Market and currency volatility have shaken up The Banker’s Top 500 Banking Brand rankings. However, the main story of 2016 is the speed at which Chinese banking brands are gaining ground on their US counterparts. Joy Macknight reports.

Top 500 Banking Brands

While the growing strength of Chinese brands has been a noteworthy trend for many years, 2016 marks a qualitative breakthrough with a number of the country’s banks consolidating their positions at the top of the rankings.

The US remained in overall first place in the country table, with an aggregate banking brand value of almost $225bn. However, China’s brand value grew by 42% to $206.9bn, putting it within reach of overtaking the US.

In comparison, the US and UK’s total banking brands increased in value by 12% and 5.1%, respectively. Rounding out the top five countries, Canada maintained fourth place despite its brand value dropping by 11.6%; France gained 2.7% in brand value and managed to nudge Japan out of the top five. 

Top performers

China’s branding success is built on the performance of its top banks. Three of the top five global brands are Chinese: ICBC (second); China Construction Bank (third); and Agricultural Bank of China (fourth).  

In addition, eight of the top 10 climbers by brand value are Chinese banks, two more than in 2015. Agricultural Bank of China, which moved up four positions in the global table in 2016, saw the biggest increase – $9.6bn – in brand value, followed by US-based Wells Fargo ($9.2bn) and China Construction Bank ($9bn).

Every Chinese bank listed in the Top 500 Banking Brands increased in value. “The Chinese banks are moving beyond provision of basic banking services and are investing in their brands,” says Vinoth Jayakumar, associate director at the Brand Finance consultancy, which compiles the list. “This has been prevalent in how Chinese banks have been innovating their brand propositions to be effective in a multichannel banking environment.”

But it is not just a numbers story. Chinese banks also score highly in the brand strength index. “Chinese banks get top marks in typical brand equity measures, such as familiarity, consideration, preference, satisfaction and recommendation,” says Mr Jayakumar.

Macro effects

Tumbling currencies and challenging market conditions in 2015 affected the value of many banking brands, and Brand Finance has produced a specific table to illustrate the impact of currency volatility.

Brazil saw a 57.4% decline in aggregated brand value and fell from eighth to 14th place in the country table. Three out of the top five biggest fallers by brand value were Brazilian banks: Bradesco and Itaú took first and second place, while Banco do Brasil was fifth.

Nonetheless, these banks preserved dominant brand strength in their markets. According to Mr Jayakumar: “Bradesco and Itaú’s values suffered as a result of the weakened Brazilian real and increased risk in Brazil. However, both banks still have high familiarity and satisfaction scores.”

Greece lost 54% in total brand value over the year. Piraeus Bank was the biggest faller by rank in 2016, moving down 199 positions. While the euro’s weakness contributed to the drop, Greece has also seen a substantial tapering off of its top-line, or net revenue. “The crisis in Greece has seen reduced commercial lending in the country. Piraeus Bank is the biggest commercial lender in Greece but also has the largest proportion of non-performing loans. As a result, it has seen a significant drop in net revenue, which resulted in a fall in brand value,” says Mr Jayakumar.

Canadian banks’ brand valuations also suffered from currency depreciation, which was compounded by their high exposure to the oil industry, according to Alex Corringham, an analyst at Brand Finance. On the whole, most Canadian banks saw an average decline of about 20%. “TD Bank has fared slightly better than its competitors, mainly because of its limited exposure to the oil sector – oil and gas make up less than 1% of its total loan book,” he adds.

Globally, the picture is weakly positive. Total brand value across all 500 banks rose by 5.7% in 2016, to $988.3bn.

Wells Fargo’s success

Notwithstanding the meteoric rise of the Chinese banks, the US's Wells Fargo held onto the top spot for the fourth year in a row, with a brand value of $44.2bn. Additionally it was the most valuable brand in retail banking, it moved up from fifth to second place in asset/wealth management and retained fifth position in commercial/wholesale banking.  

Jamie Moldafsky, chief marketing officer at Wells Fargo, is confident that the more than 160-year-old US banking brand will remain strong by staying true to its vision of helping customers succeed financially, in line with the bank’s long-running tagline ‘Together we’ll go far’.

The bank operates a master brand strategy where all business lines sit under the same brand. “The strength of our brand helps all our businesses,” says Ms Moldafsky.

