Trademarks, brand names, intellectual property and public image have been important aspects of the financial world for decades, but until the mid-to-late 20th century they were relatively crude concepts that in general were not very well understood or exploited.
How things have changed. Bank branding today, with its public relations executives, spin doctors, marketers and other ‘image makers’, is both a fine art and a highly developed science. It is an art in the sense that what makes a good brand strategy has as much to do with gut feeling, smoke-and-mirrors and intangibles as it has to do with carefully laid-out plans and rigorous market research. And it is a science in the sense that the value of a brand can be calculated in highly technical ways and put to use by accountants and solicitors.
In November, The Banker published its Top 100 Brands listing. We joined up with brand valuation firm Brand Finance to produce the first publicly available league table analysing the financial value of the world’s leading bank brands. Top of the table was Citigroup, with a brand value of $35.1bn and a brand rating of AAA-minus, followed by HSBC ($33.5bn, AAA) and Bank of America ($31.4bn, AAA-minus). The top 20 most valuable banks in terms of branding were all headquartered in the US (11) or Europe, but lower down the ranking were banks from many other regions, including six from Japan, five from Australia and three each from Brazil, South Korea and Saudi Arabia.
The article supporting the table briefly analysed the results and explained the methodology. Here, we ask banks how (or whether) they measure their brand value, and what their branding strategies are.
The world’s local bank
HSBC does not measure the financial value of its brand, locally or globally. “Putting a value, in cash terms, on a brand is useful if you use it to generate licence revenue,” says Chris Clark, head of marketing planning and brand strategy at HSBC Group. “Some businesses do that; they set up a brand company in a country with a favourable tax regime. That company then charges all its operating companies to use the brand, which generates a revenue that is then spent on marketing. Or they will licence a company to manufacture goods for them.”
Putting a value on a brand for goodwill purposes is also useful in an acquisition, says Mr Clark. But the disadvantage of quantifying brand value outside these two situations is that “it creates a stealth asset” on the balance sheet, which could be seen by the tax authorities as a revenue item, and then taxed.
“Your Top 100 Brands listing is useful, as it produces a framework of judgement,” he says. “But the methodologies that various consultancies use to calculate brand value are open to some degree of interpretation. Your listing gives us a brand value of $33.5bn. Yet Interbrand’s ‘Best Global Brands’ values us at $11.5bn. There isn’t a publicly accepted methodology that everyone seems happy with.”
HSBC’s brand strategy and image have come a long way since the late 1990s, when it was what Mr Clark calls “a disassociated group of banks that carried completely different flags around world” and it was decided to move to a single brand identity around the world.
HSBC is a prime example of what Brand Finance calls the monolithic style of branding, with just one name and one visual identity around the world (though there are some exceptions). The other categories are endorsed (such as Santander, which uses several names endorsed with a group name and visual identity) and pluralistic (like Royal Bank of Scotland, with several different names but no obvious association with a group name).
“We are a good case study of how we have changed our brand and managed it in a way that captures people’s imagination,” says Mr Clark, who is a career ‘image man’ and joined the bank six years ago from advertising agency Saatchi and Saatchi. “We are proud of what we have done at HSBC. The brand is very dear to the hearts of our current chairman and chief executive, in the sense that it provides an organisation as diverse as ours with the glue by which staff can have common values.”
Don’t forget the capital letters
Dutch bank ABN AMRO, 12th in our table, is another bank that does not measure the financial value of its brand. “We are not convinced by the methods used for measuring brand values,” says Bob van Gessel, senior vice-president, group communications. “Nor is there any accounting or regulatory pressure to come up with such values.”
He says it is “interesting” to produce brand valuation tables, like those of The Banker and other organisations, such as Interbrand, but the figures that appear in the lists differ so much that it casts uncertainty on the concept.
ABN AMRO in some cases takes an endorsed approach to its image, meaning that it uses several different names around the world endorsed by the group brand name, logo and visual identity. “The group strategy is one of a single brand, ABN AMRO, but in five cases it is also expressed through the historical name of an entity that has been acquired,” says Mr van Gessel. “This is the case for Banco Real in Brazil, LaSalle Bank in the US mid-west, for two private banks in France and Germany, and more recently for Banca Antonveneta in Italy, which in November announced its new branding.”
Banca Antonveneta retains its formal name but in branding is now just Antonveneta. Its logos and signs carry the ABN AMRO name and famous green and yellow shield, which symbolises reliability, tradition, protection and security.
“We consider these five banks to be part of the same brand, endorsed by ABN AMRO,” says Mr van Gessel. “The reason we have kept all the original names is that retail customers attach more value to the manifest localness of a bank than to a more anonymous, globalised financial firm, though the endorsement conveys to those who are interested the attributes and stability of an international bank with a large capital base. It’s a best-of-both-worlds strategy.”
ABN AMRO is often written “ABN Amro” in the press and by customers, with the second word in upper and lower case instead of all capitals. Does that not demonstrate a fundamental failure in branding if people cannot get the lettering right?
