Annual Survey of Bank Reputations

July 2019 | americanbanker.com

Citi is improving its image with customers. Most other banks are headed in the opposite direction. What’s going on?

ANNUAL SURVEY OF BANK REPUTATIONS

By releasing gender pay data that other banks would not, Citi scored points for transparency. Sara Wechter, global head of human resources, played a key role in the decision.

001_ABM_0719 1 6/10/19 2:56 PM FIFTH THIRD CORPORATE BANK FINANCIAL INSTITUTIONS

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0C2_ABM0719 2 6/10/2019 4:16:35 PM Contents July 2019 | VOL. 129 | NO. 7

Reputation Survey 16 10 Reclamation Project Other industries reversed their previous downward trend, but perceptions of the banking industry continue to deteriorate. Here are some steps banks can take to try to burnish their reputations.

16 Citi Takes a Stand Citigroup is scoring points for its willingness to go further than its peers in releasing gender pay-gap data and for acting on some controversial social issues, like gun control and climate change. Now it aims to do an even better job of reflecting its values in how it does business.

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Briefings 6 BankThink Taking a Chance on Mortgages 4 Organizers of NXG Bank, a de novo effort in 20 German import How to Defuse Workplace Tension Maryland, are making a large bet on a busi- After a lot of success in Europe, a company With millennials being so expressive, ness many banks are avoiding called Raisin is bringing a new type of generational differences are becoming more financial subscription model to the United of a factor in workplace conflict. Companies States: deposits-as-a-service can avoid big headaches if managers learn BankTechnology how to address squabbling, consultant Jeff 5 8 Butler writes Who doesn’t respect their elders? 14th-Century Roots, A video-game-style program developed by 21st-Century Model AARP teaches bank employees how to detect The Renaissance-era Italian family that BackPorch financial abuse of the elderly pioneered branches and letters of credit is involved in launching a tech-forward disruptor 24 6 in the United States Quotes from Ben Carson, Jamie Dimon, Mark M&A hot spot Calabria, and more Banks drawn by a strong economy and the opportunity to court Hispanic customers and businesses are shopping for deals in the Miami area

americanbanker.com July 2019 American Banker 1

001_ABM0719 1 6/10/2019 2:32:17 PM Volume 129, No. 7 american banker.com Editor’sWhat’s View going on Executive Editor Bonnie McGeer Art Director Robin Henriquez Contributors Penny Crosman, Paul Davis, Matthew de Paula, Will Hernandez, Alan Kline, Ken McCarthy @americanbanker.com

Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 Phone 212-803-8200 Emails [email protected] www.americanbanker.com Editor in Chief Rob Blackwell 571.403.3834 Managing Editor Dean Anason 770.621.9935 Executive Editor Bonnie McGeer 212.803.8430 Senior Editor Alan Kline 571.403.3846 Editor at Large Penny Crosman 212.803.8673 Washington Bureau Chief Joe Adler 571.403.3832 Technology Editor Suleman Din 212.803.8738 BankThink Editor, Deputy Washington Bureau Chief Victoria Finkle 646.477.7549 Community Banking Editor Paul Davis 336.852.9496 News Editor Andy Peters 404.500.5770 Contributing Editor Daniel Wolfe 212.803.8397 Digital Managing Editor Christopher Wood 212.803.8437 Copy Editor Neil Cassidy 212.803.8440 Reporters/Producers Laura Alix 860.836.5431 Kate Berry 562.434.5432 Nathan DiCamillo 212.803.8246 Neil Haggerty 571.403.3837 John Heltman 571.403.3847 Will Hernandez 212.803.8731 Hannah Lang 571.403.3855 John Reosti 571.403.3864 Gary Siegel 212.803.1560 Jackie Stewart 571.403.3852 Kevin Wack 626.486.2341 Rachel Witkowski 571.403.3857 Group Editorial Director, Banking/Capital Markets Richard Melville 212.803.8679 Executive Director, Content Operations and Creative Services Michael Chu 212.803.8313 ADVERTISING MOST READ MOST SHARED VP Sales, Banking & Payments Dennis Strong 212.803.8372 Shrinking mortgage margins Northeast Average profit per loan (in basis points) 60 Brad Bava 212.803.8829 Midwest/Southwest 50 Shelly Schmeling 312.932.9392 40 West 30 Sara Culley 831.438.8408 20 Midatlantic/Southeast 10 David Cleworth 843.640.3713 0 Marketing Manager 2014 2015 2016 2017 2018 Deborah Vanderlinder 212.803.8323 Source: Mortgage Bankers Association survey of 280 banks, nonbanks Bloomberg News Group Director Custom Marketing Solutions Virginia Wiese 704.987.3224 Wells Fargo’s Appeasement Dept. Souring on Mortgage Lending Customer Service/Subscriptions [email protected] 212.803.8500 Wells Fargo created an operations Many banks have scaled back home Licensing and Reuse of Content: Contact our official unit designed to focus exclusively on lending or even left the business. With partner, Wright’s Media, for more information about available usages, license and reprint fees, and award meeting demands of regulators who profit margins shrinking, inventories of seal artwork at [email protected] or (877) 652-5295. Please note that Wright’s Media is the have expressed dissatisfaction with its affordable homes at stubbornly low only authorized company that we’ve partnered with for SourceMedia materials. progress after a series of scandals. The levels and competition from nonbanks $1.88 trillion-asset company has been intensifying, expect more banks to in the regulatory penalty box since turn what once was a reliable profit February 2018, when the Fed imposed generator into an afterthought service a cap on its asset growth. within their branch network only.

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002_ABM0719 2 6/10/2019 2:33:12 PM “The key to this business is advice. The way we combine technology and our advisors to deliver it is what sets us apart.”

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34481_26_AD_RHOMES_Amer_Banker_FP.indd003_ABM0719 3 1 6/10/20195/16/18 4:16:39 7:59 AMPM Briefings DEPOSITS | ELDER ABUSE | M&A | MORTGAGES

more easily connect to banks. Raisin also has benefited from European consumers’ lack of loyalty to their primary bank. “People shop around more, specifically when it comes to relationships online,” he said. “There’s convenience there, and we think that’s happening in the U.S. as well.” Raisin’s other challenge is that it will need to build American consumer awareness. Georgadze said the fintech will seek to do so through various marketing efforts and partnerships. In Europe, Raisin grew its profile through partnerships with financial institutions such as mobile-only bank N26, Commerzbank and Vanguard, which is one of the world’s largest investment management companies. Georgadze envisions a scenario where Raisin could partner in the U.S. with the likes of Bankrate or NerdWal- A wrinkle from a firm called Raisin let, two of the most popular personal finance comparison websites. Deposits-as-a-service model took off in Europe, and this fintech funneled billions to “There is functionality” — such as account opening and management banks there. But it faces obstacles in the U.S. — “we can offer to third parties that would benefit them,” he said. By Will Hernandez Midsize banks in particular could benefit from Raisin as a way to Raisin, a fintech based in Germany, is through high-yield savings accounts. Venture Partners, the investment arm of decrease customer acquisition costs, on the verge of introducing a new type “In Europe, we were growing really BBVA. “We’re a nation of spenders. which average about $200 per new of financial subscription model in the fast, so the question became, what else Have a look at the credit card data. It’s account. That might set a new trend for United States: deposits-as-a-service. can we do around the world?” Stephan through the roof.” fintechs seeking to partner with banks. That’s how Raisin’s chief operating said. “The U.S. is a sophisticated type of Despite that difference, Raisin could “The Raisin announcement, along officer, Michael Stephan, described its market, and while there are areas we find success in the U.S. because of the with banks’ increased interest in online marketplace that aggregates are still learning about, it’s an attractive market’s size. acquiring stable deposits, will see the high-yield savings accounts and market to get into.” “It’s super smart of them to attack a launch of a bunch of startups that will certificates of deposit offered by banks. Raisin’s chief executive officer, Tamaz market that’s likely two times larger in focus on the customer acquisition of Raisin has garnered 13 billion euros Georgadze, has already acknowledged consumer deposits than the EU,” Gilbert financial services as opposed to ($14.5 billion) in deposits brokered one potential drawback — persuading said. building another PFM or creating across 75 partner banks in Europe since Americans to save money. The U.S. net Stephan said Raisin quickly gained another lending product,” Gilbert said. 2013. savings rate is 2.9%, while the global ground in Germany and the European For now, Stephan said, Raisin’s Raisin, which has PayPal as an average is 9.6%, according to the latest Union for a couple of reasons. While immediate focus is to wade through investor, is set to introduce its model in figures from the World Bank. the company was founded well before regulatory waters to officially launch its the U.S. at a time when banks are “We’re not really a nation of savers,” the open banking directive PSD2 marketplace here. increasingly seeking to acquire deposits said Ryan Gilbert, a partner at Propel became law in the EU, it’s helped Raisin “It will be likely that some of the

