Chinese Brands Threaten America’s Banking Primacy
The Brand Finance Banking 500, conducted by leading brand valuation consultancy Brand Finance, and published in the February edition of The Banker, is a league table of the world’s biggest banks, ranked by their brand value.
America’s banks remain the most valuable in the world. 60 American bank brands feature in the global top 500, with a cumulative brand value of $201bn. Wells Fargo is not just the most valuable banking brand in the US, but across the world. Its brand value now stands at just short of $35 billion.
However there is no room for complacency. JP Morgan Chief Executive Jamie Dimon recently expressed concerns that overregulated western banks might be superseded by Chinese brands. They have long been underestimated. Nervousness of their financial clout has been muted by a feeling that their brands were underdeveloped and lacked traction outside China. However the results of this year’s Brand Finance Banking 500 would appear to bear Dimon’s fears out; Chinese brands have well and truly arrived.
Citi, BoA and Chase, America’s 2nd, 3rd and 4th most valuable bank brands have been overtaken by both ICBC and China Construction Bank. When the world’s bank brands are ranked by the brand value they have added this year, six of the top ten are Chinese, including five of the top six. China Construction Bank has added nearly $7.5 billion. Though Chinese banks have a long way to go before making an impact domestically, they are clearly disrupting western hegemony in international banking.
US bank brands have in fact performed relatively well, especially in comparison to European banks. The improving economy means that despite the legacy of regulatory infractions continuing to impact brand strength, the year on year change for total bank brand value is +4% for the US. For Spain the figure is -2%, the UK -3%, Italy -5%, Germany -6% and France -19%.
Brand Finance’s North American Managing Director, Edgar Baum comments that “the international push of the banking sector is no longer coming from American banks. Rather it is aggressive Asian banks, led by the largest Chinese banks as well as select Canadian and European banks that are expanding their footprints and exploring what it means to be international. The value generated is reflected in the sustained growth of these institutions over the past several years. This may also be due to the fact that the American banking landscape, for the most part, is still very fragmented with opportunities for consolidation as banks are increasingly under pressure to have a 24 hours presence through online and mobile banking expectations.”
Further afield, QNB is the most valuable bank from the Middle East or Africa. Its brand value is up 44% to $2.6bn. It exemplifies the rapid growth of many Gulf and developing world banking brands. The top ten fastest growing countries are Morocco (+98%), India (+61%), Nigeria (+52%), UAE (+45%), Colombia (+44%), Qatar (+44%), the Philippines (+43%), Saudi Arabia (+40%), China (+29%) and Bahrain (+29%).
Note to Editors
Brand values for 2015 are calculated in USD with a valuation date of 1/1/15.
The study has been published annually in the February edition of the Financial Times’ ‘The Banker’ magazine since 2006. Full results can be found on Brand Finance’s website or at thebanker.com/topbankingbrands from February 2nd.
To coincide with the release of the Banker / Brand Finance Banking 500, Brand Finance is hosting an event on February 10th. Speakers include Mark Mullen, chief executive of Atom Bank, David Yates, chief executive of Vocalink, Brian Spoule, chief economist at the IOD and Brian Caplen, editor of The Banker. More information can be found on our events website. To attend please email [email protected].
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.