Chinese banks outpace US banks2 min read . Updated: 06 Feb 2017, 01:17 AM IST
Chinese banks' brand value growth has been rapidly outpacing that of European and North American competitors: study
There has been a major change in global banking, says the 2017 Brand Finance Banking 500 report. For the first time, a non-western brand tops the ranking.
Chinese banks’ brand value growth has been rapidly outpacing that of European and North American competitors since the study’s inception.
The year 2017 sees the inevitable conclusion of this trend as ICBC bank has become the world’s most valuable banking brand and total Chinese brand value outstrips that of the US.
Already the world’s biggest bank by assets, ICBC’s brand value has grown 32% year on year to a total of $47.8 billion, constituting 20% of its $239 billion market capitalization (at our valuation date).
ICBC is not an isolated case. China Construction Bank and Bank of China are also growing strongly (by 17% and 13%, respectively) and outpacing western banks. China Construction Bank (CCB) is performing particularly well and only very narrowly failed to push Wells Fargo into third place.
China’s banks look set for further international expansion that should see a further strengthening of their positions in future editions of the Brand Finance Banking 500.
ICBC recently listed a $400 million bond on Nasdaq Dubai to fund expansion and forge stronger ties in the region.
CCB is aiming to expand from 24 to 40 foreign territories by 2020, by which it is aiming for pre-tax profit contribution of at least 5% from foreign operations.
Bank of China is further ahead, with 23% of its pre-tax profit already coming from outside China and its foreign assets growing in size by 50% in the last three years alone.
Harbin Bank recently issued RMB8 billion in preference shares, which will to help fund its unparalleled growth.
It is also one of a number of Chinese banking brands benefiting from the sanctions imposed on Russia by European lenders, recently agreeing a $1.5 billion loan to VEB to help finance a range of investment projects.
Cultural factors are just as significant as macroeconomic ones. Chinese consumers have a relationship with their brands (including their bank brands) that Western brands can only dream of. Information from Brand Finance’s Brand Strength Index reveals far higher levels of trust and loyalty for Chinese bank brands than European or American ones.
This is partly the result of the simple fact that Chinese banks are yet to experience the major scandals that have dogged banks in Europe, the US and many other parts of the world.
However, China’s consumers demonstrate this lack of cynicism and affinity for brands in other sectors too, so there are certainly unique factors at play. Patriotism is a further boon.
Bureaucracy and other factors can make operating in China challenging for foreign brands, but even taking this into account, Chinese consumers seem particularly apt to choose domestic brands at the expense of foreign ones.
The success of Huawei and other domestic smartphone manufacturers (to the detriment of Apple) shows clearly demonstrates this trend.
The combination of domestic loyalty and rapidly improving international recognition and respect has resulted in formidable brand equity results for China’s banks.