4 American Banker July 2019 americanbanker.com

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more easily connect to banks. Raisin activities we do here will require a lose cognitive function. also has benefited from European banking license, and we will very likely To help banks protect older custom- consumers’ lack of loyalty to their have to partner with a sponsor bank so ers, AARP started BankSafe — a free primary bank. that we can operate under their online training program for bank and “People shop around more, specifi- license,” he said, adding that Raisin has credit union employees. The Indepen- cally when it comes to relationships had some discussions with potential dent Community Bankers of America online,” he said. “There’s convenience partners. and Credit Union National Association there, and we think that’s happening in have signed on to distribute the the U.S. as well.” training. Banks can also register Raisin’s other challenge is that it will An assist directly at need to build American consumer aarp.org/banksafe. awareness. Georgadze said the fintech from AARP Two-thirds of all deposits are held by will seek to do so through various Program helps banks catch people over 50, AARP said. marketing efforts and partnerships. In those preying on the elderly The group enlisted 200 bank Europe, Raisin grew its profile through It’s a $1 billion problem for financial employees to help develop and review partnerships with financial institutions institutions each year: people who con the training content, then tested it with such as mobile-only bank N26, older customers out of their deposits. more than 2,000 bankers in an 11-state Commerzbank and Vanguard, which is “One in five older Americans are pilot. one of the world’s largest investment victims of financial exploitation, and One component of the training is a management companies. each victim loses an average of video game called Trust Your Instincts Georgadze envisions a scenario $120,000,” said Jilenne Gunther, that is loosely based on the 1984 game where Raisin could partner in the U.S. national director of AARP’s new Duck Hunt. Employees are fed scenari- with the likes of Bankrate or NerdWal- BankSafe program. os and have to decide which ones are A wrinkle from a firm called Raisin let, two of the most popular personal Chillingly, 60% of the time family potential elder abuse. finance comparison websites. members are the perpetrators of elder A classic red flag is when a customer Deposits-as-a-service model took off in Europe, and this fintech funneled billions to “There is functionality” — such as abuse. This can make it hard for bank comes in with a second person who is account opening and management employees to detect, as family mem- speaking for that customer, Gunther banks there. But it faces obstacles in the U.S. — “we can offer to third parties that bers sometimes legitimately need to said. Another is when someone wants would benefit them,” he said. help older relatives as they age and to obtain power of attorney for a By Will Hernandez Midsize banks in particular could customer. A third is when an older benefit from Raisin as a way to person asks to buy large quantities of Venture Partners, the investment arm of decrease customer acquisition costs, Cost of elder abuse gift cards. A fourth is when a customer BBVA. “We’re a nation of spenders. which average about $200 per new who has had an account for many Have a look at the credit card data. It’s account. That might set a new trend for • 1 in 5 seniors are victims years suddenly moves money into through the roof.” fintechs seeking to partner with banks. another account with a second person Despite that difference, Raisin could “The Raisin announcement, along on it. • Their average losses are find success in the U.S. because of the with banks’ increased interest in BankSafe also provides role-playing $120,000 market’s size. acquiring stable deposits, will see the videos. One shows a son and father “It’s super smart of them to attack a launch of a bunch of startups that will who have come into a bank. The son market that’s likely two times larger in focus on the customer acquisition of • Banks lose $1B in deposits wants to start a landscaping business consumer deposits than the EU,” Gilbert financial services as opposed to each year due to elder scams using the father’s house as collateral. said. building another PFM or creating Players choose what steps the employ- Stephan said Raisin quickly gained another lending product,” Gilbert said. ee should take to protect the customer. ground in Germany and the European For now, Stephan said, Raisin’s • 60% of perpetrators are In addition to the training, BankSafe Union for a couple of reasons. While immediate focus is to wade through family members of victims provides information about state laws, the company was founded well before regulatory waters to officially launch its adult protective services agencies, the open banking directive PSD2 marketplace here. Source: AARP employee tip sheets and resources for became law in the EU, it’s helped Raisin “It will be likely that some of the customers. — Penny Crosman

americanbanker.com July 2019 American Banker 5

005_ABM0719 5 6/10/2019 2:35:20 PM Briefings

Miami heat more transactional and less “sticky” tion” — plans to establish traditional M&A activity is brisk once business. deposit-gathering and commercial again in South Florida Scale in South Florida was another lending operations around Columbia, Bank consolidation in Miami is picking driver at First American. It only has one Md. But it also would bring on a large up, with more deals expected in coming branch in Miami, which it obtained in a mortgage team the day it opens. months. 2014 acquisition. “We’re going to try to find niches Continental National Bank and In addition to tourism and hospitali- that are profitable and scale the Brickell Bank are two of the recent ty, Miami is a “vibrant economic hub” business,” said Bill Knott, the proposed sellers. The $490 million-asset Conti- driven by its position as a gateway to bank’s chief executive. nental is being sold to First American Latin America, Wells said. NXG intends to originate and sell Bank in Elk Grove Village, Ill., while More banks will likely want to bulk agency mortgages. Brickell’s parent company agreed to up around Miami, said Dennis Holthaus, The lending team it has on tap is sell the $440 million-asset bank to a managing director for Skyway from Mutual of Omaha Mortgage. Chris Banesco USA in Coral Gables, Fla. Capital Markets in Tampa, Fla. Incentino, one of the bank’s organizers, They join a growing list of Miami “As a financial institution, if you have oversees a 60-member team for the banks that have changed hands in significant growth plans in Florida, Mutual of Omaha unit that includes recent years, including TotalBank, those plans have to include Miami,” loan officers, processors and underwrit- Gibraltar Bank & Trust, Sabadell United he said. ers. The group is on pace to originate Bank and Stonegate Bank. The only issue is the limited number $400 million in mortgages this year. The Miami area has lost a dozen of community banks available, which NXG’s decision to build a nationwide banks since mid-2014, according to will likely keep premiums above 200% mortgage platform comes as others, data from the Federal Deposit Insur- of a seller’s tangible book value. including HomeStreet in Seattle and ance Corp. Premiums are higher than Thomas said out-of-state banks and Berkshire Hills Bancorp in Boston, have they have been in years. those in other countries eager to be in stepped back from that business, citing “It’s the best time to sell if you’re Miami are paying up for local banks, as slim margins, regulatory hurdles and planning to sell,” particularly for seen in the Banco Bradesco-BAC intense nonbank competition. bankers concerned that another Florida Bank deal recently. Bradesco NXG, which plans to rely on technol- economic slowdown is nearing, said agreed to pay $500 million, or 2.6 times ogy to reduce overhead, would accept Ken Thomas, president of Community book. applications online, but loan officers Development Fund Advisors. But Holthaus does not expect prices would handle approvals, Knott said. For now, buyers don’t seem overly to get overly inflated. “Bradesco has Other NXG organizers also have concerned about a correction. For had an impact on the thoughts of banking experience, including Mark them, the Miami market offers a sellers, but pricing still needs to make Keidel, who served as interim CEO at chance to diversify in terms of demo- financial sense for a buyer,” he said. 1st Mariner Bank from December 2011 graphics, geography and product mix. — Ken McCarthy to July 2014. Thomas Wells, the chief executive of Lori Bettinger, who was director of the $5.3 billion-asset First American, the Troubled Asset Relief Program from said his bank is interested in focusing Beginner’s 2008 to 2011, signed on to be NXG’s more on Hispanic customers, including chairman, after being recruited by the Cuban-American clientele at pluck Knott. “It’s great to get an opportunity Continental National. Startup bets big on mortgages to see what a de novo really looks like “Getting a Hispanic grounding is as other banks back off from the ground floor,” she said. important,” Wells said. Organizers of a de novo effort in NXG plans to raise $38.5 million to Continental, formed in 1974, was also Maryland apparently didn’t get the $42 million in initial capital. Knott said attractive because it has been around memo that community banks should about a quarter of the capital will come for a while and has a good balance give up on the idea of a national from organizers, friends and family. The sheet, Wells said. He cautioned that mortgage platform. goal is to open by early 2020. some newer banks in the area have NXG Bank — short for “next genera- — Paul Davis

6 American Banker July 2019

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007_ABM0719 7 6/10/2019 4:16:39 PM Bank Technology

American Express and at the German online bank Fidor. After trying to find € U.S. bank partners for Fidor, and determining they were too hamstrung by legacy systems to do the customer-friendly things he wanted to do, Boyle decided to create a Fidor-like ₤ bank in the U.S. He compared notes with de Medici. They realized they had a similar vision and decided to work together. Much like the original Medici family used banking innovations to facilitate trade and commerce, Medici Bank will be focused on “innovating in order to solve the pain points of the customer as opposed to innovating in order to generate more margin for the shareholder,” Boyle said. Boyle recently asked a New York importer-exporter what problem he would like a bank to solve. The New Yorker said he exports high-end ‘Reimagining modern-day banking’ electronics from the United States to other parts of the world for trade shows The Medicis (yes, those Medicis) are back, and starting an online bank that aims to — he might get asked to send 100 remove pain points for small and midsize businesses iPads to a trade show coming up in Dusseldorf, for instance. He has to invoice customers for shipping the By Penny Crosman electronics and for paying customs duties in a foreign currency. The latest U.S. challenger bank has a invented the double-entry system of bank as well as the manager of his “You need to move the money, you unique origin: the powerful Medici tracking deposits and withdrawals that family’s portfolio and shared ownership need to move it fast, and an exact family, which ruled Florence and banks still use, as well as letters of in several European banks. amount needs to arrive,” Boyle said. Tuscany for more than two centuries credit. “And typically as a small business and founded a bank in 1397. In a return to his forebears’ work, Why the Medicis are back in banking working with a bank, you are sending a The Medicis invented banking Prince Lorenzo de Medici is setting up Growing up near a town on the old Silk wire and an invisible amount of money conventions that still exist. They a challenger bank in the United States. Road that hosted a major trading goes into the ether; you don’t know pioneered branch banking because The plan is for the digital-only bank to exchange, de Medici always felt when it will arrive, and it’s never in the messengers transporting money along serve small and midsize international pressure to restart the family business. amount you thought it would be.” the famed Silk Road were often robbed. businesses in a tech- and crypto-friend- “His entire life, people asked him, There are fintechs that have services With branches, the money could be ly way. ‘You’re Lorenzo de Medici. Where’s your that help, but usually customers have deposited at one location and dis- “We are reimagining modern-day bank? Why don’t you have a bank? You to wire money from their banks to the bursed elsewhere. That developed into banking by leveraging technology that should start a bank.’ It’s always been on fintechs first. “You have the customer banks forging relationships with one creates seamless, digital customer the back of his mind — if he had a jumping through extra hoops in order another to help distribute money to experiences and expands financial bank, what would it be like?” said Ed to avoid hoops in the banking and far-flung locations, a concept now opportunity across global markets,” Boyle, Medici Bank’s chief executive. payments space,” Boyle said. called correspondent banking. They said de Medici, who is director of the Boyle, meanwhile, had worked at Medici Bank plans to offer a