Wells Fargo launched a new branding campaign in April 2015, which features different stories from across the bank. “It touched many different facets of Wells Fargo and was able to strike both an emotional as well as a rational chord with our customers and prospects,” says Ms Moldafsky. As part of the campaign, the bank invites social media followers to use the hashtag #WhyIWork and share stories about what motivates them.

Ms Moldafsky believes that customer advocacy is the most important thing for a strong brand. “Our customers believe in, trust and follow us. For banking, in particular, that sense of capability and confidence is significant, as well as the notion of trust and integrity,” she says.

Understanding Africa

This year, Brand Finance modified how it analysed the data for regional rankings, in order to have more comparable data year on year. It moved from a footprint model, based on where revenue is generated, to a domicile model, which ranks all banks domiciled in a particular region.

Africa was most affected by the modified analysis, and 2016 saw African banking brands replace the international banks present in last year’s top 10 regional table.

Standard Bank won the most valuable African banking brand accolade this year, recapturing its 2014 position. It has built its brand through strong, clearly defined, international positioning, but also by giving countries latitude to customise their marketing campaigns, according to Nikki Twomey, head of group marketing and communication.

The South Africa-based bank has recently focused on a pan-African group brand positioning strategy. “Our focus is on ensuring that our clients are the heroes of our story and showing how we, as a financial partner, support them and facilitate their success,” she says. “We coined the phrase, ‘They call it Africa, we call it home’. This helped carve out our position as a definitive African bank.”

Engaging with digital innovation is a challenge when building a banking brand in Africa, as many markets have leapfrogged old technologies and are swiftly adopting new ones. “We have reconsidered how we deliver products and services, as well as how we communicate with our clients,” says Ms Twomey. For example, Standard Bank launched a 24-hour relationship banking service in partnership with WeChat, an instant messaging service, in September 2015.

Regional changes

Latin America also saw a few changes in 2016, with Itaú moving into top position and last year’s most valuable brand, Bradesco, falling to fourth place. Additionally, Banco de Chile entered the top 10 and secured fifth place.

Both North America and Asia-Pacific were relatively stable in terms of brand rankings. In North America, the top three brands – Wells Fargo, Chase, Bank of America – occupy the same positions as last year. The Chinese banks dominated the Asia-Pacific top five rankings, with China Merchants Bank taking the fifth spot from Japan-based MUFG.

Similarly, the Middle Eastern banks’ rankings did not alter to any great degree. Qatar National Bank remained in the lead, but Saudi Arabia's Al-Rajhi Bank is closing the gap. This year National Commercial Bank, also based in Saudi Arabia, entered the top 10 regional rankings in third place.

However, European banking brand rankings saw noteworthy change in 2016, with UK banks securing the two top places. HSBC moved up from fifth spot to edge out BNP Paribas as the top banking brand in Europe, while Barclays moved from sixth to second place.

Tough times for HSBC

Historically, HSBC has consistently ranked in the top three global banking brands, but in 2016 it slipped to ninth place globally and saw its brand value decrease by 11.4%, to $24.2bn. Despite this, it is the top banking brand in Europe, the second most valued brand in investment banking and remains in the top 10 for commercial/wholesale banking.

Over the third quarter of 2015, HSBC saw limited growth in revenue due to uncertainty in core markets in Asia and tough trading conditions in the UK. It has also sold off a number of businesses and exited from some countries and markets. “These actions affect how visible our brand is on a global basis,” says Chris Clark, global head of marketing, HSBC. “Our brand remains strong and visible in our core markets but we have had some tough trading environments to weather and these pressures tug on the brand in the medium term.”

Mr Jayakumar says: “HSBC is consolidating its business, selling unprofitable parts of the bank that aren’t core to its strategy. This has had a negative impact on forecast revenues for HSBC and resulted in a heavy drop in brand value. It certainly has had a tough year, particularly from the backlash from the Swiss tax scandal and the potential ringfencing in the UK. Despite all that, it remains a very visible brand with high levels of awareness around the world.”

In 2015 the bank repositioned its brand to a strategy based on ‘supporting human ambition’. Mr Clark adds: “This is a development from the bank’s core purpose of connecting customers to opportunity and helping them realise their hopes and dreams.” HSBC is continuing with its airports programme, which he calls the 'cornerstone' of its branding effort.

