Brand Finance plc, in association with The Banker Magazine, today launches the third edition of the BrandFinance® Global Banking 500 – a review of the top financial services brands in the world measured by both brand strength and brand value, as of 31st December 2008.
The overall drop in the top 500’s brand value is US$218.1 billion (down 32%) and the drop in market capitalisation is US$3.9 trillion (down 51%). 209 of the brands present in last year’s study have fallen out of the new 500. Notable exits include the bailed Fannie Mae and the bust Lehman Brothers whilst the salvaged Merrill Lynch (Brand Rating: BBB) and Wachovia (BBB) plummet by 30 and 59 places respectively. The five largest collapsed brands (Fannie Mae, Freddie Mac, Lehman Brothers, Northern Rock and Bear Stearns) had a combined market capitalisation of US$109 billion and a brand value of US$14.3 billion in last year’s study.
HSBC’s brand value fell 40% to US$25.4 billion in 2009. Benefiting from being a truly global brand with a AAA+ Brand Rating, the geographic split of the ‘World’s Local Bank’ has buffered its exposure to the credit crisis, spreading risk both globally and across all revenue streams.
Of the biggest risers in the league table, emerging market brands of India, South Korea and Turkey dominate. This highlights the global trend where banks from emerging markets such as Brazil, Russia, India and China seem less exposed to the global financial crisis than established markets.
David Haigh, CEO of Brand Finance commented:
“The World Bank in January 2008 said ‘resilient emerging markets are cushioning the global economy amid the downturn’. Emerging market brands have significantly outperformed world brands in 2008. Many of the best known developed world banks have died in 2008. Some are walking dead awaiting a silver bullet before they finally go. Governments hold the gun. Strong brands can help some of the zombie brands return from the dead in 2009."
The Banker's editor Brian Caplen said:
"The financial crisis has obviously taken its toll on bank brand values and will make major international institutions focus heavily on their branding. Banks from key emerging markets have fared well and are starting to chase some of the traditional names of banking."
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.