8 American Banker July 2019 americanbanker.com

008_ABM0719 8 6/10/2019 2:34:30 PM American Express and at the German fintech-like international payment word ‘bank’ until three weeks ago, when online bank Fidor. After trying to find service from a chartered bank. the commissioner told us we could use € U.S. bank partners for Fidor, and Boyle and de Medici have been it,” Boyle said. determining they were too hamstrung selecting best-of-breed technologies This international banking charter by legacy systems to do the custom- for their new bank that will most likely lets Medici Bank operate in any er-friendly things he wanted to do, include distributed ledger, international nonsanctioned nation-state in the Boyle decided to create a Fidor-like automated clearing house, and Swift world (including the U.S.), as long as it ₤ bank in the U.S. He compared notes wire solutions. They plan to announce can comply with Bank Secrecy Act and with de Medici. They realized they had their vendor choices in coming months. anti-money-laundering obligations. It a similar vision and decided to work Over time, Medici Bank might serve can open accounts with customers together. the customers of these international inside and outside the U.S. Much like the original Medici family businesses with private banking and It does not have a U.S. federal or used banking innovations to facilitate wealth management services. state bank charter, nor does it have trade and commerce, Medici Bank will “Lorenzo and I think the wealth Federal Deposit Insurance Corp. be focused on “innovating in order to management business is this last coverage. “FDIC insurance at this stage solve the pain points of the customer bastion of banking where it is anything is optional,” Boyle said. “We’re consid- as opposed to innovating in order to but fast and data-centric,” Boyle said. ering whether or not we will opt for it generate more margin for the share- “And where you see robo-advisers when we launch the bank by the end of holder,” Boyle said. making inroads into the retail space the year.” Boyle recently asked a New York with apps on phones for millennials, we importer-exporter what problem he think there’s a big opportunity in the Crypto-friendly, to a degree would like a bank to solve. The New traditional family office wealth One of the modern aspects of Medici Yorker said he exports high-end management space.” Bank is its so-called crypto-friendliness. ‘Reimagining modern-day banking’ electronics from the United States to Medici Bank plans to let business This term has to be parsed. The other parts of the world for trade shows customers use its application program- bank has no plans to offer digital asset The Medicis (yes, those Medicis) are back, and starting an online bank that aims to — he might get asked to send 100 ming interfaces to integrate with their custody, digital wallets or other remove pain points for small and midsize businesses iPads to a trade show coming up in accounting, payables, receivables and cryptocurrency services. It does not Dusseldorf, for instance. He has to shipping systems. It’s co-designing APIs plan to accept cryptocurrency; it invoice customers for shipping the with new and prospective customers, intends to deal only in sovereign fiat By Penny Crosman electronics and for paying customs who are sharing how they’d like a money. duties in a foreign currency. digital-account-opening process and It is open to banking companies that bank as well as the manager of his “You need to move the money, you online banking to work. do something related to blockchain family’s portfolio and shared ownership need to move it fast, and an exact technology and cryptocurrency. Boyle in several European banks. amount needs to arrive,” Boyle said. Getting a charter said these companies often struggle to “And typically as a small business Becoming a U.S. bank is not easy. find a willing bank partner. Why the Medicis are back in banking working with a bank, you are sending a Obtaining a state or federal banking “We look at prospective customers Growing up near a town on the old Silk wire and an invisible amount of money charter takes time, money and of the bank on an individual basis Road that hosted a major trading goes into the ether; you don’t know patience. — what business are they in, what is exchange, de Medici always felt when it will arrive, and it’s never in the Medici Bank has taken an indirect the nature of that business, what pressure to restart the family business. amount you thought it would be.” route. Boyle and de Medici’s team products, policies and procedures do “His entire life, people asked him, There are fintechs that have services acquired a division of a Belize bank they utilize in their business and how ‘You’re Lorenzo de Medici. Where’s your that help, but usually customers have called Choice Financial. Through well do they apply those policies and bank? Why don’t you have a bank? You to wire money from their banks to the that acquisition, they obtained an procedures?” Boyle said. “So even in a should start a bank.’ It’s always been on fintechs first. “You have the customer international banking charter from the high-risk industry like cryptocurrency, the back of his mind — if he had a jumping through extra hoops in order U.S. Commonwealth of Puerto Rico. It is we are friendly to the extent that we’d bank, what would it be like?” said Ed to avoid hoops in the banking and supervised by the Federal Reserve Bank be willing to speak with them and have Boyle, Medici Bank’s chief executive. payments space,” Boyle said. of New York. an application from them and possibly Boyle, meanwhile, had worked at Medici Bank plans to offer a “We were not allowed to use the bank them.”

americanbanker.com July 2019 American Banker 9

009_ABM0719 9 6/10/2019 2:34:31 PM Last year corporate America took a reputational hit across many industries, as public trust broadly eroded. This year as other industries started to improve, the banking industry is falling further. WHEN’S “I think the leading theme here is that of a missed recovery,” says Sven Klingemann, director of research at the LReputation Institute. Of the 40 banks evaluated in the LIFTOFF? 2019 American Banker/Reputation While other industries reversed their previous Institute Survey of Bank Reputations, downward trend, perceptions of the banking only two earned an “excellent” reputation with customers, down from six last industry continue to get worse. Here are year. some steps banks can take to try to burnish Five had “average” scores, their reputations. up from two. The number of banks that have “weak” scores with By Matthew de Paula noncustomers doubled, to more than half of them. The decline in reputation translates into less willingness to buy a bank’s products and to recommend others do so, the research shows. It also means people are less likely to give a bank the benefit of the doubt if something goes wrong. But banks can counteract the negative sentiment. The research indicates the most effective way to do that is by demonstrating ethical behavior and good citizenship, Klingemann said. “This is a strategy that banks can use consistently to turn things around,” because it improves perceptions regardless of the bank type and regardless of whether someone is a customer, he said.

10 American Banker July 2019 americanbanker.com

010_ABM0719_001 10 6/11/2019 8:47:49 AM Last year corporate America took a Focus on governance Citizens is one of only two banks that reputational hit across many industries, The survey rates banks in seven catego- did not lose ground with either as public trust broadly eroded. This ries: products and services, innovation, customers or noncustomers. year as other industries started to leadership, workplace, performance, Klingemann said customers consider improve, the banking industry is falling citizenship and governance. Which cat- Citizens’ brand personality appealing. further. egories most heavily influence people’s The survey shows that they perceive it WHEN’S “I think the leading theme here is perceptions of banks can shift from one as technologically advanced and that of a missed recovery,” says Sven year to the next. modern. It is also perceived as one of Klingemann, director of research at the Citizenship remains one of the top the least self-serving among all the LReputation Institute. three drivers of reputation for noncus- banks evaluated. Of the 40 banks evaluated in the tomers, though dropped in importance Beth Johnson, Citizens’ chief LIFTOFF? 2019 American Banker/Reputation among customers, who now put more marketing officer, said it’s not any one Institute Survey of Bank Reputations, emphasis on financial performance. thing that has made the difference, but only two earned an “excellent” reputa- But governance is in the top three a commitment to improving the way tion with customers, down from six last with both customers and noncustomers the bank does business overall. She year. cited a list of recent initiatives, Five had “average” scores, Missed Recovery both internal and external, that is While other industries on average have recovered some of the reputation up from two. losses they’ve suffered since 2017, the banking industry continues to decline improving Citizens’ standing with The number of banks that 2017 2018 2019 employees and customers. have “weak” scores with 0 One, called “Simple, period” (or noncustomers doubled, to -1 “Simple.”), launched about a year more than half of them. -2 and a half ago. It is focused on The decline in reputation -3 the customer experience and translates into less willing- created a mechanism that -4 ness to buy a bank’s allows employees to make -5 products and to recommend suggestions and collaborate -6 others do so, the research to drive improvements. -7 shows. Average for All Industries Banking Industry Another initiative called It also means people are Community Connect encourages less likely to give a bank the benefit of again this year. This is a gauge of local branch staff to participate in the doubt if something goes wrong. whether people perceive the bank as random acts of kindness. It started in But banks can counteract the fair, ethical and transparent. 2017 as a grassroots effort in Connecti- negative sentiment. The research Compared with the large and cut and expanded bankwide in indicates the most effective way to do nontraditional banks, regional banks as February 2018. Citizens encourages that is by demonstrating ethical a group experienced the biggest drop employees to share their acts of behavior and good citizenship, in the governance category, losing kindness on social media, to magnify Klingemann said. three points on the 100-point scale, the effect. “This is a strategy that banks can Klingemann said. use consistently to turn things around,” One exception is the $161.3 bil- The most risky behavior because it improves perceptions lion-asset Citizens Bank in Providence, Facebook misusing personal informa- regardless of the bank type and R.I., which held steady in that category tion, Volkswagen skirting environmental regardless of whether someone is a with its customers. regulations, and Wells Fargo opening customer, he said. And on the overall reputation scores, phony accounts all registered with the Caption a ilitae aut apit quatis qui dolestiur alit pamodi cum a volut americanbanker.com July 2019 American Banker 11 dolor aut eos etumqui