“That’s an interesting question,” says Mr van Gessel. “The decision to capitalise the name goes back to when the bank in its current form was created in 1990 and we have stuck to that. The problem is that a number of newspapers and magazines with closely defined editorial and spelling rules rule out the possibility of capitalised acronyms that contain four letters or more and which can be pronounced as a word. They consider this form of capitalisation as a covert attempt at advertising by making the name more dominant on the page. No matter how we write ABN AMRO, they will write it according to their own editorial principles.”
Occupying the centre ground
Bradesco, 50th in our listing and the highest ranking Brazilian bank, does measure the financial value of its brand. “For us, the brand is a valuable asset that is directly linked to our ability to create value for shareholders and clients, based on a positive presence in people’s minds,” asserts Milton Vargas, vice-president and director of investor relations. “Therefore, we use accompaniment models to measure its financial value.
“In general terms, we try to understand how the brand works in the creation of profits and market value, in building a client relationship based on respect and ethics, and in creating a harmonious environment among employees.”
The bank begins by verifying the value of the brand locally and then extends this to making global valuations. The process is complex and involves many variables in terms of client surveys, financial performance indicators by operating sector and geographical reach, as well as fundamentals, such as profit, efficiency and profitability ratios.
“The brand study published by The Banker gives us a framework, as do similar reference models, such as economic value added (EVA),” says Mr Vargas. “Generally speaking, we want to know if the brand is strong enough within our operating market, using our main competitors as a reference, and its impact on profitability. The studies we have undertaken, carried out by specialist companies we have contracted, confirm and even surpass the value published by The Banker’s study.”
Top in Africa
Standard Bank, 44th overall and the leading South African bank in our listing, has received recognition in the past for the success of its brand. In 2005, it was placed first in South Africa’s Most Valuable Brands Survey, conducted by brand strategy and design management company Interbrand Sampson. The survey valued the Standard Bank brand at R10,165bn ($1404bn).
“In this survey, brand value is premised on the argument that brands, like any business asset, are valuable insofar as they are able to generate economic benefit to their owners,” says Nikki Twomey, director, brand marketing, at Standard. “This evaluation is based on more than perception or popularity; it demonstrates how brands, as key elements of corporate wealth, can and should be considerable factors in business strategy.”
In 2004, Standard Bank consolidated all its local and international business operations under the Standard Bank brand (or Stanbic Bank in some African markets). This realignment provided several advantages, the most important being promoting the bank’s business strategy of continuously improving co-operation between the different business units to ensure a customer-centric focus at all times.
“In addition, it allowed Standard Bank to capitalise on its reputation as a respected and recognised brand in South Africa and internationally,” says Ms Twomey. “At the same time, the Standard Bank vision and values were launched in all 38 countries in which we operate.”
This monolithic branding strategy allows the bank to put all its efforts behind a single brand. Research, both before and after the change, was conducted among its corporate and investment banking customers, who responded favourably, with many of them emphasising that they tended to see, and identify with, the brand as Standard Bank, and not as SCMB, as its corporate and investment banking division was previously known.
The beauty of brevity
ICICI, India’s second largest bank in terms of assets and largest in terms of market capitalisation, came 66th in our branding table, just a few places lower than the State Bank of India, which came 61st. “The ICICI brand has only really been developed in the past 10 years,” says Madhabi Puri Buch, the bank’s group corporate brand officer.
Shortening the name was an obvious step, as it was too long and no longer accurate. “We were originally a corporate bank – the Industrial Credit and Investment Corporation of India – but in 1997 we moved into the retail sector as well. We have had a consistent branding strategy since then, which is to communicate a single proposition to the customer: ‘We want to add value for you, and we will do that by leveraging technology’.”
Ms Buch says that this single proposition manifests itself according to the products offered and the customer segments being addressed. On the retail side, there are three key customer segments: urban Indian consumers, and more lately rural Indian consumers and global consumers. ICICI has a strong consumer business in the UK and Canada, where there are many people of Indian origin, and a consumer business in Russia. It also has corporate banking activities in those countries.
“Our branding strategy follows our business strategy,” says Ms Buch. In the mid-1990s, retail banking in India was dominated by the public sector banks, which had a large customer base, large branch networks and many employees, but a restricted product suite. Foreign banks offered a wider choice of services and products, but only to niche segments.
“When we entered the retail market, our business strategy was to offer the same range of services and products as foreign banks, but on a mass scale to the Indian consumer, leveraging technology, and our branding strategy followed that. For example, we have a wide ATM network of 2400 machines, and we were the first to offer internet banking and one of the first to offer 24/7 call centre services,” she says.
ICICI follows the monolithic approach to branding, in that everything is under the one name and identity. The only exceptions are where it has joint ventures, such as ICICI Prudential Life Insurance.
