World  Business and Economic Analysis 

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 A decade on from the global financial crisis, the world’s top banking brands are thriving, led by impressive results in China. Joy Macknight reports.

 
 

Despite facing an increasingly regulated market, suppressed interest rates, macroeconomic uncertainty and changing customer expectations, the world’s top banking brands have continued to flourish. While The Banker’s Top 500 Banking Brands ranking smashed the trillion-dollar barrier for the first time in 2017, this year’s elite brands have added a further 10%, bringing the aggregate valuation to $1181bn.

“The growth mainly stems from strong financial performance generally across the sector, with market capitalisation increasing by an average of 14.9%,” says Declan Ahern, consultant, at Brand Finance, which compiles the ranking for The Banker. “Forecasts were also up, reflecting optimism among analysts in the sector.” 

The strong results pushed the average brand strength index of the top 100 brands up from 75.5 to 76. “This has had a big effect on the total value, as 79% of the total brand value is held in this top 20%,” adds Mr Ahern.

China still leads

Chinese banking brands experienced another year of striking growth, increasing the country’s total banking brand valuation by 22% and widening the gap between itself and the US. Impressively, China’s aggregate brand strength of $317.4bn is based on just 45 banks, 84% of which expanded their brand value over the past year.

The US, in second place, increased its aggregate brand valuation by 8% and added six banks to the Top 500 ranking, bringing the total number to 76. However, the country’s top three banking brands – Wells Fargo, Chase and Bank of America – slipped by one place each, losing out to Chinese brands despite increasing their brand value. Overall, one in three US banks in the Top 500 saw a contraction in brand valuation.

While Mexico saw the largest drop in aggregate brand value, this can be attributed to Banamex’s rebranding as Citibanamex, which is now counted within the Citi brand and not listed separately. All four Mexican banks in the Top 500 – Banorte, Inbursa, Banco Azteca and Compartamos Banco – increased their brand value year on year.

ICBC: from strength to strength

Industrial and Commercial Bank of China (ICBC) remains the world’s premier banking brand for the second year in a row. Its brand value rose by almost one-quarter to reach $59.2bn. The bank has also maintained its top position in the commercial banking industry segment table, as well as ranking within the top 10 brands globally in retail and investment banking.

According to a spokesperson from the ICBC brand management department, the bank’s brand strength stems from three attributes: its reputation as a prudent and rational bank; its pioneering and innovative spirit; and its socially responsible business ethics.

ICBC prides itself on playing a leading role in supporting the real economy through developing innovative financial services, especially for microenterprises and small companies. For example, the bank set up an inclusive finance department aimed at farmers and rural areas, as well as entrepreneurs.

At the same time, and in line with its prudent approach, ICBC is committed to addressing both the symptoms and root causes of non-performing loans (NPLs), which are a growing concern for many Chinese banks. “We have worked hard to protect our credit asset quality through controlling new NPLs, preventing deterioration of loan quality, improving disposal means, and accelerating the establishment of a new credit management mechanism consistent with the new normal,” says the ICBC spokesperson.

ICBC’s internationalisation continues apace, with a network of 421 institutions in 45 countries, and it reports an annual compound growth rate of more than 20% for overseas institutions’ assets and profits. At the end of 2016, the bank established the Sino-CEEF Holding Company to finance collaborative projects between China and central and eastern Europe projects. It also set up the ‘Belt and Road’ interbank routine co-operation mechanism and is providing a wide range of financial services and support for the initiative.

“While pursuing internationalisation, ICBC follows the principles of doing business – mutual respect, equality and trust – and makes efforts to build a positive image of a Chinese-funded bank in the international financial market with good business results,” says the spokesperson.

CCB gains ground

Close on ICBC’s heels, China Construction Bank (CCB) has overtaken US banking giant Wells Fargo to reach second place in the Top 500 ranking. CCB increased its brand value by 37% – the greatest increase among the top 20 banks globally – and is now within arm’s reach of its compatriot.

CCB also beat both Wells Fargo and ICBC to become the premier retail banking brand globally. Additionally, it increased its brand value by 32% in investment banking and moved up two spots to take second place behind JPMorgan. In commercial banking, it maintained second position behind heavyweight ICBC.

“Our strategy is to continuously demonstrate our commitment to fulfil our responsibilities as a major national financial institution,” says Zhang Lilin, executive vice-president of CCB. “We also endeavour to showcase our technological prowess through our ‘new generation’ business systems and smart banking, among other things.”