011_ABM0719 11 6/10/2019 2:35:51 PM REPUTATION SURVEY

public in a big way. Each of those vulnerable to attack. RANKINGS BASED ON CUSTOMER SCORES companies is still facing fallout for The Reputation Institute gauged Still Falling 2019 2018 Change Large banks as a group did not lose as their breaches in trust; Wells Fargo how party affiliation correlates with much luster with their customers as the remains at the bottom of the bank opinions of bank reputations, and 1 USAA Bank 88.2 87.0 1.2 regional and nontraditional banks did. rankings, and is the only one with a found that Republicans had the 2 Huntington Bank 80.4 81.9 -1.5 Among noncustomers, bank reputations overall declined by an average of 3.8 “poor” reputation among noncus- most favorable views, and Indepen- 3 Citizens Bank 79.2 77.8 1.4 points, sinking into “vulnerable” range. tomers. dents the worst, with Democrats 4 First Citizens 78.6 78.0 0.6 In studying what events can falling in the middle. 5 PNC 78.6 80.8 -2.2 LARGE BANKS damage bank reputations most, But the key drivers of reputation 6 Discover Bank 78.2 79.7 -1.5 Klingemann found that risks related for all three groups are the same, 7 Webster Bank 77.7 76.3 1.4 to privacy and data security are regardless of political persuasion. 8 Northern Trust 77.7 79.2 -1.5 becoming more important to “We see that on average, for each 9 Cullen/Frost Bankers 77.5 77.9 -0.4 68.6 48.7 people. one of the affiliations, governance 10 Union Bank 77.1 75.3 1.8 But the risks that had the is the most important driver, 11 BOK Financial 76.9 81.0 -4.1 -0.7 -3.7 biggest potential negative impact followed by products and services, 12 Regions 76.6 82.0 -5.4 all related to ethical behavior. Of and citizenship,” Klingemann said. 13 First Tennessee 76.0 76.4 -0.4 REGIONAL BANKS the 19 risks assessed, deceptive “These three dimensions taken 14 Associated Bank 75.9 73.9 2.0 sales practices and unequal pay by together are especially important 15 Bank of the West 75.7 74.9 0.8 gender ranked at the top, each one for Independents, who view banks 16 Capital One 75.6 77.9 -2.3 having the potential to drag down in the most skeptical way.” 17 BB&T 75.5 79.7 -4.2 75.1 59.8 reputation scores by a whopping The only bank with a strong 18 U.S. Bank 75.3 77.3 -2.0 17.2 points. score among all three political 19 BBVA Compass 75.1 77.3 -2.2 It’s worth bearing in mind that groups was USAA. -2.2 -3.9 20 BMO Harris Bank 75.1 82.3 -7.2 treatment of employees matters in The $87 billion-asset San 21 Comerica 75.0 75.2 -0.2 an outsize way, with bias related to Antonio bank, which restricts its NONTRADITIONAL BANKS 22 Fifth Third Bank 74.4 73.9 0.5 race, gender and sexual orientation customers to current and retired 23 People's United 74.3 75.5 -1.2 bias coming in second (-16.2), military personnel and their 24 Chase 74.1 73.7 0.4 followed by incidents of sexual families and operates almost 25 First National of Pa. 74.1 71.7 2.4 harassment (-15.8) and firing or entirely online, has been at or near 77.8 62.2 26 BankUnited 73.6 76.8 -3.2 punishing whistleblowers (-15.7). the top of the rankings for several 27 Citibank 73.5 72.9 0.6 Klingemann said the data shows years, a streak that continues this 28 Santander 73.4 74.1 -0.7 -2.0 -3.7 that avoiding reputation trouble year. 29 Ally Bank 73.0 77.2 -4.2 comes down to one principle: “Do USAA is at the top of the 30 SunTrust Banks 73.0 77.9 -4.9 ALL BANKS INDUSTRY AVERAGE the right thing.” customer ranking with a score of 31 KeyBank 72.8 76.2 -3.4 88.2, which is considered “excel- 32 TD Bank 72.6 77.6 -5.0 The political minefield lent,” and the noncustomer ranking 33 CIT Bank 71.6 75.4 -3.8 This is particularly useful insight with a score of 70.2, just high 34 Zions Bank 71.1 77.8 -6.7 74.5 58.7 given a new set of data in the study enough to qualify as “strong.” 35 M&T Bank 70.3 75.1 -4.8 this year that focuses on political Klingemann said with hedging dynamics. against political risk expected to 36 Synovus 69.8 78.3 -8.5 -2.1 -3.8 These day banks have to become especially important in the 37 BNY Mellon 68.9 77.3 -8.4 navigate tricky public policy coming year, a focus on reputation 38 Bank of America 67.2 67.2 0.0 Scores from customers Excellent/Top Tier Above 80 positions and hot-button will go a long way toward helping. 39 HSBC 65.8 71.2 -5.4 Strong/Robust 70-79 Scores from noncustomers socioeconomic issues in a “Good reputation will boost your 40 Wells Fargo 62.8 61.3 1.5 Average/Moderate 60-69 Decrease from 2018 Weak/Vulnerable 40-59 politically divided country, performance, but also offer Excellent/Top Tier Above 80 Not a meaningful change Strong/Robust 70-79 Klingemann said. protection in times of risk. It’s what Average/Moderate 60-69 And with 2020 national elections we call an insurance policy,” he Weak/Vulnerable 40-59 Poor/Bottom Tier Below 40 Source: Survey of Bank Reputations 2019 said. looming, banks are particularly Source: American Banker/Reputation Institute Survey of Bank Reputations 2019

