Regional Banks

North American, Australian Banks Prosper as Economies Strengthen

Chinese banks struggle with slowdown

The brand value of the regional bank category appreciated 6 percent overall in the BrandZ™ Top 100 Most Valuable Global Brands 2014, compared with a 15 percent increase a year ago. The ranked banks divide into two groups.

The six banks from the strong economies of North American and Australia appreciated in brand value, with US Bank appearing in the BrandZ™ regional banks category ranking for the first time. The four Chinese banks, affected by the country’s slower growth rate, either declined or remained flat in brand value.

Having generally avoided the risky loans that caused the financial crisis and government intervention, both the US and the Canadian regional banks were well positioned to benefit from the resurgence of the US economy.

Chinese banks felt the impact of liberalized regulations, an increase in loan repayment problems, and a reduction in capital investment borrowing by State Owned Enterprises (SOEs) and regional governments. In addition, these other trends impacted the category:

  • Disruption
    Especially in China, Internet companies offered online lending, investment products, and mobile payment options.
  • Slower BRICs growth
    Despite India’s economic slowdown, India’s ICICI experienced profit growth, but Indian banks set aside larger provisions for bad loans.
  • Regional to global
    Sberbank, which expanded from its roots in Russia to countries of the Former Soviet Union and then to Central and Eastern Europe, considered acquisitions outside of Europe.

US economy gains strength

Wells Fargo became the most profitable US bank in 2013, on the strength of loan growth and fee income. Net income improved 16 percent. The bank’s stock rose 33 percent during 2013.

Wells Fargo increased in scale dramatically when it acquired Wachovia, in 2008, without inheriting the kinds of subprime mortgage liabilities that hurt many of its peers.

The integration and rebranding went relatively smoothly and Wells Fargo passed the stress tests that US regulators designed, following the global crisis, to assess whether institutions have adequate capital and other resources necessary for surviving a similar event.

US Bank achieved record earnings in 2013, with strong growth from commercial loans and other lending activity, including credit cards and home mortgages. The bank operates from around 3,080 offices in 25 states. It recently doubled its presence in Chicago.

Canada and Australia show strength

Canada’s two largest banks, TD Bank and Royal Bank of Canada (RBC), experienced healthy business in 2013. TD Bank grew net income despite pressure on its insurance business. RBC produced strong results, with its net income up 12 percent.

The banks benefited from their significant operations outside of Canada. TD is one of the largest banks in the US, based on assets. It services more than eight million customers through its network of approximately 1,300 locations across the US. RBC operates in 46 countries. A weakened Canadian dollar made the banks’ strong US results even better.

The Australian banks prospered because of the stability of Australia’s economy and the proximity to the fast growing markets of Asia. ANZ, Australia’s third-largest bank by market capitalization, has grown through acquisition, having purchased the operations of Royal Bank of Scotland in six Asian countries.

Commonwealth Bank of Australia enjoyed positive results based on rising home prices and a robust mortgage business. It has over one million home loan customers. The bank’s range of businesses includes retail, corporate and institutional clients. The bank operates in Australia, New Zealand, Asia-Pacific and Europe.

Slower growth impacts China’s banks

Slower growth in China and other BRIC markets impacted the Chinese banks, which also contended with market reforms that pressured profits made from loans and pushed banks to look for fee-based products.

Several Internet companies, including Tencent, Baidu, and Alibaba disrupted banking with applications that made it easy for consumers to keep some of their savings in online accounts for higher yields and make financial transactions with their mobile devices. China Mobile bought a stake in Shanghai Pudong Development Bank to facilitate its entry into financial services.

ICBC, China’s largest lender, continued its traditional role of funding the projects of State Owned Enterprises (SOEs), focusing a lot of activity in Western and Northeastern China. It also cultivated business among new, small business clients.

Driven by slower growth at home, China Construction Bank, the nation’s second largest state-owned bank, looked abroad for business, opening six overseas branches, in Taipei, New Zealand, Russia, Dubai, Osaka and Luxembourg. In China, it moved into retail, opening an online shopping platform.

Agricultural Bank of China accelerated its transition to a modern commercial bank by improving the coordination between its growing urban and international business and its base in China’s rural communities. Already present in Asia, North America, and Australia, the bank received permission to open in Dubai.

The state-owned Bank of China is the country’s most international bank, with operations in 37 overseas countries. Determined to build a global commercial banking business, Bank of China developed relationships with currency trading exchanges in Asia and London.

Action Points

Set the bar high.

Formulate high standards and inspire the organization to meet or exceed them. Customers appreciate performance more than apologies.

Be ready when the bar falls.

Anticipate that problems from the past will come back to impact the present. Hold your nerve. Be open. Make it right. The past will pass and fade from the public’s memory. Until another issue serves as a reminder. So no excuse for complacency.

Know your place.

It could be global, regional or local. There’s a place for the global bank that meets the needs of international corporations and cosmopolitan customers. And there’s a need for more narrowly focused operations. But it’s difficult to be all things.

Be agile.

Competition has increased from outside the category. A lot of other organizations are looking to eat your lunch. Prepare for the new ways people will interact with their banks. Use technology effectively to meet customer needs.

Regional Banks Up 6%

The bank category, which includes both retail and investment institutions, is split into two tables, with the brands classified as either global or regional. Global banks are defined as deriving at least 40 percent of revenue from business outside their home country.

BrandZ Top 100 2014

BrandZ Global 2014 Report Top 100 Report

Top 100 Chart

Top 100 Infographic

Methodology and valuation by Kantar Millward Brown

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