From: Martin Zeman Sent: 1/24/2019 11:32:16 AM To: CC: Stewart 0ldfield 'Paul Barrett • Nadean Novogratz Subject: Li Trade Idea: Buy Upside on SX7E (Eurostoxx Banks Index) as ECB gradually starts shifting stance Paul — below is something we put together more widely here but contains a couple of prices highlighted in yellow. We are still working on the restructure of your existing note and will be back soon. At the last ECB press conference, Mario Draghi raised the issue of the structural profitability of the banking system and the potential for a shift in ECB thinking on the cost of negative rates. We think that one solution they could potentially look at is a tiered reserve system which would be a huge positive for the banks. The negative interest rate policy is a huge negative for the sector (banks cannot pass on the costs to households and weighted margins have fallen 45% since the crisis). Click here for a note with an update on how ECB thinking on this issue is shifting. (the links are to research published prior to today's press conference by Draghi). At today's press conference, Draghi acknowledged that although discussed by the members of the ECB, they "didn't discuss policy or policy implications this time." That basically means that there is no announcement on this as of today and as a result SX7E dropped 1% right after the conference. Having said that, the risk-reward is shifting for the index to staying more or less unchanged with upside potential on this upcoming likely change over the next few months. Trade Idea: Earn 11.5% coupon paid at maturity by buying a 1-year structured note that gives you downside principal protection down to 75% of initial level AND pays you a coupon as long as the index stays above 85% of initial level (meaning the SX7E can go down 14.99% from initial level and you still get your coupon. If the index drops less than 25%, you get your principal back). Alternative you asked about our call: if you have