UK Outperforms All Major Western Economies but RBS Woes Continue, Bank Brands Study Reveals
The annual study, conducted by leading brand valuation consultancy Brand Finance plc, ranks the world’s biggest banks by their brand value. The results, published in the February edition of The Banker magazine, reflect industry trends and indicate future developments.
Total British bank brand values are up 18%, a faster rate of increase than that of the US, Germany, France, Spain or Canada. The net gain of US$11.5 billion (£7 bn) is the result of the resurgence of some of Britain’s top banks. Last year Britain’s three biggest bank brands (HSBC, Barclays and Standard Chartered) saw their values tumble and their ratings downgraded. This year however, all three have staged a recovery with HSBC leading the charge. It has added US$4 billion (£2.4 bn) of brand value, a 17.5% increase, to bring its total to US$26.9 billion (£16.3 bn). Barclays and Standard Chartered have added US$730 million (£442 m) and $126 million (£76 m) respectively.
The results for Lloyds Group are even more positive. Bank of Scotland and HBOS have increased their brand values by 35% and 38% respectively. The most significant news for the group this year though has been the partition of Lloyds TSB. TSB has been reincarnated, subsuming Cheltenham & Gloucester to create a US$2.35 billion (£1.4 bn) brand. Despite having lost such a significant chunk of brand equity, Lloyds’ brand value is up $454 million (£275 m) on the figure for Lloyds TSB last year - quite an achievement. Recent IT glitches aside, Antonio Horta-Osorio will be pleased with the Velvet Divorce he has overseen.
The results will make welcome reading for the chancellor too. The increasing brand values are the result not only of growing levels of consumer trust and shrewd marketing but also improved economic forecasts for the UK. Brand Finance analysts point to the falling corporation tax rate and the help to buy scheme, boosting banks’ competitiveness, revenues and reputation with mortgage customers.
The only bad news to emerge from the data is the performance of RBS Group. All five of the group’s brands, RBS, NatWest, Citizens Bank, Charter One and Ulster Bank have lost brand value, totaling US$1.193 billion (£722 m). RBS itself accounts for well over half of this. Falling revenues are largely to blame, but the impact of recent revelations that it profited from distressed businesses have hit brand strength.
Brand Finance chief Executive David Haigh commented, “In the last year, there has been a significant revival of UK bank brands. Bad news in the form of IT breakdowns and residual fines for bad behavior have continued, but looking forward, the outlook is encouraging with increased competition and choice, particularly in retail banking.”
Global Results (click here for the full table)
Wells Fargo has held its position as the world’s most valuable banking brand, with a total brand value of over US$30 billion. Western brands in general have shown promising improvements. Besides HSBC, UBS and BNP Paribas are Europes biggest winners, up US$3.35 billion US$1.6 billion respectively. Meanwhile the total for Greece is up over 100% as successful austerity measures have begun to rapidly transform the country’s economic outlook.
Notable results from elsewhere in the world included the halting of rapid growth in some BRIC countries, namely Russia, India and Brazil. Their national brand value totals are down 6%, 13% and 23% respectively. China, however, continues to grow strongly. Its banks have added a total of nearly US$19 billion and there are now 3 Chinese bank brands in the global top ten.
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 nearly 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.