Ms Buch’s department measures the success of the two tenets of its branding strategy – adding customer value, and leveraging technology – through various “metrics” and market research, some of it on a monthly basis across 12 Indian cities. But it does not measure the financial value of the brand, as The Banker has done.
“About four years ago, we undertook an exercise in brand valuation which was aborted,” she says. “It was aborted because we found there was no credible way of doing it. The variance was too great, with the brand value coming out anywhere between x and 10x. This high level of variability meant it was inappropriate to attach a value to the brand because we might mislead ourselves.
“But that was some years ago. Your Top 100 Brands made us think that perhaps the methodologies have become more sophisticated. Even if the absolute numbers in your table are vulnerable to questioning, it is useful to see the relative positioning of the banks.”
Hiving off intellectual property
In 32nd place in our table is Standard Chartered. It is an interesting case because in 2005 it created a separate company, Standard Chartered Strategic Brand Management Ltd, to be responsible for the bank’s trademark policies, intellectual property (IP) and ensuring consistent use of the brand name. The bank licensed the IP rights of its brand to this wholly owned subsidiary for $1465m, over 10 years.
Aidan Lisser, group head of brand development at the bank, does not want to give details about how the financial value of the brand is calculated or how the IP company works because he says it is “commercially sensitive information”. But he is willing to discuss strategy in general terms.
The bank’s “brand promise” is to be “the right partner, leading by example”, says Mr Lisser. “Our brand represents what we stand for and believe in. It is a promise that we make to our customers and all our stakeholders. We believe the brand is the umbrella for all we do and we use it to unify and link together the organisation.”
Its latest branding campaign is focused on the theme of teamwork and partnership. This includes sponsoring seven marathons across its main markets. It also includes the Seeing is Believing campaign, which aims to help prevent avoidable blindness, reaching out to 10 million people across 20 countries in the next four years.
Meeting competition head-on
Al-Rajhi Bank, the Saudi Arabian bank that came 69th in our global listing and top in Saudi Arabia, has just undertaken a rebranding exercise, completed for it last autumn by international image experts Enterprise IG.
“With 400 branches and more than 500 ATMs in the Kingdom of Saudi Arabia, Al-Rajhi is the ‘people’s’ bank,” says Hermann Behrens, managing director of Enterprise IG Middle East. “But there was a need to revamp the brand to recapture some of the market it had begun to lose. Other local banks had been relaunching their brands, and Al-Rajhi needed to do the same.
“Second, more overseas competition has been coming in, such as Deutsche Bank, which it had to counter. Third, it needed to improve its reputation for customer service.”
The solution included shortening the name from Al-Rajhi Banking and Investment Corporation to Al-Rajhi Bank, introducing a new typeface, creating a new icon that “looks to the future, while respecting its Islamic values”, designing new stationery and altering the design of its branches.
“Banks across the Middle East are reviewing their brands, driven by increased competitive pressures, much of it from abroad,” says Mr Behrens, who is based in Dubai, United Arab Emirates. “Banks in the Gulf region especially have performed incredibly well in the past two years and that is funding their rebranding programmes.”
Laggards must catch up
So where does that leave us? First, this is an issue on which there is no single view. Not only does every bank have a unique brand, it seems that every bank and every brand specialist defines the term ‘brand’ in a different way.
“Some define ‘brand’ very narrowly, as ‘trademarks’ and ‘associated goodwill’,” says David Haigh, chief executive of Brand Finance. “Some define ‘brand’ as all ‘marketing intangibles including trademarks and other associated intangibles’. Some define ‘brand’ as the ‘whole value of a business trading under a particular trademark’. Some valuers do not clearly define what they mean and their valuations are often regarded as subjective as a result.
“For the purposes of The Banker’s Top 100 Brands, we defined ‘brand’ in the most technically precise sense – as ‘trademarks and associated goodwill’,” says Mr Haigh. “We did this to avoid arguments about vague asset definition. Even in this narrow sense, the values concerned are very large, which we felt was an important message for bank directors to understand.”
Second, ‘brand’ is not just the preserve of marketing, PR and communications people. There are a number of other audiences in banks that have an interest in the financial value of brands: those working in accounting, tax, legal and commercial licensing.
The ‘image people’ tend to think in terms of overall branding strategy and feel they do not need to attach a precise value to their brands; by contrast, the ‘numbers people’ have a real interest in knowing the specific brand values. Accountants, for example, need to understand the value of brands the company has acquired to comply with IFRS 3, the new accounting standard on acquisition accounting (FAS 141 in the US has similar requirements).
It is the image-makers rather than the valuers who tend to dominate. That is because bank boards, staff, shareholders and customers all tend to focus on the broader picture: brand strategy and image.
Banks are getting better at implementing such strategies, and the best ones feature in our table. But far too many banks are simply not up to standard. For the laggards, there is only one solution: they need to review their brands, revamp their marketing departments, give the marketing men and women more power and, perhaps, employ the services of an external make-over artist.
