NTM Price Level 9/18/24 Bear 4,400 -21.7% Base 5,900 5.0% Bull 6,500 15.7% Source: Bloomberg, FactSet. 20

  21. Slide 21: US Treasury Curve Remains Inverted but Has Shifted Lower Since April

    US Treasury Curve Remains Inverted but Has Shifted Lower Since April 5.4% US Treasury Yield Curve 5.6% As of 5.4% 5.4% 9/18/2024 5.4% 5.4% 4/25/2024 (recent high) 5.2% 5.3% 5.2% 2023 year end 5.2% 5.0% 5.0% 4.9% 4.8% 4.7% 4.9% 4.8% 4.7% 4.7% 4.8% 4.8% 4.7% 4.6% 4.5% 4.4% 4.2% 4.2% 4.1% 4.2% 4.0% 4.0

  22. Slide 22: Bond Yields Have Moved Meaningfully Lower Since April

    Bond Yields Have Moved Meaningfully Lower Since April US Fixed Income Indices Yield-to-Worst Index 4/30/2024* 9/18/2024 Difference 2-Year Treasury 5.0% 3.6% -1.4% 10-Year Treasury 4.7% 3.7% -1.0% Aggregate Bond 5.3% 4.2% -1.1% Intermediate Government/Credit 5.1% 3.9% -1.2% Municipal Bond 3.8% 3.3% -

  23. Slide 23: Election Year

    Election Year Current Environment | Historical Perspective | Market Considerations

  24. Slide 24: The Election Looks Like a Close Call, and Divided Government Is Possible

    The Election Looks Like a Close Call, and Divided Government Is Possible Probability of Election Outcomes as Probability of Winning Presidential Election as Implied by Prediction Markets 40% Implied by Prediction Markets 70% Democrat Republican 35% 65% 30% 60% 25% 55% 20% 50% 15% 45% 10% 40% 5% 35%

  25. Slide 25: The “Misery Index” Has Moved Down as Voters Head to the Polls

    The “Misery Index” Has Moved Down as Voters Head to the Polls Misery Index (CPI Inflation Rate + Unemployment Rate) Average, last 40 years 25 20 15 10 5 0 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 Source: Federal Reserve, Bloomberg 25

  26. Slide 26: Initial Economic Policy Proposals

    Initial Economic Policy Proposals Economic Policy Proposals from Candidates and Associated Campaigns Vice President Harris Former President Trump - No tax hikes on incomes <$400k Extend personal income tax cuts - Higher cap. gains tax on higher-income taxpayers Raise corporate tax rate to 28% Lower

  27. Slide 27: Initial Tax Policy Proposals

    Initial Tax Policy Proposals Income Tax Trump Harris - Return top marginal rate to 39.6% -Top tax bracket rate Full party control scenario - Extend 2017 tax cuts was cut to 37% in - Potential surcharge on higher Individual 2017. incomes -Rate snaps back to 39.6% if not Divided government Without bip

  28. Slide 28: Tariff Policy: Hikes Look More Likely Than Cuts

    Tariff Policy: Hikes Look More Likely Than Cuts 3500 Amount of US Imports from the World Subject to Tariffs Billions of Dollars Annually 3000 Major risk 2500 scenario 2000 1500 1000 Conservative Moderate scenario risk scenario 500 0 Baseline Plus… Pres. Biden China tariffs at Plus… New tariff on Har

  29. Slide 29: S&P Performance Does Not Appear to Depend on Partisan Control

    S&P Performance Does Not Appear to Depend on Partisan Control Partisan Control, Average Calendar Year S&P Performance 15.7% (1872-2023, Excl. 2001-02) 16% 14% 12% 10% 8.4% 7.5% 7.1% 8% 6.8% 6% 4.8% 4% 2% 0.9% 0% President: D President: D President: R President: R President: D President: D President:

  30. Slide 30: Stay Informed with Our Latest Releases

    Stay Informed with Our Latest Releases In Brief | A look at the week ahead in under two minutes every Monday morning Q&A Videos | Monthly conversations covering 2-3 of the top questions we’re hearing from clients Market updates | Monthly interactive discussions with in- depth analysis of markets and

  31. Slide 31: Authors

    Authors Important Disclosures This material is for informational purposes only and is not intended to be an offer, specific investment strategy, Brent Ciliano, CFA | SVP, Chief Investment Officer recommendation, or solicitation to purchase or sell any security or insurance product, and should not be

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