· Total value of Chinese bank brands surpasses that of US, brand study reveals
· Wells Fargo loses its status as the world’s most valuable banking brand
· ICBC is now the world’s most valuable, worth US$47.8bn after 32% growth
For the very first time, the combined brand value of China’s lenders has surpassed that of the United States. China’s bank brands account for 24% (US$258 billion) of the total brand value of the Brand Finance Banking 500, while the US accounts for 23%.
Every year, leading valuation and strategy consultancy Brand Finance values the brands of thousands of the world’s biggest companies. The results of this analysis are then ranked, with the world’s 500 most valuable banking brands featured in the Brand Finance Banking 500.
Brand Finance’s research shows that China’s consumers demonstrate a lack of cynicism, an affinity for brands and economic patriotism that gives their banks a solid foundation that (post 2008) western banks cannot hope to match.
Driving more recent growth has been accelerating Chinese foreign M&A activity. This hit a record high in 2016, providing opportunities for the country’s banks beyond its growing domestic market. Brand Finance’s CEO David Haigh states, “Chinese banks are being carried along in the slipstream of its industrial giants as they grow and expand into international markets. Facilitating international deals boosts revenues, but more importantly, enables the banks to build their reputations with potential clients across the world.”
The combination of domestic loyalty and rapidly improving international recognition has resulted in formidable brand equity and brand value results for China’s banks. Already the world’s biggest bank by assets, ICBC’s brand value has grown 32% year on year to a total of US$47.8 billion. China Construction Bank and Bank of China are also growing strongly (by 17% and 13% respectively). The fastest growing brand this year is also Chinese. Harbin Bank’s brand has trebled in value over the course of 2016 to US$811 million.
The success of the Chinese banks and ICBC in particular comes at the expense of Wells Fargo, which has lost its position as the world’s most valuable banking brand. Wells Fargo has also been the architect of its own misfortune. Its fake accounts scandal has seen its reputation take a hit, with downgraded revenue forecasts contributing to a 6% brand value fall to US$41.6 billion.
The situation for Europe’s banks is worse still. The most valuable bank brands from the UK, France, Germany and Italy (HSBC, BNP Paribas, Deutsche Bank and Intesa Sanpaolo) have all declined in brand value. Deutsche has recently been hit with a US$7.2 billion bill to settle an investigation into its mortgage backed securities. 2016 also saw a 97% drop in profits and an individual bonus freeze for all VPs and MDs. Deutsche’s torrid year was reflected in its brand value, which is down 41% to US$4.9 billion.
HSBC has declined by a less severe 5% to US$22.9 billion as it goes through a period of consolidation. At the domestic level, over a quarter of its UK branches have been closed in the last two years while internationally, HSBC’s Brazilian business was sold to Bradesco. HSBC’s marketing communications have shifted to reflect its more geographically concentrated approach. The ‘World’s Local Bank’ message has been replaced with campaigns that now focus more on HSBC’s role in facilitating personal and business ambitions.
Canada’s banks are an exception to the general western trend. RBC leads the way with brand value growth of 28% to US$12.7 billion, but TD, Scotiabank, Bank of Montreal, CIBC and Desjardins have all posted double digit brand value growth.
Qatar National Bank is the Middle East and Africa’s most valuable bank brand. Net profit in 2016 was US$3.4 billion, up 10% from the previous year while total assets reached US$198 up by 34% from December 2015. QNB acquired Turkey’s fifth largest lender, Finansbank, the subsequent rebrand contributing to overall brand value growth of 56% to US$3.82 billion.
Itaú is the most valuable banking brand in Latin America. The Brazilian Real appreciated approximately 25% in 2016 and the economy is rebounding after several difficult years. Itaú is clearly benefitting, with a brand value of US$6.9 billion, almost double that of last year.
Sberbank, ranked 24th globally, is Russia’s most valuable banking brand. Its brand value is US$9.1 billion after 33% growth this year. David Haigh concludes, “Sberbank has weathered the struggling Russian economy thanks to carefully managed risk but more importantly its ambitious, technology-led innovation.”
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.