12 American Banker July 2019 americanbanker.com

012_ABM0719 12 6/10/2019 2:35:53 PM vulnerable to attack. RANKINGS BASED ON CUSTOMER SCORES RANKINGS BASED ON NONCUSTOMER SCORES The Reputation Institute gauged 2019 2018 Change 2019 2018 Change how party affiliation correlates with opinions of bank reputations, and 1 USAA Bank 88.2 87.0 1.2 1 USAA Bank 70.2 73.8 -3.6 found that Republicans had the 2 Huntington Bank 80.4 81.9 -1.5 2 First Tennessee 63.2 69.7 -6.5 most favorable views, and Indepen- 3 Citizens Bank 79.2 77.8 1.4 3 M&T Bank 63.1 62.8 0.3 dents the worst, with Democrats 4 First Citizens 78.6 78.0 0.6 4 Cullen/Frost Bankers 62.8 71.1 -8.3 falling in the middle. 5 PNC 78.6 80.8 -2.2 5 Zions Bank 62.3 65.1 -2.8 But the key drivers of reputation 6 Discover Bank 78.2 79.7 -1.5 6 Synovus 62.0 68.5 -6.5 for all three groups are the same, 7 Webster Bank 77.7 76.3 1.4 7 Union Bank 61.9 62.0 -0.1 regardless of political persuasion. 8 Northern Trust 77.7 79.2 -1.5 8 Citizens Bank 61.7 59.8 1.9 “We see that on average, for each 9 Cullen/Frost Bankers 77.5 77.9 -0.4 9 Northern Trust 61.7 66.9 -5.2 one of the affiliations, governance 10 Union Bank 77.1 75.3 1.8 10 BNY Mellon 61.5 65.8 -4.3 is the most important driver, 11 BOK Financial 76.9 81.0 -4.1 11 BMO Harris Bank 61.5 66.0 -4.5 followed by products and services, 12 Regions 76.6 82.0 -5.4 12 Huntington Bank 61.2 64.8 -3.6 and citizenship,” Klingemann said. 13 First Tennessee 76.0 76.4 -0.4 13 First National of Pa. 61.0 64.6 -3.6 “These three dimensions taken 14 Associated Bank 75.9 73.9 2.0 14 Webster Bank 60.9 68.4 -7.5 together are especially important 15 Bank of the West 75.7 74.9 0.8 15 BB&T 60.9 59.8 1.1 for Independents, who view banks 16 Capital One 75.6 77.9 -2.3 16 Comerica 60.6 62.5 -1.9 in the most skeptical way.” 17 BB&T 75.5 79.7 -4.2 17 Ally Bank 60.2 65.4 -5.2 The only bank with a strong 18 U.S. Bank 75.3 77.3 -2.0 18 Associated Bank 60.0 61.8 -1.8 score among all three political 19 BBVA Compass 75.1 77.3 -2.2 19 People's United 59.9 67.3 -7.4 groups was USAA. 20 BMO Harris Bank 75.1 82.3 -7.2 20 Bank of the West 59.9 59.5 0.4 The $87 billion-asset San 21 Comerica 75.0 75.2 -0.2 21 Discover Bank 59.6 62.5 -2.9 Antonio bank, which restricts its 22 Fifth Third Bank 74.4 73.9 0.5 22 KeyBank 59.6 60.9 -1.3 customers to current and retired 23 People's United 74.3 75.5 -1.2 23 TD Bank 59.5 61.8 -2.3 military personnel and their 24 Chase 74.1 73.7 0.4 24 BBVA Compass 59.5 63.4 -3.9 families and operates almost 25 First National of Pa. 74.1 71.7 2.4 25 Regions 59.0 63.3 -4.3 entirely online, has been at or near 26 BankUnited 73.6 76.8 -3.2 26 CIT Bank 58.9 61.8 -2.9 the top of the rankings for several 27 Citibank 73.5 72.9 0.6 27 First Citizens 58.6 66.2 -7.6 years, a streak that continues this 28 Santander 73.4 74.1 -0.7 28 BOK Financial 58.6 68.2 -9.6 year. 29 Ally Bank 73.0 77.2 -4.2 29 SunTrust Banks 58.4 59.6 -1.2 USAA is at the top of the 30 SunTrust Banks 73.0 77.9 -4.9 30 PNC 58.2 62.0 -3.8 customer ranking with a score of 31 KeyBank 72.8 76.2 -3.4 31 BankUnited 58.0 66.4 -8.4 88.2, which is considered “excel- 32 TD Bank 72.6 77.6 -5.0 32 Fifth Third Bank 56.5 59.8 -3.3 lent,” and the noncustomer ranking 33 CIT Bank 71.6 75.4 -3.8 33 Chase 55.5 60.0 -4.5 with a score of 70.2, just high 34 Zions Bank 71.1 77.8 -6.7 34 Capital One 55.4 61.6 -6.2 enough to qualify as “strong.” 35 M&T Bank 70.3 75.1 -4.8 35 Citibank 54.4 57.8 -3.4 Klingemann said with hedging against political risk expected to 36 Synovus 69.8 78.3 -8.5 36 Santander 54.3 57.8 -3.5 become especially important in the 37 BNY Mellon 68.9 77.3 -8.4 37 US Bank 53.2 57.1 -3.9 coming year, a focus on reputation 38 Bank of America 67.2 67.2 0.0 38 HSBC 52.2 58.6 -6.4 will go a long way toward helping. 39 HSBC 65.8 71.2 -5.4 39 Bank of America 46.1 46.3 -0.2 “Good reputation will boost your 40 Wells Fargo 62.8 61.3 1.5 40 Wells Fargo 35.4 39.1 -3.7 performance, but also offer Excellent/Top Tier Above 80 Excellent/Top Tier Above 80 Strong/Robust 70-79 Strong/Robust 70-79 protection in times of risk. It’s what Average/Moderate 60-69 Average/Moderate 60-69 we call an insurance policy,” he Weak/Vulnerable 40-59 Weak/Vulnerable 40-59 Poor/Bottom Tier Below 40 Poor/Bottom Tier Below 40 said. Source: American Banker/Reputation Institute Survey of Bank Reputations 2019 Source: American Banker/Reputation Institute Survey of Bank Reputations 2019

americanbanker.com July 2019 American Banker 13

013_ABM0719 13 6/10/2019 2:35:54 PM REPUTATION SURVEY

What matters most when What Huntington is up to specific to the banking industry and then we selected the forming perceptions of a brand? Despite slipping a little — to 80.4 — Huntington Bank is the subset of people that were most active. And we’re really Governance remains among the top reputation drivers for both only one besides USAA to get an “excellent” score with talking about 10% of our overall sample who are these very customers and noncustomers. For this survey, governance is customers this year. passionate and active people who are making their voices essentially a measure of how ethical people think a bank is, with the score being based on perceptions of transparency and fairness. The $108-billion-asset Huntington of Columbus, Ohio, and opinions heard,” Klingemann said. Customers Noncustomers attributes this in part to initiatives that it started in the He described them as “ordinary people with authentic midst of the Great Recession — particularly Fair Play credibility and extraordinary influence and impact on ce Prod nce Produc an uct rma ts/ orm s/S fo Se rf e er rv e r P ic Banking, which features 24-hour overdraft grace periods reputation.” P vi e c s % 1 e % 1 .2 8. s .9 6. 4 9 p 2 7 % i % p 1 h 1 and Asterisk-Free checking. They tend to be highly active on social media, but make i h s I r n s I r n e n 1 e % n d % o 1 2 0 o a 9 v “This is not an overnight thing,” said Sandra Pierce, a their voices heard in multiple ways. They can create a d 1 . . . a v e a 2 . t 4 a L 2

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2 4 C C i . . regional banking director at Huntington. “This is part of who industry-specific topics. t 4 it 6 i i % z % % z % e 9 e .6 n . n 2 e s 1 1 e s 1 c we are.” Influencers have the same top three priorities as the h 7. 1 c h 18 la ip 0% la ip . 1% p p rk k o o r W She also cited Huntington’s new digital banking platform, non-influencers when rating reputations — governance, G W G ov ove ernance rnance called The Hub, as a likely factor. It helps customers better citizenship and products and services — but they are more The top 5 scorers for each of the reputation drivers manage spending and keep financial goals top of mind. demanding in what they expect of banks. For example, Customers Noncustomers The Hub, which began rolling out late last year, was excellence in leadership and workplace conditions are

Products & Services Products & Services shaped by insights gleaned from what Pierce calls a series disproportionately more important for influencers in the USAA Bank 83.9 USAA Bank 74.3 of candid “kitchen table conversations” Huntington execu- banking industry, products and services less so. Cullen/Frost Bankers 79.0 Northern Trust 67.5 Discover Bank 78.9 BNY Mellon 66.9 tives had in customers’ homes during a two-year listening “Talking about how great your products are makes some Huntington Bank 78.9 Ally Bank 66.7 tour that entailed visits across the Midwest. The feedback is difference — it’s top three — but what you really need to BOK Financial 77.8 Cullen/Frost Bankers 66.2 also informing in a new branding campaign. focus on here is governance,” Klingemann said. “So Innovation Innovation convincing influencers that you go above and beyond the USAA Bank 75.8 USAA Bank 64.6 The fact that Huntington was the top Small Business Cullen/Frost Bankers 74.8 Ally Bank 63.2 Administration lender by volume in 2018, and the largest call of duty when it comes to fairness and transparency Ally Bank Cullen/Frost Bankers 73.0 61.7 originator in its footprint for the 10th year in a row is also a and ethical behavior is really the way to go.” Union Bank 72.9 Capital One 61.1 Discover Bank 72.4 Discover Bank 60.1 factor in how the bank gets perceived, she said. So is its But that’s not all. “You also need a bit more of a Workplace Workplace decision to be one of the first companies to voluntarily raise balanced approach” when it comes to targeting influenc- USAA Bank USAA Bank 78.7 69.3 its minimum wage to $16 an hour and improve health care ers, he said. “So just focusing on one thing is definitely not BOK Financial 75.5 M&T Bank 65.3 Cullen/Frost Bankers 75.3 First Tennessee 64.9 and family leave benefits for employees. going to cut it here.” Huntington Bank Regions 75.2 64.2 “I think it’s all of that, not one thing,” Pierce said. Citizens hired a social media manager in late 2017 and KeyBank 75.0 Citizens Bank 64.2 The same message recurs in the survey repeatedly: started ramping up influencer efforts last year through Governance Governance Cullen/Frost Bankers 80.2 USAA Bank 70.7 Managing reputations is about doing the right thing, not partnerships with personal finance experts, such as Jean USAA Bank First Tennessee 79.7 65.6 just in a few areas, but as many as possible. Chatzky, financial editor of NBC’s “Today Show.” The goal Huntington Bank 76.5 Synovus 64.7 Regions 75.3 Cullen/Frost Bankers 64.7 And this becomes particularly important with regard to was not to push products, but to educate parents and First Citizens Northern Trust 75.2 64.5 some of the most vocal stakeholders: influencers. students on how to tackle paying for college. The cam- Citizenship Citizenship paign involved efforts on Facebook, Twitter and Instagram, USAA Bank 82.6 USAA Bank 72.2 Cullen/Frost Bankers 76.9 First Tennessee 64.0 The outsize impact of influencers including a Facebook Live interview between Chatzky and Union Bank Associated Bank 76.4 63.3 Every year, the Reputation Institute polls C-level executives Christine Roberts, Citizens’ head of student lending. Huntington Bank 74.1 Cullen/Frost Bankers 62.7 Regions 73.9 Synovus 62.6 about what is top of mind when it comes to managing It’s perhaps not surprising then, that influencers rate

