Banking brands

The banking sector’s image has suffered in 2011, with an overall decline in the rankings of banks’ brand value. However, there are some notable exceptions that have carved a niche in the market.

The banking sector was one of the worst affected in terms of brand value in the rankings of the top 100 global brands released in September. These results form an update to the annual survey that was completed in January 2011. “We did this survey because there was a lot of talk about a double-dip recession and so we wanted to re-run the numbers,” says David Haigh, CEO of Brand Finance, the company that produced the rankings.

Banks saw a drop in their brand value of 7% between January and September 2011, a fall that is related to the declining market capitalisation of banks and which Brand Finance attributes to tougher regulation of banks and fears about their exposure to sovereign debt.

Although some banks remain in the global top 20 brands, they have slid down the rankings. Wells Fargo has tumbled from ninth place to 13th between January and September 2011, while Bank of America fell from sixth to 14th. This places Bank of America fourth in the ‘losers’ list with a brand value change of -17.2%. There are a few other banks in the losers list: BBVA, Itaú, Goldman Sachs, Bradesco, Citi, Wells Fargo, Santander and Bank of China.

“Overall the banks are down, but some are doing better than others,” says Mr Haigh.
Bucking the trend

HSBC is the only bank brand in the top 20 that has climbed in the rankings, but there are other success stories among the banks in the global rankings. Agricultural Bank of China comes sixth in the winners list with an increase in brand value of 16.5%. Russia’s Sberbank is also noticeable for being in the top 20 winners list, with a brand value change of 11.5% between January and September 2011.

This brand value is calculated based on an assessment of what a company would pay to use the brand if it were owned by a third party. Assessing something as intangible as brand value is keenly debated as there are many different ways of assessing the value of a brand.

María Sánchez del Corral, global head of corporate marketing at Santander, says that the brand value in this sense is important, but it is not really key because the Santander brand is not for sale. She says: “It is not only the value of the brand that is important but how consumers perceive the brand in terms of its promise, trust and strength.”

Brand Finance uses a royalty relief method, which looks at the turnover of a company against a particular brand and assesses what percentage of the turnover would be paid to use the brand. This is applied to a predicted revenue royalty stream, which eventually arrives at the net present value or brand value.
Brand power

Mr Haigh points out that brand licensing is common in many industries where third parties pay royalties to use the brand on their own products. Using databases that carry data on such licensing fees, it is possible to make an estimate of what a future royalty stream for a bank brand would be. The calculation also involves a number of other steps, which includes looking at the companies’ financial and revenue data, as well as demand for and position of the brand compared with its competitors.

Companies may not license out their brand to third parties, but may set up a brand company within the organisation and license the brand to different departments. One advantage of this, according to Mr Haigh, is a tax break on the income. For example, more revenue can be sent to the holding company that could be in a tax haven, rather than keeping it in a jurisdiction where the tax rate is higher.

Chris Clark, global head of marketing at HSBC, says that these rankings – based on the business value of the brand – are a useful bellwether for the bank. This method is one of many that people use and complements an assessment of brand value based on consumers’ perceptions or how well a brand is received by its customers.

HSBC has managed to hold its own among its global brand competitors. Part of the reason for this, explains Mr Clark, is that the bank has a clear differentiated positioning as an internationally minded bank, as demonstrated in its advertising campaigns at international airports that reference local customs. As a result, HSBC has been able to emerge from the financial crisis with its brand intact.

“We have learned that our brand is hugely enhanced by the activities of the company and its reputation around the world for stability,” says Mr Clark. He adds that in his time at the bank, with each change of CEO there has been a continuation, rather than a rewriting, of what the brand stands for. Mr Clark describes this as a respect for cultures of difference.
International recognition

Building an internationally recognised brand has been the focus also for Santander, which in recent years has brought most of its units under a single brand policy. Ms Sánchez del Corral notes that the majority of Santander’s business is outside Spain and so the focus has been on making changes to the acquisitions that go deeper than a superficial image change.

Part of Santander’s brand-building strategy has included the sponsorship of Formula 1 motor racing, which has enabled it to become internationally recognised. This kind of campaign, and the airport advertising campaign by HSBC, is of a different genre to the other global brands that have climbed to the top of the rankings.

Mr Clark at HSBC says that a key difference with banks and the new stars in the global brand rankings (Google and Apple, for example) is that the new players hardly need to advertise at all. Rather than pushing out advertising campaigns, Mr Clark explains that the focus for these newer brands is not to use traditional marketing methods. Instead, the emphasis is on the user’s experience of the brand.

This compares with well-known brands, such as Coca-Cola and McDonald’s, which have traditionally been reliant on classical brand marketing campaigns. Many US brands that are dependent on the domestic US market have been impacted by the decline in the US economy. For internationally recognised brands, this has not been the case. For example, Coca-Cola managed to rise from 16th to 11th place in the ranking and McDonald’s held steady in 17th place.

Google and Apple are followed by Microsoft and IBM in the top four places in the ranking of top global brands by brand value, showing the strength of technology and electronics, despite the economic gloom that has affected the financial services sector. Apple has increased its brand value by 33% since January 2011 and has now become a more valuable brand than Microsoft for the first time. Also notable in the winners’ list was Samsung, which has had a 23.6% increase in its brand value since the beginning of the year.

Other sectors, such as the oil and gas industry, have shown gains in their brand value, while the bank brands have suffered because of external economic factors. Looking ahead, Mr Haigh at Brand Finance anticipates that these same trends are likely to be accelerated in the next few months.

Brand ranking tables

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