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China’s Banks Continue to Consolidate Global Brand Presence

  • Led by ICBC as the world’s most valuable banking brand (US$79.8 billion), China’s banks dominate top four spots of the Brand Finance Banking 500 2019 ranking
  • Chinese banks grow 28%, achieving US$407 billion in total brand value, over US$100 billion more than US banks
  • All US banks, with the exception of Wells Fargo (-9%), Chase (-7%), and BankUnited (-6%), improve their brand value
  • Growth of European banks is pedestrian, with German banks losing 24% of value, but Banca Mediolanum stands out as the fastest-growing brand in the world
  • Sberbank of Russia claims the title of the world’s strongest banking brand, with a score of 93.1 out of 100 and an AAA+ rating

China’s major banks dominate the top spots in the Brand Finance Banking 500 2019 ranking, published in The Banker magazine. The Industrial and Commercial Bank of China (ICBC) leads as the world’s most valuable banking brand, growing 35% to US$79.8 billion. It also fared well in brand strength as one of only three banks this year with an elite AAA+ rating. China Construction Banking comes in 2nd place (US$69.7 billion) with Agricultural Bank of China (US$55.0 billion), and Bank of China (US$51.0 billion) in 3rd and 4th respectively.

ICBC continued to expand beyond China with growth initiatives across Asia and entered into a joint venture with Standard Chartered around sustainable banking. With increased competition from financial technology firms, ICBC responded by establishing innovation labs and strengthening its “Smart Bank”, focusing on operations, IT management and technology research.

The growth trajectory of China’s banks, against a backdrop of trade friction and currency concerns, remains strong, thanks to a growing middle class and government support. China’s overall brand value growth was 28%, double the United States’ total growth. Furthermore, China’s presence and growth rate is underlined by the country’s total brand value of US$406.9 billion, more than US$100 billion higher than the United States’ total brand value (US$297.0 billion).

David Haigh, CEO Brand Finance, comments:

“We continue to see a tremendous performance from Chinese banking brands as they grow at an outstanding rate despite fears of an economic slowdown and the rise of protectionism in international trade. The Chinese market remains so vast that it can sustain these brands’ growth for many more years, but as they set their eyes on foreign markets, their expansion is likely to accelerate even more rapidly, and the Western banks should take notice.”

China drove Asia’s growth rate of 26%. The other regions trail Asia, with North America growing by 15% and Europe rising by just 4%. The United States, benefitting from strong fundamentals, has 81 brands in the Brand Finance Banking 500 versus China’s 48, and continued to grow, albeit less vigorously. All but three US banks saw their brand value rise, but two of those three are among the country’s largest brands.

US banks perception woes

Wells Fargo, which experienced a number of challenges around reputation, is the highest-placed US bank in 5th place, although brand value declined 9% to US$39.9 billion. Wells Fargo leads a cluster of US banks in the top 10, including Chase, the only other large US bank to decline (down 7% to US$36.3 billion).

Despite being in a healthier state due to early regulatory intervention in the global financial crisis, many US banks are hampered by perception issues. Proprietary consumer research conducted by Brand Finance revealed US banks fare badly in terms of reputation and providing value for money.

European banks struggle to grow

While US banks have recovered, the European banking system is now experiencing significant hurdles due to a less active approach to the financial crisis. As a result, brand values have fallen and customer satisfaction is at an all-time low.

Germany, for example, has seen its banks lose 24% of overall brand value, with Deutsche Bank being the only German brand to make the top 100. The bank dropped from 47th to 70th and lost 30% of brand value to US$4.3 billion, due to sustained losses and management volatility. The plight of Germany’s banks is underlined by three of the country’s leading financial institutions languishing among the fastest declining brands by strength – Nord LB (-23%), Bayerische Landesbank (-19%) and Deutsche Bank (-13%). All three banks scored lowly for innovation, quality, value for money and reputation, although in the area of customer loyalty, Deutsche Bank and Nord LB retain relatively high scores of 58.13% and 55.79%, respectively. All three banks also dropped significantly in brand value.

Alex Haigh, Director of Brand Finance, commented:

“While the US has seen the benefit of a robust regulatory response to the financial crisis, in Europe we are now only seeing the full implications of a less proactive reaction by governing bodies. As a result, Europe’s leading banks are losing ground and brand value, notably in Germany, where Deutsche Bank has declined by 30% and fallen down the rankings.”

The UK banking landscape, with the added complication and long-term uncertainty around the country’s forthcoming departure from the European Union, is stagnant. A decade after the bail-out of the UK banking system, RBS lost 32% of its brand value dropping 52 spots to 234th. Among the larger banks, the RBS subsidiary, NatWest, provides grounds for optimism, with brand value rising 19% to US$7.7 billion.

Banca Mediolanum stands out

Italy’s banks continue to struggle on the back of the country’s economic woes, yet Banca Mediolanum is the fastest-growing brand in the Brand Finance Banking 500, with its brand value improving 82% to US$569 million. The bank scores well on consumer metrics such as ‘innovation’ as well as ‘differentiation’. Following a rebranding two years ago, when the banking and insurance lines of business were merged, Banca Mediolanum is now known for offering an all-round customer experience that makes it stand out from among its competitors.

Russia’s Sberbank becomes banking industry’s strongest brand

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. According to these criteria, Moscow-headquartered Sberbank has claimed the title of the world’s strongest banking brand for the first time this year, with a score of 93.1 and the elite AAA+ rating. With over 14,000 branches, assets of US$446 billion and 45% of all deposits in Russia, Sberbank’s brand enjoys phenomenal success in the country. The bank boasts high scores across familiarity (92.9%), loyalty (94.6%) and consideration (92.7%). Importantly, in an age when many banks fare poorly in reputation rankings, Sberbank achieves a remarkable 7.99 (out of 10) score and also a relatively high score (3.93 out of 5) for quality.

Majority-owned by the Russian Central Bank, Sberbank’s position in the Russian financial system is unrivalled. The bank has around 2.5 million corporate customers and is building an ecosystem through which its customers are able to access e-commerce, e-government, e-trade, and other professional, mass digital, and offline services.

David Haigh, CEO of Brand Finance, commented:

“Sberbank’s high-quality services and products create the kind of loyalty that results in long-term customer relationships. Unparalleled within Russia, the bank can deepen its relationship with customers and extend into new products, services, and even industries.”

ENDS

Note to Editors

Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 500 most valuable banking brands in the world are included in the Brand Finance Banking 500 report and published by The Banker magazine.

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.

Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.

Additional insights, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Banking 500 report.

Key findings of the study will also be presented at the Brand Finance Banking Forum organised in partnership with The Banker magazine and scheduled to take place on 21st March 2019 at Brand Exchange in London. The event will focus on refreshing bank brands to meet global reputational challenges.

Data compiled for the Brand Finance league tables 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.

Media Contacts

Konrad Jagodzinski

Communications Director

T: +44 (0)2073 899 400           

M: +44 (0)7508 304 782          

k.jagodzinski@brandfinance.com

Sehr Sarwar

Senior Communications Manager

T: +44 (0)2073 899 400

M: +44 (0)7966 963 669

s.sarwar@brandfinance.com

Follow us on Twitter @BrandFinance and LinkedIn.

About Brand Finance          
Brand Finance is the world’s leading brand valuation and strategy consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.

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. 

Methodology

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
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.

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