Leadership Leadership reputation risk. This year, influencers emerged as a hot Citizens’ reputation three times more positively than that of USAA Bank USAA Bank 80.3 72.0 topic. the average regional bank. Cullen/Frost Bankers 78.1 BNY Mellon 66.5 BOK Financial 77.4 Ally Bank 66.3 Though the term has become synonymous with social Of the three types of banks, influencers score regionals Huntington Bank 77.2 Cullen/Frost Bankers 66.1 media, this study adopts a broader definition. “An influencer most favorably and large banks most negatively by a wide First Tennessee 76.4 Citizens Bank 66.0 could be in the category of the general public or an margin. So at least for regional banks, influencers are a Performance Performance USAA Bank 81.1 USAA Bank 72.7 employee,” Klingemann said. Basically, it’s anyone who is an bright spot. Cullen/Frost Bankers 79.3 BNY Mellon 67.8 active communicator, whether on social media, via word of “Despite the fact that regional banks are kind of the loss Discover Bank 76.7 Ally Bank 67.6 Huntington Bank 76.4 Discover Bank 66.9 mouth with friends and family, or by directly reaching out to leaders in reputation, they’re still viewed more positively by BMO Harris Bank 76.1 BMO Harris Bank 66.7 regulators, politicians and banks. influencers. Imagine if the influencers were on their bad Source: American Banker/Reputation Institute Survey of Bank Reputations 2019 “We asked them about their activities and involvement side what would happen,” Klingemann said. ☐

14 American Banker July 2019 americanbanker.com

014_ABM0719 14 6/10/2019 2:35:56 PM What Huntington is up to specific to the banking industry and then we selected the Next to Last Despite slipping a little — to 80.4 — Huntington Bank is the subset of people that were most active. And we’re really Of the 16 industries that the Reputation Institute tracks, only telecom scored lower than banking this year. On a 100-point scale, overall bank only one besides USAA to get an “excellent” score with talking about 10% of our overall sample who are these very reputations fell 3.3 points. customers this year. passionate and active people who are making their voices The $108-billion-asset Huntington of Columbus, Ohio, and opinions heard,” Klingemann said. Industry 2019 Change from attributes this in part to initiatives that it started in the He described them as “ordinary people with authentic 2018 midst of the Great Recession — particularly Fair Play credibility and extraordinary influence and impact on Consumer 73.1 1 Banking, which features 24-hour overdraft grace periods reputation.” and Asterisk-Free checking. They tend to be highly active on social media, but make Food & Beverage 72.8 1 “This is not an overnight thing,” said Sandra Pierce, a their voices heard in multiple ways. They can create a Transport 71.8 2.9 senior executive vice president in private banking and movement, and shape the narrative around company- or regional banking director at Huntington. “This is part of who industry-specific topics. Retail 71.6 2 we are.” Influencers have the same top three priorities as the Hospitality 70.7 1.6 She also cited Huntington’s new digital banking platform, non-influencers when rating reputations — governance, called The Hub, as a likely factor. It helps customers better citizenship and products and services — but they are more Technology 70.5 1.3 manage spending and keep financial goals top of mind. demanding in what they expect of banks. For example, The Hub, which began rolling out late last year, was excellence in leadership and workplace conditions are Information 70.4 6 shaped by insights gleaned from what Pierce calls a series disproportionately more important for influencers in the Services 69.7 1 of candid “kitchen table conversations” Huntington execu- banking industry, products and services less so. tives had in customers’ homes during a two-year listening “Talking about how great your products are makes some Automotive 69.6 -0.8 tour that entailed visits across the Midwest. The feedback is difference — it’s top three — but what you really need to Financial 68.6 3.7 also informing in a new branding campaign. focus on here is governance,” Klingemann said. “So The fact that Huntington was the top Small Business convincing influencers that you go above and beyond the Health Care 68.3 0.1 Administration lender by volume in 2018, and the largest call of duty when it comes to fairness and transparency Energy 66.7 10.2 originator in its footprint for the 10th year in a row is also a and ethical behavior is really the way to go.” factor in how the bank gets perceived, she said. So is its But that’s not all. “You also need a bit more of a Pharmaceutical 65.9 1.9 decision to be one of the first companies to voluntarily raise balanced approach” when it comes to targeting influenc- Airlines 65.1 2.8 its minimum wage to $16 an hour and improve health care ers, he said. “So just focusing on one thing is definitely not and family leave benefits for employees. going to cut it here.” Banking 63.2 -3.3 “I think it’s all of that, not one thing,” Pierce said. Citizens hired a social media manager in late 2017 and The same message recurs in the survey repeatedly: started ramping up influencer efforts last year through Telecom 61.7 3.4 Managing reputations is about doing the right thing, not partnerships with personal finance experts, such as Jean Source: Reputation Institute just in a few areas, but as many as possible. Chatzky, financial editor of NBC’s “Today Show.” The goal Strong/Robust 70-79 Average/Moderate 60-69 And this becomes particularly important with regard to was not to push products, but to educate parents and some of the most vocal stakeholders: influencers. students on how to tackle paying for college. The campaign involved efforts on Facebook, Twitter and Instagram, The outsize impact of influencers including a Facebook Live interview between Chatzky and SURVEY METHODOLOGY Every year, the Reputation Institute polls C-level executives Christine Roberts, Citizens’ head of student lending. COMPANY SELECTION: about what is top of mind when it comes to managing It’s perhaps not surprising then, that influencers rate Companies drawn from the Federal Reserve’s list of large reputation risk. This year, influencers emerged as a hot Citizens’ reputation three times more positively than that of commercial banks, with final selections by American Banker based on total assets and deposits topic. the average regional bank. Only those with significant retail brands were considered Though the term has become synonymous with social Of the three types of banks, influencers score regionals media, this study adopts a broader definition. “An influencer most favorably and large banks most negatively by a wide RATINGS: could be in the category of the general public or an margin. So at least for regional banks, influencers are a Ratings were collected via online questionnaire in March and April 2019 employee,” Klingemann said. Basically, it’s anyone who is an bright spot. At least 100 customers and 100 noncustomers rated active communicator, whether on social media, via word of “Despite the fact that regional banks are kind of the loss each company, with more than 12,000 respondents overall mouth with friends and family, or by directly reaching out to leaders in reputation, they’re still viewed more positively by Each respondent was very or somewhat familiar with the regulators, politicians and banks. influencers. Imagine if the influencers were on their bad companies they rated “We asked them about their activities and involvement side what would happen,” Klingemann said. ☐

americanbanker.com July 2019 American Banker 15

015_ABM0719 15 6/10/2019 2:35:57 PM THE DIVIDENDS OF DETERMINATION

REPUTATION IS A TEAM EFFORT From left: Sam Lalanne, senior vice president, global talent and diversity | Elizabeth Kelly, director, global public affairs | Val Smith, global head of corporate sustainability | Sara Wechter, global head of human resources | Yiting Shen, global head of external network management, Treasury and Trade Solutions | Ed Skyler, executive vice president for global public affairs | Priya Rajani, senior vice president, corporate client strategy | Geetha Krishnamurthy, head of digital performance insights

16 American Banker July 2019 americanbanker.com

016_ABM0719 16 6/10/2019 2:37:08 PM THE DIVIDENDS OF DETERMINATION It’s hard for the biggest banks to get much love these days, but Citigroup is taking risks that make it stand out from its peers. Here’s how it aims to do even better.

By Alan Kline | Photograph by David Yellen

EARLIER THIS YEAR, THE INVESTMENT FIRM ARJUNA Capital challenged 12 financial services and technology companies in which its clients own stakes to publicly disclose how much their female and minority employees earn in comparison to white men. Research has shown that companies with higher percentages of women and minorities in decision-making roles tend to be more profitable and make better long-term decisions than those that lack diversity, and Arjuna asked for the median pay gap as a means of pressuring companies to bring more gender and racial equity to their management ranks. To date, only one of the dozen has complied — Citigroup. Citi did so knowing full well that the initial news coverage would not be flattering. The data showed that female employees are paid far less than male employees — even though women make up more than half of the global workforce — and journalists seized on that point. “Citigroup’s business is money, but not a lot of it goes to its female employees,” read the opening line in a New York Daily News story. But to Citi officials, it was an issue of credibility, said Sara REPUTATION IS A TEAM EFFORT Wechter, the company’s global head of human resources. Months earlier, Citi had disclosed its goals for increasing From left: Sam Lalanne, senior vice president, global talent and diversity | Elizabeth Kelly, director, global public affairs | Val Smith, global head of corporate sustainability | Sara Wechter, global head of human resources | Yiting Shen, global head of external network management, female and minority representation at the management Treasury and Trade Solutions | Ed Skyler, executive vice president for global public affairs | Priya Rajani, senior vice president, corporate client level and executives saw the challenge from Arjuna as an strategy | Geetha Krishnamurthy, head of digital performance insights opportunity to measure progress in a very public way.

