• The industry is facing the most severe investment
banking crisis in 30 years. Morgan Stanley and
Oliver Wyman — in this joint report — estimate that
six quarters of industry earnings will have been wiped
out from marks and weaker revenues to April 2008.

• We forecast underlying investment banking revenue
pools to be down ~(20)% in 2008 before a further
US$75 billion+ of marks in our base case. Our base
case includes credit revenues down 60% and IBD
down 40%. Our bear case has total revenues
including marks down 45% on 2007.

• We expect longer term RoEs to fall as banks seek to
delever and regulators ask banks to hold more
cushion. We estimate half of the increase in RoEs in
the last four years has come from higher leverage,
which we think will start to be reduced when
‘log-jammed’ credit clears.

• While cautious near term, we are optimistic further out
as the cycle turns and we see numerous opportunities
for rebound and growth, including the return of credit
distribution, albeit in a very different form.