However, the biggest positive impact on the brand, according to Mr Clark, has been as a result of the increased focus on service quality that the bank is now providing. “We have made a real commitment to improve our service and have received consistently high ratings from our customers this year,” he says. “We have teams working on eliminating redundant processes and ensuring that we build the right digital tools.” He highlights HSBC’s launch of Apple Pay in late July 2015 as an example.

Barclays boost

In contrast, Barclays increased its brand value by 14.3% to $16.2bn and moved up the rankings into the top 10 globally. It also ranks in the top 10 brands for credit cards and investment banking.

Emma Isaac, ‎group brand and marketing director, believes that Barclays’ brand improvement has been based on its singular focus on its purpose – "helping people achieve their ambitions in the right way" – and its values – "respect, integrity, service, excellence and stewardship".

“We’ve been building our purpose and values from the inside out, as we believe that embedding ethical behaviour, being fully transparent, playing a positive role in society, as well as delivering for our customers and clients, are all fundamental to rebuilding trust in our brand,” she says.

“We’ve also put our purpose and values at the heart of our marketing strategy. An example of this is our ‘Digital Eagles’ campaign, launched in 2015, which told the story of how our Digital Eagles have been helping customers become more confident with technology – helping them to get online and become part of the digital revolution.”

Business lines

Brand Finance has examined a new business segment, investment banking, in the 2016 Top 500 Banking Brands report. JPMorgan is the premier brand in investment banking and one of just a few to see an increase in its brand value in this space; its value rose by 5.7% to $9.61bn. HSBC and Deutsche Bank, the next two biggest brands in the table, saw falls of 12.2% and 24.1%, respectively.

According to Mr Corringham at Brand Finance, there has been a shift away from investment banking into retail and commercial banking. In both retail and commercial banking, a majority of banks saw an increase in their brand value. Asset/wealth management and credit cards, on the other hand, showed more mixed results.

The Chinese banks expanded their presence in both retail and commercial/wholesale banking. Eight out of the top 10 commercial/wholesale banks are Chinese, up from five in 2015.

The US banking brands maintained their dominance in credit cards, taking the top four positions. As yet no emerging market brands have penetrated the ranks of asset/wealth management or investment banking rankings.

Challenger banks

A number of challenger banks entered the Top 500 Banking Brands for the first time in 2016, such as the UK's Shawbrook Bank, while others moved up the rankings. UK-based Virgin Money was the highest climber overall, scaling 165 places to reach 235th position.

“The brand is central to Virgin Money, as with any Virgin business,” says marketing director Paul Lloyd. “We talk about our brand ambition – to make everyone better off – including customers, partners, shareholders and staff. Our products live up to that philosophy: simple, open and transparent, no frills, no hidden traps, just good value for money.” The bank’s tagline is 'There’s money and there’s Virgin Money'.

Virgin Money sponsors the London Marathon to raise its brand profile and has launched a not-for-profit fundraising site called Virgin Money Giving. The bank is extending its lounge network, which first launched in 2011. “Our lounges are where customers can relax, read the paper, have a coffee, surf the web, let the kids play on Playstation, etc, for free,” says Mr Lloyd.

“They are great word-of-mouth generators because customers can bring their friends. The net promoter score is phenomenal and we will continue to add to the network because customers love them.”

One of the biggest challenges in bank branding is low consumer engagement and interest, according to Mr Lloyd. “Most consumers would rather be doing other things than banking,” he says. “So there is an opportunity in making banking more engaging, rewarding, interesting and helpful – the lounges do that.”

He believes that Virgin Money and other challenger banks are creating a positive disruption in the marketplace. “Global brands can be built quickly with an effective business model that upsets the status quo,” he says.

Methodology

Brand Finance employs a discounted cashflow 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 is then segmented into the following revenue streams: retail banking, wholesale/commercial banking, investment banking, asset/wealth 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 2015 using Institutional Brokers Estimate System (IBES) consensus forecast.
- A five-year forecast period (2016 to 2020) 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, 2015. Now in its 10th year, The Banker’s Top 500 Banking Brands is an annual ranking of the most valuable brands in banking conducted by Brand Finance.

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Top 500 Banking Brands 2016

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