Credit & Risk Management. Lawrence Marsiello Vice Chairman and Chief Lending Officer

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1 Credit & Risk Management Lawrence Marsiello Vice Chairman and Chief Lending Officer

2 2006 Progress and 2007 Expectations Well-positioned to perform through the cycle Robust and consistent credit grading methodology and process Risk-based pricing and capital allocation Active portfolio management approach Creating more stable and predictable credit performance

3 Credit Execution Agenda Key portfolio attributes Diversification Cross-business correlations Counter-cyclicality Credit management science Delivering superior credit performance Consistency Lower volatility in credit metrics Stable risk-adjusted returns

4 Balanced Portfolio Composition of Managed Assets $17 Billion $72 Billon 11% 7% 10% 11% 33% 28% 28% 18% 10% 19% 10% 15% Consumer / SBL Vendor Finance Trade Finance Corporate Finance Equipment Finance * Transportation Finance 1996 Sept 2006 * Equipment Finance was combined with Corporate Finance in 2006.

5 Client Ratings Reflect Middle Market Focus Portfolio by Risk Grade* A-AAA BBB BB B 6% 12% 39% 37% Focus on transactions just below investment grade Minimal change in our client risk profile - Consistent market focus - Continuously refine underwriting criteria Below B 6% * Risk grading based on credit quality of obligor and probability of default.

6 Top 10 Exposures Rank Industry Amount Business Facility Grade ($ millions) 1 Rail 395 Transportation Finance BBB 2 Retail 379 Trade Finance AA 3 Retail 309 Trade Finance BBB 4a Energy 231 Corporate Finance B 4b Energy 62 Corporate Finance D 5 Aerospace 292 Transportation Finance BB 6 Retail 235 Trade Finance A 7 Aerospace 233 Transportation Finance B 8 Retail 228 Trade Finance BBB 9 Aerospace 219 Transportation Finance BB 10 Aerospace 207 Transportation Finance B High ratings for large hold positions = less portfolio value at risk

7 Broad Geographic Dispersion Asset Diversification (% Financing and Leasing Assets) 6% 15% 20% Northeast West 10% 18% Midwest Southeast Southwest 14% 17% Canada Europe, Latin America and Asia Data as of September 30, 2006.

8 Diverse Industry Profile Asset Diversification (% Financing and Leasing Assets) 16% * 15% Other* Communications Consumer Other Wholesale Transportation Healthcare 2% Home Lending 2% 12% 4% Manufacturing Educational Lending 4% Retail 5% 12% Commercial Air 6% Services 10% 12% * No other industry served greater than 2%. Data as of September 30, 2006.

9 Portfolio Correlation Analysis Modeled business segments to anticipate performance through credit cycles Credit Performance Linkage (% of Average Finance Receivables) Sample correlations: Corporate Finance Vendor Finance Transportation Finance Consumer Finance STRONG (38%) MODERATE (34%) Less credit loss volatility than monoline companies Trade Finance Transportation Finance NEGATIVE / LOW (28%)

10 Limited Economic Sensitivity Portfolio Correlation to U.S. Economy (% of Financing and Leasing Assets) 37% 65% portfolio minimally correlated to US economy 22% 22% Adjusting mix to non-cyclical industries 4% 2% 3% 8% 2% Well-equipped to manage risk in cyclical industries Negative / Low Strong

11 Improving Risk Skill Set Developing Intellectual Capital Identifying gaps and making investments across the business Providing additional training to existing teams Adding new talent to the organization in critical roles Driving Empowerment Using two-tier risk rating system and standard processes Larger decision authorities pushed down into units Aligned compensation to reward growth, risk balance and margins Consistent views of portfolio volatility Consistent skill sets Consistent processes More decisions made closer to the customer