americanbanker.com July 2019 American Banker 17

017_ABM0719 17 6/10/2019 2:37:19 PM “It was a rough morning when we Pioneer on the pay-gap issue Citi said bluntly that the gaps exist said, forces companies to set goals put out the numbers, but then the news Those workplace initiatives include its because the majority of higher-paying, while helping them honestly assess cycle changed,” Wechter said. Eventu- transparency around disclosing mid- to senior-level manager positions whether they have the right policies in ally, the stories became less focused on pay-gap data. are held by men — and, in the U.S., place to ensure that they are attract- the numbers and more focused on Citi’s Arjuna, a self-described impact mostly white men. ing, retaining and promoting women transparency about the numbers. investor, successfully pressured some “Our problem is not about gender and people of color. Are talented “When you are willing to put out the financial services and tech companies equality or diversity,” Wechter said. “It women, for example, quitting because raw number, it gives you so much to disclose their adjusted gender pay really is about representation at the the work-at-home or travel policies are credibility because you are admitting gap last year. That figure takes into most senior levels of the organization.” not conducive to raising families? where there is a problem,” Wechter said. account factors like type of work and For banks, there are risks to making “If we keep doing things the way Its willingness to go further than its level of experience. such data public. According to the we’ve been doing them, then nothing is peers in releasing pay-gap data is But this year Arjuna requested Reputation Institute, unequal pay by going to change,” Lamb said. among the reasons that Citi has made companies disclose their unadjusted gender is right up there with deceptive Citi, she added, is “taking all the strides in the annual American Banker/ gender pay gap, which compares the sales practices as the issue that could right steps. It’s setting hiring and Reputation Institute Survey of Bank median pay for all women to the most harm reputations, so why promotion targets and being very Reputations. median pay for all men. voluntarily release data that could transparent and honest” about how it Citi’s reputation has also been While adjusted data shows if there is generate negative publicity? intends to achieve more diversity. bolstered by its decision to take a stand equal pay for equal work, the unadjust- JPMorgan has so far rebuffed Echoing Wechter, she said, “The first on polarizing social issues, such as gun ed data shows if there is equal oppor- Arjuna’s calls for more transparency step is admitting you have a problem.” control and climate change, and by its tunity in high-paying jobs, Arjuna around pay differences by gender, ongoing commitment to improving the argues. arguing that its diversity efforts are A good citizen cities it serves. Citi was the first of the large banks self-evident. Once a poster child for corporate Customer scores for most of the 40 to disclose its adjusted figures, and In its 2019 proxy statement, in which wrongdoing — it has paid nearly $20 banks in the ranking dropped in 2019 several rival banks quickly followed suit. it urged shareholders to reject Arjuna’s billion in fines and legal settlements for when compared with 2018, but Citi But that data was relatively uncontro- proposal to disclose median pay-gap various financial-crisis-era misdeeds essentially held steady amid the versial. Banks found, for the most part, data, JPMorgan noted that women — Citi has, under Michael Corbat, powerful downward trend. that men and women doing similar jobs make up 45% of its operating commit- worked diligently to improve its public Citi still trails most regional banks on are paid roughly the same amount of tee and lead some of its highest-reve- image. the seven reputation components — money. nue business lines, including asset Corbat, Citi’s chief executive since citizenship, governance, innovation, It was after the request to disclose management, consumer lending and late 2012, has been unafraid to take leadership, performance, products and unadjusted figures that Citi stood apart capital markets. stands on controversial social issues. workplace — but it stacks up well from rivals. JPMorgan, Wells Fargo, It also argued that such disclosures After last year’s mass shooting at a against other large banks, a category Bank of America and Bank of New York could have unintended consequences. Florida high school, Citi was the first that also includes Bank of America, Mellon all, in one way or another, tried “We understand that a blunt metric major U.S. bank to impose restrictions HSBC, JPMorgan Chase and Wells to block Arjuna-backed shareholder like median pay gap may be helpful for on gun sales by its customers in the Fargo. resolutions that would have required a certain discussion about pay, retail industry and processing of Its score for each component was them to disclose the data. representation and public policy, but it payments for gun purchases by its higher than the average for the large Why? “Companies are reluctant to is not the answer,” JPMorgan’s proxy credit card partners. banks, with both customers and publish unflattering data,” said Natasha statement said. “For example, if a “As an avid outdoorsman and noncustomers. Lamb, a managing director at Arjuna. company with a high concentration of responsible gun owner, I know that “In an environment of reputation Citi’s numbers weren’t flattering women in entry-level jobs wanted to some will find our policy too strict decline among U.S. retail bank custom- either. In a blog post in January, the even out its median pay metric, it could while others will find it too lenient,” ers, Citi has been able to buck the company said, globally, its female do so by limiting entry-level job Corbat wrote in March 2018 email trend by reaping the benefits of their employees earn a median of 29% less opportunities for women.” to employees. corporate responsibility efforts, than its male employees on an Lamb and other activist investors “We don’t have the perfect solution,” especially with respect to workplace unadjusted basis. It also said that, in reject that argument, however. in the effort to both support constitu- initiatives,” said Sven Klingemann, the the U.S., the median pay for minorities What the pay-gap data exposes tional rights and keep children safe, he research director at the Reputation is 7% lower than the median for most of all is a lack of diversity in the said. “But we shouldn’t let that stop us Institute. nonminorities. management ranks. Tracking it, Lamb from doing our part.”

18 American Banker July 2019 americanbanker.com

018_ABM0719 18 6/10/2019 2:37:20 PM Citi said bluntly that the gaps exist said, forces companies to set goals Peer Comparison because the majority of higher-paying, while helping them honestly assess Citi customers think more highly of the bank on all seven reputation components, when mid- to senior-level manager positions whether they have the right policies in compared with the average of customer scores for other large banks are held by men — and, in the U.S., place to ensure that they are attract- Average for Large Banks Citi 80 mostly white men. ing, retaining and promoting women 70.9 72.4 71.0 67.9 68.7 70.5 69.8 69.8 70 66.7 65.8 “Our problem is not about gender and people of color. Are talented 63.0 64.8 64.5 64.7 60 equality or diversity,” Wechter said. “It women, for example, quitting because really is about representation at the the work-at-home or travel policies are 50 most senior levels of the organization.” not conducive to raising families? 40 For banks, there are risks to making “If we keep doing things the way 30 such data public. According to the we’ve been doing them, then nothing is 20

Reputation Institute, unequal pay by going to change,” Lamb said. 10 gender is right up there with deceptive Citi, she added, is “taking all the 0 Citizenship Governance Innovation Leadership Performance Products Workplace sales practices as the issue that could right steps. It’s setting hiring and Source: American Banker/Reputation Institute Survey of Bank Reputations 2019 most harm reputations, so why promotion targets and being very voluntarily release data that could transparent and honest” about how it On climate change, Citi has commit- credit risk. Another spot detailed its generate negative publicity? intends to achieve more diversity. ted to sourcing renewable power for role in financing the rebuilding of a JPMorgan has so far rebuffed Echoing Wechter, she said, “The first 100% of its energy needs by 2020 and housing project near John F. Kennedy Arjuna’s calls for more transparency step is admitting you have a problem.” was the only U.S. bank to participate in Airport in New York that was decimat- around pay differences by gender, a 2017 United Nations pilot program in ed by Superstorm Sandy, spotlighting arguing that its diversity efforts are A good citizen which banks examined risks in their its broader commitment to affordable self-evident. Once a poster child for corporate loan and investment portfolios under housing financing. (Citi has been the In its 2019 proxy statement, in which wrongdoing — it has paid nearly $20 various global warming scenarios. nation’s No. 1 affordable housing lender it urged shareholders to reject Arjuna’s billion in fines and legal settlements for Two years earlier, it pledged $100 for nine straight years, according to proposal to disclose median pay-gap various financial-crisis-era misdeeds billion in financing within 10 years for Affordable Housing Finance magazine.) data, JPMorgan noted that women — Citi has, under Michael Corbat, activities that would help accelerate a Ed Skyler, Citi’s executive vice make up 45% of its operating commit- worked diligently to improve its public transition to a low-carbon economy, president for global public affairs, said tee and lead some of its highest-reve- image. such as wind farms, mass transit and that spreading the message of corpo- nue business lines, including asset Corbat, Citi’s chief executive since energy-efficient buildings — and is rate responsibility matters because, management, consumer lending and late 2012, has been unafraid to take already 95% of the way there. these days, customers, employees and capital markets. stands on controversial social issues. Like many banks whose reputations prospective employees want to know It also argued that such disclosures After last year’s mass shooting at a suffered in the wake of the financial where companies stand on pressing could have unintended consequences. Florida high school, Citi was the first crisis, Citi has been very intentional social issues and how they are “We understand that a blunt metric major U.S. bank to impose restrictions about promoting its corporate social responding. like median pay gap may be helpful for on gun sales by its customers in the responsibility efforts. It has for a “You have to be very clear about a certain discussion about pay, retail industry and processing of decade put out an annual report your values and living up to those representation and public policy, but it payments for gun purchases by its detailing initiatives that aim to better values in the decisions you make,” is not the answer,” JPMorgan’s proxy credit card partners. the lives of its customers, communities Skyler said. “And those decisions can be statement said. “For example, if a “As an avid outdoorsman and it serves and society at large. It also clients that you take on or, just as company with a high concentration of responsible gun owner, I know that publishes a separate report highlight- powerfully, clients and transactions women in entry-level jobs wanted to some will find our policy too strict ing its commitment to diversity. that you don’t take on.” even out its median pay metric, it could while others will find it too lenient,” Many of Citi’s ads are similarly Citi is a public company with a do so by limiting entry-level job Corbat wrote in March 2018 email themed. One 60-second television spot responsibility to make money for opportunities for women.” to employees. tells the story of how Citi helped the shareholders, so it can’t just stop Lamb and other activist investors “We don’t have the perfect solution,” Public Lighting Authority of Detroit financing activities that some custom- reject that argument, however. in the effort to both support constitu- secure financing to replace and repair ers, employees or impact investors may What the pay-gap data exposes tional rights and keep children safe, he about 40% of streetlights that weren’t find objectionable, Skyler said. Despite most of all is a lack of diversity in the said. “But we shouldn’t let that stop us working, at a time when most other its commitment to financing clean management ranks. Tracking it, Lamb from doing our part.” banks viewed the city as too great of a energy projects, Citi remains one of the