Like ICBC, CCB is focused on supporting the real economy and one of its marketing campaigns over the past year emphasised CCB’s commitment to supporting key national strategies. “We demonstrated both CCB’s aspirations and concrete measures in supporting the nation’s efforts in housing reforms and institutionalisation, [for example] through our ‘Choose CCB for renting a home’ campaign,” says Mr Zhang. Financial inclusion is high on the bank’s priority list, and in 2017 it highlighted its achievements in serving small businesses and microenterprises, as well as meeting rural financing needs.

Looking ahead, CCB is considering more innovative ways of communicating, in response to the rapid development of new media and a growing young customer base. “CCB will leverage new media, the community-based economy and other new channels to innovate its marketing and communication strategies in order to gain great public recognition of our brand and our quality products and services,” he says.

There is still room for improvement when it comes to the global visibility of the CCB brand, according to Mr Zhang. In 2018, CCB plans to continue expanding its promotional campaigns overseas and communicate its brand image in major international conferences and forums through channels such as influential international media outlets and airports.

Asia’s buoyancy

Unsurprisingly, Asia-Pacific is the fastest growing region by aggregate Top 500 brand valuation, seeing a 16% year-on-year rise. While driven mainly by Chinese brands, other countries have also experienced strong growth in brand valuation.

For example, Vietnam’s banks have enjoyed great success in increasing their brand value, with two – VietinBank and Vietcombank – among the top 20 climbers by brand value, experiencing 51% and 41% growth, respectively. In the Top 500 ranking, VietinBank jumped 98 places, while Vietcombank climbed 93.

According to Mr Ahern at Brand Finance, the Vietnamese government has made a concerted effort to ensure a climate in which businesses can grow, which has resulted in nearly 7% gross domestic product growth. “Furthermore, VietinBank and Vietcombank have benefited from significant government ownership ensuring an element of stability and trust regarding their respective creditworthiness,” he says. “Additionally, our research indicates a significant improvement in brand equity scores and overall brand strength for both banks.”

Brand value 2018

European brands rebound

The ranking saw Europe turn a corner. The region experienced an 8% increase in aggregate brand value, which puts it on par with North America. Half of the top 20 climbers by brand value were European banks, led by Bank Austria, part of the UniCredit Group. With an 130% increase in brand valuation, the bank climbed 90 places within the ranking.

Spain’s BBVA was also among the top 20 climbers by percentage brand value increase. While its domestic rival, Santander, is ranked higher in the global Top 500, BBVA exhibited the greatest growth rate of the top 25 banks, with a total brand value of $11.6bn, and moved up eight positions in the global ranking.

The bank’s senior management team has a deep understanding of the importance customer feedback, interaction and data plays in building a strong bank brand, according to Rob Brown, global head of marketing, design and responsible business at BBVA. The level of senior management alignment in mapping the bank’s digital transformation journey was what tempted him away from Barclays 18 months ago.

At the beginning of 2017 BBVA launched a new bank purpose – 'To bring the age of opportunity to everyone' – and a corresponding tagline: 'Creating opportunities'. This was a big change for the bank after a decade of the 'Adelante' (Ahead) tagline, says Mr Brown, and was driven by his team, which includes both marketing and design. “The new purpose embodies our aim of transforming the lives of customers and colleagues by providing a much better [banking] experience,” he adds.

The bank has also focused on its “sound DNA”. “We want to build brand recognition through sound, for example in ads, mobile apps and on websites. So, we hired an up-and-coming Spanish band to write a song for us,” says Mr Brown. The song is called ‘How we dream’ and the band has gone from playing tiny gigs to a 20,000-capacity venue in Madrid. “Creating opportunities for this small band links directly to our purpose,” he adds. Interestingly, Mr Brown hints that “smell DNA” is another area that the bank is exploring.

Looking ahead, Mr Brown is working closely with BBVA’s global leadership team to assess the brand value of simply being BBVA globally, instead of using sub-brands BBVA Compass or BBVA Bancomer. “This issue wasn’t as critical three or four years ago, but we are now receiving a lot of recognition as leaders in digital transformation so there may be advantages to using a single brand across the 30 countries we operate in,” he says.

Mr Brown does not rule out a name change. “I don’t think there was a conscious thought process when the first letters of the four merged banks were brought together. If we had the opportunity to do it again, we would probably think of a word or name that is straightforward and easy to say internationally. But that is a big decision because BBVA has been around for 160 years and is incredibly well known, especially in Spain.”