12 Evolving Credit Portfolio Management Aggregate Portfolio Management Pre Current State Stakeholder Value Active Credit Portfolio Management Sophistication Investment Philosophy Originate and hold Mostly originate and hold, some use of risk mitigation tools Originate, portfolio optimization, hedging and redistribution Transaction Evaluation Transaction-by-transaction Transaction specific, with some regard to overall portfolio Marginal impact relative to existing portfolio Ownership Originators Originators / Credit Credit portfolio manager Pricing Traditional Risk based Portfolio driven Performance Measure Income ROE Risk-adjusted ROE / Economic profit

13 Enhanced Credit Portfolio Management Portfolio Parameters Simulation Summaries Obligors, transaction data Reference data (industry, ratings, etc.) Reporting tables Correlations Data Inputs Modeling Parameters Transition matrix Market data Credit conversions Loss-given defaults Etc. Loss Distribution Simulation Setting Options Confidence interval MTM / book value No. of simulations Sampling Stress tests Horizon Greater Depth of Model Inputs More Simulation + = Options Improved Ability to Manage Risk

14 Improved Risk Based Pricing Common Input Parameters Standard RBP Modeling Methodology Consistent Outputs Guide Credit, Sales Organizations Probability of Default Risk Based Pricing: Basic Products Outputs Scenario Information Scenario Name Example 3 Date Created 3/29/2006 Created By Amy Parkerton Account Manager Area Manager General Information Customer Reckitt Benckiser (Belgium) SA Customer Number (Optional) Account Type (Optional) Global Vendor Vertical International Segment Europe PD Grade 8 LGD Grade 7 Term in Months (1-360) 48 High Operating Highlights Percent Dollars Interest Income (APR) 9.60% 12,129 Capital Allocation Cost of Funds Operating Expenses Less: Interest Expense (COF) 3.67% 4,638 Plus: Equity Benefit 0.42% 534 Margin 6.35% 8,025 Plus: Other Income (Not Yield-Related) ($) 0.00% 0 Total Revenue 6.35% 8,025 Less: Credit Losses 0.98% 1,242 Less: Operating Expenses 2.50% 3,157 Less: Other Expense (Not Yield-Related) ($) 0.00% 0 Pretax Income 2.87% 3,626 Less: Tax (Tax Rate: 15.0%) 0.43% 544 Net Income (Loss) 2.44% 3,082 Risk-Adjusted ROA - Return on Average Earning 2.44% Performance Measures Assets Risk-Adjusted ROE - Return on Equity 18.74% Impact on Risk-Adjusted ROE of + 10bp Change in APR 0.65% Leverage Ratio 7.7 Higher Spread > PRICING CURVE Amount of Capital Allocated Low Missed Opportunities Risk- Adjusted Returns Asset Risk Risk- Adjusted Returns Underperforming Asset Portfolio High Increasing Risk > Transition to three common pricing models

15 Historic Credit Losses Charge-Off History (% Average Finance Receivables) 1.77% 0.91% 0.61% 0.70% % 0.60% % 0.40% mos (E) Full Cycle Expect 2007 to remain below full cycle credit losses

16 Consistent Reserve Coverage Loan Loss Reserves vs. Charge-Offs* (% Finance Receivables) 3.00% 2.50% 2.00% 1.92% 1.77% Charge-Offs Specific General 1.50% 1.00% 0.50% 1.57% 1.49% 1.46% 0.91% 1.31% 1.22% 0.61% 0.40% 0.00% mos. * Excludes Student Loan Xpress finance receivables.

17 '92 '98 Stable Margin In All Environments Margin (% AEA*) Year Average: 4.00% Charge-Offs (% AFR ** ) Year Average: 0.76% '87 '88 '89 '90 ' Margin '93 '94 '95 '96 '97 '99 '00 '01 '02 '03 '04 ' mos. Charge-Offs * Average Earning Assets ** Average Finance Receivables

18 2006 Progress and 2007 Expectations Well-positioned to perform through the cycle Robust and consistent credit grading methodology and process Risk-based pricing and capital allocation Active portfolio management approach Continual investment in transactional level talent, skills and processes Robust syndication capabilities for risk distribution and portfolio optimization Creating more stable and predictable credit performance

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