americanbanker.com July 2019 American Banker 19

019_ABM0719 19 6/10/2019 2:37:21 PM world’s largest lenders for the explora- diversity goals by 2021: increasing operations in about two-dozen tion of fossil fuels, according to female representation at the assistant countries and co-leads the women’s Rainforest Action Network. vice president through managing affinity group at Citi. “We don’t just cut off companies director levels to 40% globally, from Fraser is considered one of Citi’s we’ve worked with for many years,” the current 37%, and increasing most ardent champions for advancing Skyler said. “What we try to do is work African-American representation in the the careers of women, though it wasn’t with them and help them make the U.S. to 8%, from 6%. a role she always embraced. transition” to a low-carbon economy. It is also setting ambitious diversity “Growing up in banking in the “We’re in a client business, and you goals for hiring summer interns and [male-dominated] ‘80s and ‘90s ... I don’t want clients to think you’re going entry-level employees. It has made wanted to [succeed] on my own merits, to cut and run when things get a little meaningful progress on that front — not because I was a woman,” she said. challenging.” 26% of this year’s summer interns are “And I felt that women who were taking He added that the transition is minorities, up from 15% two years ago, on the mantle, pushing for more already taking place: Citi is close to and 47% are women, up from the “high women, got the ‘women’s’ label.” hitting its environmental financing 30s” two years ago, Wechter said. Its Now Fraser has a different view. She targets six years ahead of schedule. goal is to get to 30% underrepresented believes diversity is “increasingly “We’re not forcing this down minorities and 50% women. important to a firm’s ability to com- anyone’s throats,” he said. “The client “It’s not about just getting people in pete” and, as one of Citi’s most-senior demand is there.” the senior ranks, it’s about bringing women, she feels a responsibility to people in the door in absolute num- help women and minorities overcome Diversity goals bers,” Wechter said. “If we do not fix the barriers to advancement so that the There’s a strong business case to be incoming class representation, we are company can better serve an increas- made for bringing more gender and not going to be able to fix the holistic ingly diverse market. racial balance to the management problem we are talking about.” “It’s very important to create an ranks and it’s on Wechter, the head of One way Citi is widening its search environment that’s inclusive,” Fraser human resources, to make sure senior for young talent is by recruiting at a said. “The world is so divisive, and executives are fostering inclusive wider array of schools, including histori- there’s so much change going on. If you environments and taking measurable cally black colleges. Its leaders are don’t have diversity of thought around steps to help Citi meet its diversity doing more mentoring at colleges and the table, you don’t compete well.” goals. it has set up programs through its Wechter and Terry Hogan, Citi’s Citi has already made huge strides various affinity groups to offer pointers head of talent and diversity, echoed in diversifying its leadership. When in resume building and job interviewing. that sentiment. Jane Fraser, now the CEO for Latin It’s up to business-line heads to Hogan said that teams made up of America, first joined the management make sure their divisions are building men and women with diverse experi- team in 2014, there were only two their pipelines and preparing women ences and backgrounds “bring perspec- women who reported directly to and minorities for more responsibilities tive that reflect our client base and Corbat. Today, five of Corbat’s 14 direct through stretch assignments, mentoring allow us to be better prepared to reports, including Fraser, are women. and networking opportunities. Once a innovate for our clients.” Citi’s chief financial officer, Mark month they are to report their progress Plus, said Wechter, it matters to Mason, is African-American, and its at operating committee meetings, and clients, particularly large corporate chief risk officer, Bradford Hu, and its if they are falling short of expectations, clients seeking sophisticated banking general counsel, Rohan Weerasinghe, Wechter will let them know about it. or institutional services. are Asian. There are also six women on Fraser said the color-coded progress “We now have clients coming to us the 16-person board of directors. report is effective. and asking about the [makeup of To keep the momentum going, Citi “There’s nothing like having a red, females and minorities] on the team needs to be more intentional about yellow or green slide put up against that’s representing them,” she said. filling the pipeline with more women your name in front of your peers to “I love that corporate customers are and minorities, Wechter said. As a make sure you are paying attention to asking these questions,” Wechter said. starting point, it aims to achieve two this,” said Fraser, who oversees “It’s the right thing.” ☐

20 American Banker July 2019

020_ABM0719 20 6/10/2019 2:37:22 PM BankThink

Be ready to act on workplace conflict

By Jeff Butler

More than half of employees ages 18 to that office door. But the younger 29 see socialism in a positive light, but workforce feels like you’re hiring the only about a quarter of those 50 and whole person, including their opinions,” older do, according to a Gallup poll a says Cara Silletto, a consultant on few years ago. This is just one example employee retention. “I encourage of the varied — and sometimes people to be themselves at work … just conflicting — viewpoints that employ- know that people are watching you.” Option three: Directly addressing ees might bring up in the workplace. Directly addressing differences in the Dealing with these differences Option two: Indirectly addressing workplace has become a more effectively is important. Personal But what about employees from mainstream approach to solving conflicts can interfere with work and cultural backgrounds that are histori- intergroup conflict lately. even become nationwide political cally at odds with each other? Joseph Grenny, the author of stories via a simple tweet or post. Researcher Thomas Pettigrew “Crucial Conversations: Tools for Managers can help companies avoid compiled a meta-analysis of 515 Talking When Stakes Are High,” a big headache by learning in advance studies focusing on how groups with recommends getting everyone together how to address intergroup conflict. cultural, political, gender and age and giving each person a chance to differences work together in a cohesive speak without interruption as the Option one: Avoidance way. He concluded that emotional others take notes. Grenny then uses a Seeking to keep differences in beliefs connection was the key. whiteboard to categorize the problems outside of the workplace — a form of Four things have to be in place to that are expressed and presses all avoidance — is the most common achieve this connection: The people parties involved to brainstorm solutions. tactic that companies use. Opinions, must be on an equal level in the As Grenny would put it, “The employees specifically political ones, don’t need to hierarchy; they must be working toward aren’t exactly lunch buddies now, but be brought up with colleagues. a common goal; the effort they are the process works.” Human resource policies can bar undertaking must be cooperative, There are many companies that find employees from behaving in certain rather than competitive; and there the direct approach useful, though ways, such as sporting Confederate must be institutional support, especially heated emotional conflicts often flags or other political attire. Then, if when something goes awry. require specialized facilitators to employees break a rule, managers only Many companies undertake efforts intervene. need to alert HR. that meet these conditions in the form Differences of opinions will always But even so, millennials tend to of time off for employees to do exist — but they don’t have to go be more expressive than their older volunteer work as a group, team-build- beyond the cubicle and lead to a public colleagues, and generational differenc- ing events like escape rooms, and relations firestorm. How a company es are becoming more of a factor in reverse-mentoring programs. acts when conflicts occur can keep workplace conflict. Employees participating in these them from escalating. □ “The older workforce was trained to types of programs are able to put aside separate their ‘personal’ personality, their differences, consequently building Jeff Butler is a speaker and consultant on attire and relationships from the a mutual understanding for one attracting millennials as employees and ‘professional’ as soon as they walked in another. customers.

americanbanker.com July 2019 American Banker 21

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JAMIE BLOOMBERG NEWS DIMON “It’s not responsible for MEERA JOSHI a company — just my “It was a party. own view — to have a Why stop it?” CEO leave with no plan Former chair of New York’s Taxi and Limousine Commission, in place. I don’t person- saying all players, including ally understand that.” city officials, let taxi-medallion JPMorgan Chase CEO, lending get out of control criticizing Wells Fargo for its lack of preparation prior to the departure of embattled CEO Tim Sloan ROGER BERTLING “I don’t think I could JEFF concoct a more “An Oreo?” EDWARDS predatory scheme A confused secretary of if I tried. This was “There’s a culture housing and urban where they are loath to development, wondering if modern-day indentured acknowledge mistakes.” a question about real estate servitude.” owned, or REO, might be a Instructor at Harvard Law Pastor at United Methodist reference to the cookie Church of Parsippany, N.J., on School’s clinic on predatory BLOOMBERG NEWS suing Wells Fargo for incorrectly lending, condemning linking him to check forgery and taxi-medallion lending causing his arrest HESTER PEIRCE in New York City “A sandbox can be useful. But you don’t MANUEL want the parents in the sandbox building the sandcastle. You usually want the kids to figure MARK DE LUQUE it out for themselves. It changes the creative CALABRIA process once you have the regulators MUNTANER “The status quo is no watching you.” “The crypto winter is longer an option.” Commissioner at the Securities and Exchange Com- gone.” Director of the Federal mission, recommending U.S. federal regulators try a Housing Finance Agency, on Founder and CEO of Block multiagency sandbox initiative that allows companies to the urgent need for housing Asset Management, on the experiment with new technology rebound in the price of bitcoin finance reform

24 American Banker July 2019

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