Against a backdrop of uncertain economic conditions, characterised by geopolitical challenges, interest rate movements, and the disruption of Brexit, brand value among the world’s 500 largest banks has fallen for the first time since the financial crisis, according to the latest report by leading independent brand valuation consultancy Brand Finance, published by The Banker magazine today.
The total brand value in the annual Brand Finance Banking 500 ranking saw its first year-on-year contraction since 2009 – from US$1.36 trillion in 2019 to US$1.33 trillion this year. Nevertheless, while brand values of banks from established markets, such as the US, Europe, China, and Japan, are lower or remain stagnant, many banking brands in emerging markets, especially Southeast Asia, Middle East and Africa, and Latin America, are demonstrating robust performance.
Once again, the top 10 is dominated by banks from China and the US, both countries represented by five banks apiece. Europe has just four representatives within the top 20. Overall, China and the US account for the highest share of global brand value in the sector, US$412 billion and US$281 billion respectively.
David Haigh, CEO of Brand Finance, commented:
“The brand performance of established banking markets is a reflection of the fragile global economy and political landscape as well as the expectation of a downturn. But it also represents banks’ ongoing challenge in adapting to increased regulatory and technological change within the industry.”
Chinese banks maintain lead
China’s ICBC retains top position with its brand value reaching US$80.8 billion. The year-on-year increase of 1% is nonetheless very modest compared to the brand’s average growth rate of 23% between 2009-2019. Although at a slower pace than in the past, ICBC has still extended its lead at the top to more than US$18 billion, owing to a 10% drop in brand value at China Construction Bank (brand value US$62.6 billion). ICBC continues to explore new business opportunities, growing in both investment banking and asset management. The bank is also involved in joint ventures with overseas partners and has embarked on blockchain-oriented initiatives.
China’s banks have been affected by the now-curtailed trade war with the US and there have been concerns about big lenders being forced to relax their underwriting policies to stimulate the country’s economy. ICBC is China’s biggest lender but has reduced non-performing loans to less than 1.5% and enjoys the loyalty of well over 600 million customers.
Agricultural Bank of China (US$54.7 billion) and Bank of China (US$50.6 billion) saw a slight dip in brand value, but maintained their third and fourth places respectively.
Resurgent JPMorgan and Merrill
US banks have an increased presence in the top 10 due to the healthy growth of JPMorgan (up 15% to US$22.8 billion), the second highest rise in terms of cash amount (US$3 billion) across the whole ranking. JPMorgan also topped the brand value in investment banking and asset management, following expansion in 16 markets and significant investments in technology, Artificial Intelligence, and their securities business in China.
Another US bank that has increased its brand value is Merrill (up 10% to US$7.0 billion). Merrill has dropped “Lynch” from its name and is enjoying strong growth in new client acquisitions, boosted by an aggressive hiring programme and through the cross-selling Bank of America products.
Wells Fargo (up 2% to US$40.9 billion) remains the top brand in the US, however, occupying only fifth position globally with half the brand value exhibited by ICBC. The bank has overcome a string of reputational setbacks to relaunch its brand, including a new visual identity and multiple changes in its senior management structure.
In neighbouring Canada, the leading bank by brand value is TD, which jumped four places to 13th and saw its brand value grow by 15% to US$16.1 billion. As Canada’s Big Five have maintained a heavy saturation of the domestic market, TD has led the way among brands seeking growth further afield. Expansion down the Eastern seaboard of the US has brought the bank considerable success and played a major role in brand value growth. TD’s brand value in the US has increased at 27% CAGR, versus 6% for the remaining operations, with the US market now responsible for 42% of TD’s overall brand value.
European banks have lost 7% in value, more than any other region, with several major banks losing significant brand value. Principal players such as Deutsche Bank (-17%), UBS (-14%), BNP Paribas (-10%), Barclays (-8%), and Credit Suisse (-8%) have all declined. Europe’s top bank is HSBC, dropping out of the top 10 for the first time this year, following 4% brand value decrease to US$19.5 billion.
