Mumbai: The global credit crisis that has felled some of the world’s best known financial institutions and left survivors with a mountain of bad debt has also taken a heavy toll on banks’ brand valuations.
The world’s top 500 banks lost brand value worth $218.1 billion (about Rs10.8 trillion), a 32% drop over the past year, while their market capitalization slumped by $3.9 trillion, or 51%, according to a global survey. State Bank of India (SBI), the nation’s biggest lender, was the only Indian institution to figure in the top 100 rankings.
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British bank HSBC Holdings Plc. retained its top rank and Bank of America Corp. moved to number two from number three as of 31 December, according to the third edition of BrandFinance Global Banking 500—a review of the top financial services brands in the world measured by both brand strength and brand value.
Conducted by UK-based brand valuation agency, Brand Finance Plc., the survey showed Wells Fargo and Co. dramatically ascending five places to the third rank.
About 209 of the brands present in last year’s list have fallen out of the new 500 after a year of unprecedented turmoil in the financial industry that has plunged the US, Europe and Japan into recession.
Mortgage lenders Fannie Mae and Freddie Mac, which were seized by the US government, Lehman Brothers Holdings Inc. and Bear Stearns Companies, both of which collapsed, and Northern Rock Plc., bailed out by the UK government, had a combined market capitalization of $109 billion and brand value of $14.3 billion in last year’s study.
Even HSBC’s brand value fell 40% to $25.4 billion although the lender benefited from a global reach that helped offset its exposure to the credit crisis, spreading risk both geographically and across revenue streams.
“Emerging market brands have significantly outperformed world brands in 2008,” said David Haigh, chief executive officer of Brand Finance Plc. “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.”
India escaped the worst of the global financial industry bloodbath, helping give a leg-up to the charts for financial institutions from the country. Lenders such as Canara Bank and Oriental Bank of Commerce made their debut in the Top 500 list, State Bank of India remained in the top 100 and Axis Bank Ltd climbed up the charts.
It’s a sign that Indian financial brands have the potential to reach the global big league, said Unni Krishnan, managing director of Brand Finance India Pvt. Ltd.
From this inflection point, Indian banks can tap into a $50 billion local market opportunity in services such as microfinance and microinsurance, he said.
“This domestic dominance can then help them catapult in the global league, though the big challenges for Indian brands will be customer centricity and service excellence,” Krishnan added.
SBI ranked 69 in the latest survey, down from 60 a year earlier, with a brand value of $1.44 billion, down from $2.852 billion. Its market capitalization fell to $9.83 billion from $12 billion.
However, if SBI’s associate banks were added to the score—as was done last year—then its ranking would have jumped to 56 and brand value to $1.87 billion, said Krishnan.
ICICI Bank Ltd, the country’s second largest lender, saw its ranking drop to 108 from 64 the year before, while its brand value plummeted to $939 million from $2.6 billion and market cap declined to $7.89 billion from $17.64 billion, according to the report.
ICICI Bank’s heavy reliance on retail lending and lack of enough emphasis on quality may have led to the decline, said Krishnan. ICICI Bank had no comment when contacted by Mint.
HDFC Bank Ltd’s rank, market cap and brand value leapt. It is now ranked 151, up from 236 a year earlier. Its brand value is estimated at $611million compared with $368 million a year ago, while market cap rose to $7.78 billion from $6.88 billion.
Axis Bank also surged ahead in rankings and value, while Kotak Mahindra Bank Ltd’s rank rose though its value dropped.
Banks such as Punjab National Bank, Bank of India and Union Bank of India, which did not figure in the Top 500 the year before, made their entry this year.
Ramesh Thomas, president and chief knowledge officer, Equitor Management Consulting Pvt. Ltd, said SBI benefited from the scale of its operations. “HDFC, on the other hand, is based on sheer quality of performance. It’s the performance that speaks in terms of management of assets, quality of service, etc. And that’s not something that ICICI enjoys. Also, these rankings are not so much a function of image building because both SBI and HDFC are relatively quiet brands. So is Canara, which has made its debut in the list.”
The global financial industry landscape has been permanently altered after last year’s turmoil, said Krishnan. “This global change will give rise to new business models and corporate and brand values for the financial services industry as a whole.”
Graphics by Sandeep Bhatnagar / Mint