The brand value of US banks has reached a new high, while emerging economies such as Brazil and China also stand out in this year’s Top 500 Banking Brands ranking. 

Editor's choice 

The Top 500 Banking Brands 2012

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Wells Fargo replaces HSBC as the world’s most valuable brand in this year’s Top 500 Banking Brands ranking. Wells Fargo’s achievement demonstrates the improved standing of US banks as they recover from the financial crisis and forge ahead.

Bank brands have performed well across the board with total brand value rising 15% from $746.8bn in 2012 to $860.7bn this year, a new high and a big difference from last year when the total fell from $855bn, the 2011 total.

Chinese banks also improved their collective result, as did all the top 10 countries with one notable exception. The UK saw its overall valuation drop as a result of brand value losses by leading players such as HSBC and Standard Chartered.

Wells Fargo gained $2.8bn to give it a brand value of $26bn and so recovering some, but not all, of last year’s $5.7bn loss. And while 2012’s drop in value did not dislodge Wells Fargo from the second spot, this year’s increase was enough to give it the top position.

US banks hold four of the top five places in the ranking – up from three last year – and overall they account for 93 brands – five more than last year – with a total value of $230.6bn. This is an increase of $24.6bn on 2012’s figure and keeps them well ahead of their nearest rival China, whose 23 brands increased in value by $16bn. In fact, the total brand value of US banks is larger than the next three biggest countries – China, the UK and Canada – combined.

Clean out

A key element in the brand valuation (see Methodology) is earnings projections and with US banks disposing of their bad assets and the domestic property market starting to recover, the outlook on this front is better. An interesting indicator is the percentage of brand value to market capitalisation. As brand value is based on fundamentals, while market capitalisation moves with investor sentiment, a high brand value to market capitalisation suggests that a bank is undervalued.

The research for The Banker’s Top 500 brands ranking is conducted by consultant Brand Finance. Chief executive David Haigh says: “In 2007 the brand value to market cap percentage of the US banks in the top 100 was 12% and has been rising ever since, though not in a straight line, to reach 15% in 2013. The brand value over the same period has been much more constant, in the $160bn to $200bn range, with the exception of 2009 during the worst of the crisis. This suggests that markets have moved from overvaluing US banks to undervaluing them.”

By contrast some emerging markets have seen huge increases in brand value over the past five years, reflecting the fast growth and more dynamic performance of their banks and the better establishment of their brands. Russian brand values have performed the best with a 453% uplift since 2008, followed by Indonesia (443%), the Philippines (412%), Colombia (377%) and China (335%).

As with The Banker’s Top 1000 World Banks ranking, the presence and might of the Chinese banks has been ever growing. This year their total brand value reached $95.7bn, and Agricultural Bank of China recorded the highest leap in brand value of any bank – $6.04bn which sent it up from 18th to 11th place. ICBC notched up the second highest value rise with $4.66bn, taking it up from 11th to seventh place. In a table of the highest number of places climbed, Indonesia’s Panin bank claims the top spot, rising from 492nd to 322nd.

Another good performances has come from Russia’s Sberbank, which increased its brand value by $3.39bn and rose from 17th to 13th position. It also occupies second position in the top brand value in Europe table, helped by the fact that all of its $14.2bn brand value is concentrated in the region. 

Brazilian strength

In Latin America, the biggest gainer is state-owned Banco do Brasil, which saw its brand value rise by $2.62bn – the ninth highest overall – closing the gap on its Brazilian rivals Itaú and Bradesco, and giving it 22nd position in the main table.

In country terms, Brazil has the sixth largest sector brand value – $38bn – on the back of only eight brands, the lowest number of any of the top 10 countries. This illustrates the dominant position held by the major Brazilian banks.

Moving on to insurance, and Brazil’s Bradesco comes second to RBC in the table of insurance brand values of banks worldwide. Spain’s Santander takes the top billing in the retail ranking and JPMorgan in the wholesale/investment banking table.

In the Middle East, the four top rated banks held their places in the table – QNB, Al-Rajhi, National Bank of Abu Dhabi and Emirates NBD – but only QNB was able to increase its brand value, from $12.6bn to $13.1bn. In Africa, Standard Bank takes the top spot from Citi, while ABSA moves to second from third and Nedbank from sixth to fourth.

The Banker’s Top 500 Banking Brands is now in its eighth year and creates huge interest on publication. This reflects the increasing awareness among bankers of the importance of brand to their business, and how it needs to be both invested in and protected. For many banks from emerging markets, this is a process that has moved ahead fast over the past eight years, but for developed country banks hit by the financial crisis it has been a case of moving backwards as well as forwards

Brandvaluewinners

METHODOLOGY

Brand Finance employs a discounted cash flow technique to discount estimated future royalties at an appropriate rate to arrive at a net present value of a bank’s trademark and associated intellectual property – its brand value.

The steps in this process are to:

1 - Obtain brand-specific financial and revenue data. The revenue was then segmented into the following revenue streams: retail banking, commercial banking, wholesale/investment banking, insurance, asset management and credit cards.

2 - Model the market to identify market demand and the position of individual banks in the context of all other market competitors.

Three forecast periods were used:

  • Estimated financial results for 2012 using Institutional Brokers Estimate System (IBES) consensus forecast.
  • A five-year forecast period (2013 to 2017) based on three sources: IBES, historic growth and gross domestic product (GDP) growth.
  • Perpetuity growth based on a combination of growth expectations (GDP and IBES).

3 - Establish the royalty rate for each bank by:

  • Calculating brand strength on a scale of zero to 100 according to a number of attributes, including asset strength, emotional connection, market share and profitability. 
  • Determining the royalty rate for each revenue stream mentioned in step one.
  • Calculating the future royalty income stream.

4 - Calculate the discount rate specific to each bank, taking account of its size, geographical presence, reputation, gearing and brand rating (see below).

5 - Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value – the brand value.

Royalty relief approach

Brand Finance uses a ‘relief from royalty’ methodology that determines the value of the brand in relation to the royalty rate that would be payable for its use, were it owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value. This approach is used for two reasons: it is favoured by tax authorities and the courts because it calculates brand values by reference to documented third-party transactions and it can be done based on publicly available financial information.

Brand ratings

These are calculated using Brand Finance’s ßrandßeta analysis, which benchmarks the strength, risk and potential of a brand relative to its competitors, on a scale from AAA to D. Conceptually, it is similar to a credit rating. The data used to calculate the ratings comes from various sources including Bloomberg annual reports and Brand Finance research.

Brand ratings definitions:

AAA Extremely strong

AA Very strong

A Strong

BBB-B Average

CCC-C Weak

DDD-D Failing

Valuation date: All brand values in the report are for the year ending December 31, 2012

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Contact customer services on thebanker@ft.com or call +44 (0)1858 438 417.

You can also see how the banks fared in previous rankings from The Banker and Brand Finance:

Top 500 Banking Brands 2012

Top 500 Banking Brands 2011

The Banker/Brand Finance Banking 500 is an annual ranking of the most valuable brands in banking conducted by Brand Finance. This annual report pits the best global banking brands against one another in the most definitive list of banking brand values available.

Additional detail and analysis of specific brands is available from Brand Finance. Please call +44 (0)207 389 9400 or email enquiries@brandfinance.com.

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