BrandFinance® Banking 500 2011
A sleeping giant awakes; America’s banks dominate the 2011 BrandFinance® Banking 500 as financial institutions begin rebuilding damaged reputations
Bank of America ($30.6bn) and Wells Fargo ($28.9bn) are the two most valuable banking brands in the world
Four of the top ten are domiciled in the USA; American total banking brand value increased by almost 30% from 2010
European bank brands also recovering but face problems relating to sovereign debt exposure within the Eurozone
Proactive marketing strategies and an improving domestic consumer banking market have seen the US regain its place as the world’s financial capital, according to the fifth edition of the BrandFinance® Global Banking 500 – an annual review of the top banking brands in the world published in The Banker.
Despite concerns of further mortgage-related write-downs, Bank of America is currently the most valuable banking brand in the world. In 2010, the company actively sought to repair its reputation – supporting new consumer protection legislation, modifying 285,000 loans, 76,000 in the fourth quarter alone, and engaging in more philanthropic activities - which was underpinned by strong results, the integration of Merrill Lynch and overall improvements in the consumer banking market.
The BrandFinance® Banking 500 contains ninety American bank and twenty UK banks. Many of these larger institutions have directly addressed their recent perceived failings, from Goldman Sachs’ 39 recommendations and proposed restructuring, to Bob Diamond’s cordial but bullish defence of Barclays to the UK’s Treasury Select Committee.
Whilst investors remain twitchy about the full extent of further write-offs and the introduction of more stringent legislation, many brands have seen their rebuilding strategies in tackling perceptual issues be rewarded with both increases in brand value and stable or enhanced Brand Ratings.
Brazil and China
Bradesco (brand value - $18.7 bn) is one of the big winners in 2011, moving up three places, reflecting its domestic dominance and the increasingly positive international view of Brazil’s economy. Itaú, another Brazilian bank, recorded the largest overall brand value increase ($9.7bn). ICBC Bank enters the top ten, a first for Chinese banks, and is the only Chinese bank with a retail presence in the US.
Despite their colossal market capitalisations and enormous retail networks, Chinese banks still have both substantial perceptual and regulatory hurdles to overcome before they achieve significant international retail expansion.
David Haigh, CEO of Brand Finance Plc said:
‘‘The top tier of the BrandFinance® Banking 500 demonstrates that a cohesive, intelligent brand strategy can help to salvage even the most damaged reputations. Banking brands have never previously been subjected to such high levels of consumer, client and political scrutiny. However, it is possible that some banks will struggle in the short to medium-term as their business strategy fails to deliver on their revised brand and communications mandate.’’
Anne Finucane, Global Strategy & Marketing Officer Bank of America added: “Our vision is to be recognized as the finest financial services firm in the world. In today’s new reality, that has little to do with simply quarterly earnings or a marketing budget – it’s about being resilient and focused on the issues that matter most to consumers and communities, and that truly drive the domestic and global economies forward. At the end of the day, our brand is clearly a very powerful asset to leverage against all our businesses and it is setting opportunity in motion for everyone we serve.”
Brian Caplen, Editor of The Banker concluded:
‘‘In the fifth year of publishing the BrandFinance Banking 500, it is interesting to see a couple of the forecasted trends come to fruition: the rise of the brands from the BRIC countries and consolidation amongst Western banks. The focus for 2011 will be the stability of the US brands’ recovery, and the possibility of the BRIC brands successfully expanding internationally.’’
To view BrandFinance® Top 500 Most Valuable Banking Brands, please visit www.brandirectory.com
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes over 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined 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. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
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 Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings 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, while 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 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.