As established brands continue to see their value eroded, so-called challenger banks are in the ascendancy. Virgin Money, benefitting from the rebranding of Clydesdale Bank, increased brand value by 49% to US$0.7 billion, and Shawbrook rose by 73% to US$0.3 billion.
Positive momentum is also evident in some central and eastern European brands such as Romania’s Banca Transilvania (up 53%), OTP Bank of Hungary (+33%) and Russia’s VTB Bank (+32%).
David Haigh, CEO of Brand Finance, commented:
“Challenger banks, with their culture of innovation and flexibility, are becoming more of a threat to traditional banks that are losing brand impetus. For example, while principal banks in major markets have lost significant value, new lenders such as Virgin – up by 49% - and Shawbrook – 73% - are adding real value to their offering as the dynamic changes.”
QNB outpaces Middle Eastern competitors
Qatar National Bank, the biggest lender in the region, has a clear lead over competitors, with its brand value of US$6.0 billion almost 50% higher than that of the second-placed banking brand in the Middle East. QNB’s brand value has grown 20% since 2019 – despite a regional embargo on Qatar – as the bank has been pursuing expansion across new markets, with a notable strategic focus on Southeast Asia.
Asian boost from Vietnam
The market with the highest increase in brand value is Vietnam, which has risen by 146%. Vietcombank climbed by 99% to US$0.8 billion, the second highest growth rate by percentage globally. Since the Vietnamese government introduced its strategy to boost accountability and strength of the banking sector, including more stringent capital requirements and greater transparency, customer perception has improved. Growing confidence in the sector – reputation measures have improved 8% in Brand Finance’s research – has translated into higher revenues and a more positive outlook from equity analysts.
Brand strength elite
Apart from calculating brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Alongside revenue forecasts, brand strength is a crucial driver of brand value.
According to these criteria, Indonesia’s BCA, which has become one of Asian banking’s most admired companies, has the sector’s strongest brand, along with Russia’s Sberbank, both of which boast an impressive Brand Strength Index (BSI) score of 91.6 out of 100 and the corresponding elite brand rating of AAA+.
BCA is one of the biggest banks in the ASEAN region, with a low percentage of non-performing loans and a high return on equity. Moreover, BCA is an influential brand in terms of SME growth and lending in rural areas. The ASEAN region is home to five of the top 10 banks by brand strength, with Maybank, DBS, BNI, and Bank Mandiri hot on BCA’s heels. Some Asian banks have lost value due to their exposure to the unstable situation in China’s Hong Kong, but Malaysian and Indonesian banks are not as vulnerable.
Sberbank is a stable brand that has a particular focus on customer experience, from traditional financing to a strong digital offering. The bank is responsible for one third of the Russian banking system and is the country’s largest issuer of debit and credit cards. Now, with rapid development in non-finance, Sberbank is pioneering new frontiers for continuously evolving financial institutions.
David Haigh, CEO of Brand Finance, commented:
“Sberbank has earned unparalleled trust in its domestic market and is a bedrock of the Russian financial system. The bank is an excellent example of how customer relationships can build a compelling brand that commands great loyalty.”
South Africa provides two of the top 10 banks by brand strength, Capitec Bank and First National Bank, both of which improved their BSI scores this year. Capitec, which has more customers than any other South African bank, sees its brand strength rise by 0.5 to 89.2, while the country’s oldest bank, First National Bank, has a BSI of 87.6, up from 87.3 last year.
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 500 most valuable banking brands are included in the Brand Finance Banking 500 2020 ranking and published today in the latest issue of The Banker magazine.
To learn more about the role of brand in the banking industry and to speak to Brand Finance experts, register to attend the Brand Finance Banking Forum on Wednesday, 5th February 2020.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance Banking 500 2020 ranking.
Data compiled for Brand Finance’s rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.
About The Banker
The Banker provides economic and financial intelligence for the world's financial sector and has built a reputation for objective and incisive reporting. It leads the debate on all the issues surrounding the global banking industry, providing in-depth news and analysis, exclusive interviews with senior industry figures and definitive regional bank listings, including the internationally acclaimed Top 1000 World Banks ranking.
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.