He points to Simple, the start-up US financial institution that BBVA acquired in 2014. “That is a brilliant name – an easy word to say and people know what it means,” he says. “I am weighing up different options, but don’t expect big changes in the near future.”

NatWest rises from RBS’s ashes

Following a 16% contraction in aggregate brand value in the 2017 ranking, mainly as a result of the Brexit vote, this year the UK’s aggregate brand valuation grew by a muted 2%. “UK banks experienced a relative shock due to uncertainty surrounding Brexit. The valuations have rectified somewhat, growing slightly on average for 2018’s valuation, driven mostly by the increasingly optimistic forecasts,” says Mr Ahern. HSBC remains the premier brand in the UK, as well as in Europe, despite an 11.5% drop in value.

The big story in the UK was the rebranding of most of Royal Bank of Scotland’s (RBS's) businesses as NatWest. “The revenue that was previously attributable to RBS is now attributable to NatWest. While RBS maintains its brand in investment banking and in Scotland, NatWest now makes up 80% of the group’s revenues,” says Brand Finance. As a result, NatWest shot up 37 places in the global ranking, increasing its brand value by almost 100%. RBS, on the other hand, was the biggest faller by percentage and fell 103 places.

“We decided to focus on our customer-facing brands, to fulfil our ambition to be number one in customer service, advocacy and trust by 2020,” says RBS chief marketing officer David Wheldon. Thus, NatWest is the lead brand in England and Wales, Royal Bank of Scotland in Scotland and Ulster Bank for the island of Ireland.

NatWest celebrated its 50th anniversary in 2017 and the new brand identity was drawn from the bank’s history. “We brought out the symbolism – three solid blocks to represent the three banks that came together to form NatWest,” says Mr Wheldon. “The 3D logo is fit for digital and the future.”

The NatWest brand relaunch featured three campaigns. First, it released a brand film, 'We are what we do'. Second, in addition to a TV ad promoting 'MoneySense', its financial education tool, the bank employed 13-year-old Mog Stinchcombe, from the TV series Child Genius, as a junior financial consultant to interview different people, including CEO Ross McEwan. Third, NatWest illustrated its commitment to small enterprises by partnering with Entrepreneurial Spark to help start-up businesses.

The rebranding campaign in Scotland and Northern Ireland began with the release of new polymer banknotes. “We used the banknotes as a sharp marketing tool,” says Mr Wheldon. “Of all the new polymer notes in Scotland, only ours have women on them. We also launched RBS’s new £10 note into space, to great social media acclaim.” This note features Scottish scientist and astronomer Mary Somerville.

One of the major changes in the UK banking landscape in 2018 is the advent of Open Banking, but many customers do not yet know how this will affect them. “Open banking presents a great opportunity to continue to build our brands, as customers will turn to those institutions they trust for advice,” says Mr Wheldon.

Another focus for the group this year is examining how it banks women. Mr Wheldon points to researcher Kantar’s October 2017 report, ‘Winning over women’, which states that UK financial institutions are “failing to connect with female customers at every stage of the buying journey”. Mr Wheldon says: “There are few financial products that are constructed with women in mind. We are keen to think about that.”

A new Middle Eastern brand

Qatar National Bank (QNB) once again leads the Middle East regional ranking, a place it has held since 2012 when it knocked Emirates NBD off the top spot. QNB has increased its lead, increasing its brand value by almost 11% compared with the 4% rise at Emirates NBD.

A new brand has emerged in the region – First Abu Dhabi Bank (FAB) – following the merger of National Bank of Abu Dhabi (NBAD) and First Gulf Bank. Ranked third in the regional table, and reflecting NBAD’s previous position, FAB launched its new brand identity in May 2017 with the ‘Grow stronger’ slogan.

In a statement at the time, FAB group CEO Abdulhamid Saeed said: “The new brand represents our promise to inspire and help our stakeholders across our global network to grow stronger and deliver top shareholder value, through personalised and market-leading financial solutions and technology that put our customers first.

“It will also serve as a strong platform for FAB to support the prosperity of the United Arab Emirates and its global network, as well as our strategic aims to grow locally and internationally, and build on our position as a financial services leader.” 

Brand ranks 2018

Africa: a changing of the guard

First National Bank (FNB) has taken over as the premier bank in Africa after Standard Bank’s two-year tenure at the top. FNB increased its brand valuation by 23% and moved up 16 places in the global ranking; Standard Bank, on the other hand, saw a drop of 10% in its brand value, the only South African brand to see a contraction.

FNB’s core brand tenet is ‘How can we help you?’, and Faye Mfikwe, the bank’s chief marketing officer, believes that its continued focus on the customer’s circumstance and context plays a vital role in helping to maintain a strong and relevant brand. “We understand what is important to our customers and aim to address these elements at every touch point – products, services and channels – with the aim of delivering against our brand promise,” she says.

FNB launched a brand positioning campaign in 2017, redefining ‘helpfulness’ in the current South African and African context. The bank measures a campaign’s success based on how well it resonates with customers, rather than how many sales it drives in the short term. “In an independent measure of all banking advertisements that ran over the same period, ours was rated as the one that generated the best emotional connection with customers, in an authentic way,” says Ms Mfikwe.

Raising brand awareness across the region can be challenging, as the level of understanding and engagement differs according to geography. “Culture plays a large role in how the brand should position itself,” says Ms Mfikwe. “Therefore, you have to manage the brand uniquely depending on the local context and nuances, while retaining the brand essence – a one-size-fits-all approach will surely fail.”

While FNB’s core brand promise will not waver from ‘helpfulness’, Ms Mfikwe says that how this is defined will continue to evolve. “For the next 12 to 18 months, we want to entrench the perception that we empower our customers, that we have their best interests at heart and win their unwavering trust,” she says.

A new ranking: Islamic finance

For the first time, The Banker has published the top 10 brands in Islamic finance, which has developed into an important business vertical. Five UAE banks made it into the top 10 ranking, with Dubai Islamic Bank establishing itself as the premier brand. Impressively, the sector’s aggregate brand valuation grew by 27% over the past year.

Only the asset/wealth management business saw a bigger increase in aggregate brand valuation, rising by 34%. This industry segment remains dominated by Western brands, with five US banks in the top 10 led by Wells Fargo.

While the commercial, retail and investment banking sectors saw moderate growth, credit cards is the only business line that saw a contraction in brand valuation, declining by 14%. While US brands – Chase, Citi and Capital One – remain dominant in the credit card business, one is notably absent from the top 10 list. Bank of America, consistently in the top three for many years, exited the ranking this year. After many years of withdrawing from the consumer credit card business outside its home market, in December 2016 Bank of America sold off the final international unit, MBNA UK, to Lloyds Banking Group.

This trend may continue in future as other banks rethink their credit card strategy under new regulations, such as the EU’s Payment Services Directive 2 and Interchange Fee Regulation.

Top 50 brands by country 2018

Methodology

Brand Finance employs a discounted cashflow technique to discount estimated future royalties at an appropriate rate to arrive at a net present value of a bank’s trademark and associated intellectual property: its brand value.

The steps in this process are to:

1. Obtain brand-specific financial and revenue data. The revenue is then segmented into the following revenue streams: retail banking, wholesale/commercial banking, investment banking, asset/wealth management, Islamic banking and credit cards.

2. Model the market to identify market demand and the position of individual banks in the context of all other market competitors.

Three forecast periods were used:

• If not yet reported, then financial results for 2017 were estimated using Institutional Brokers Estimate System (IBES) consensus forecast.

• An explicit forecast period, from base year 2017 up to 2022. This was determined using three sources: IBES, historic growth and GDP growth.

• Perpetuity growth based on a combination of growth expectations (GDP and IBES).

3. Establish the royalty rate for each bank by:

• Calculating brand strength on a scale of zero to 100 according to a number of attributes, including asset strength, emotional connection, market share and profitability.

• Determining the royalty rate for each revenue stream mentioned in step one.

• Calculating the future royalty income stream.

4. Calculate the discount rate specific to each bank, taking account of its size, geographical presence, reputation, gearing and brand rating (see below).

5. Discount future royalty stream (explicit forecast and perpetuity periods) to a net present value: the brand value.

Royalty relief approach

Brand Finance uses a ‘relief from royalty’ methodology that determines the value of the brand in relation to the royalty rate that would be payable for its use, were it owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value. This approach is used for two reasons: it is favoured by tax authorities and the courts because it calculates brand values by reference to documented third-party transactions and it can be done based on publicly available financial information.

Brand ratings

These are calculated using Brand Finance’s Brand Strength Index, which benchmarks the strength, risk and potential of a brand relative to its competitors, on a scale from AAA to D. Conceptually, it is similar to a credit rating. The data used to calculate the ratings comes from various sources including Bloomberg annual reports and Brand Finance research.

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