Banking 500 2017 The annual report on the world’s most valuable banking brands February 2017 Foreword Contents steady downward spiral of poor communication, Foreword 2 wasted resources and a negative impact on the Definitions 4 bottom line. Methodology 6 Brand Finance bridges the gap between the marketing and financial worlds. Our teams have Understand Your Brand’s Value 7 experience across a wide range of disciplines from market research and visual identity to tax Executive Summary 8 and accounting. We understand the importance Full Table 20 of design, advertising and marketing, but we also believe that the ultimate and overriding How We Can Help 30 purpose of brands is to make money. That is why we connect brands to the bottom line. By Contact Details 31 valuing brands, we provide a mutually intelligible language for marketers and finance teams. Marketers then have the ability to communicate David Haigh, CEO the significance of what they do and boards can Brand Finance use the information to chart a course that maximises profits. Without knowing the precise, What is the purpose of a strong brand; to attract financial value of an asset, how can you know if customers, to build loyalty, to motivate staff? All you are maximising your returns? If you are true, but for a commercial brand at least, the first intending to license a brand, how can you know answer must always be ‘to make money’. Huge you are getting a fair price? If you are intending investments are made in the design, launch and to sell, how do you know what the right time is? ongoing promotion of brands. Given their How do you decide which brands to discontinue, potential financial value, this makes sense. whether to rebrand and how to arrange your Unfortunately, most organisations fail to go brand architecture? Brand Finance has beyond that, missing huge opportunities to conducted thousands of brand and branded- effectively make use of what are often their most business valuations to help answer these important assets. Monitoring of brand questions. performance should be the next step, but is often sporadic. Where it does take place it Brand Finance’s recently conducted share price frequently lacks financial rigour and is heavily study revealed the compelling link between reliant on qualitative measures poorly strong brands and stock market performance. It understood by non-marketers. As a result, was found that investing in the most highly marketing teams struggle to communicate the branded companies would lead to a return value of their work and boards then almost double that of the average for the S&P underestimate the significance of their brands to 500 as a whole. Acknowledging and managing a the business. Skeptical finance teams, company’s intangible assets taps into the hidden unconvinced by what they perceive as marketing value that lies within it. The following report is a mumbo jumbo may fail to agree necessary first step to understanding more about brands, investments. What marketing spend there is can how to value them and how to use that end up poorly directed as marketers are left to information to benefit the business. The team operate with insufficient financial guidance or and I look forward to continuing the conversation accountability. The end result can be a slow but with you. 2. Brand Finance BankingGlobalAirlines 500 30 500 30February February February 2016 2017 2015 Brand Finance Banking 500 February 2017 3. Definitions Effect of a Brand on Stakeholders E.g. Definitions Lloyds + Enterprise Value – the value of the Banking entire enterprise, made up of Directors Group Potential Middle ‘Branded‘Branded multiple branded businesses Customers Managers Enterprise’Enterprise’ Existing All Other ‘Branded‘Branded E.g. + Branded Business Value – the Customers Employees Business’Business’ Lloyds value of a single branded business Bank operating under the subject brand ‘Brand’ Contribution’ Influencers Production E.g. + Brand Contribution– The total e.g. Media Brand Lloyds economic benefit derived by a Bank business from its brand ‘Brand Value’ Trade Sales Channels E.g. + Brand Value – the value of the Lloyds trade marks (and relating Strategic Bank marketing IP and ‘goodwill’ Debt Allies & providers attached to it) within the branded Suppliers Investors business Branded Business Value Brand Contribution Brand Value Brand Strength A brand should be viewed in the context of the The brand values contained in our league In the very broadest sense, a brand is the focus Brand Strength is the part of our analysis most business in which it operates. For this reason tables are those of the potentially transferable for all the expectations and opinions held by directly and easily influenced by those Brand Finance always conducts a Branded brand asset only, but for marketers and customers, staff and other stakeholders about responsible for marketing and brand Business Valuation as part of any brand managers alike. An assessment of overall an organisation and its products and services. management. In order to determine the valuation. Where a company has a purely mono- brand contribution to a business provides However, when looking at brands as business strength of a brand we have developed the branded architecture, the business value is the powerful insights to help optimise performance. assets that can be bought, sold and licensed, a Brand Strength Index (BSI). We analyse same as the overall company value or more technical definition is required. marketing investment, brand equity (the ‘enterprise value’. Brand Contribution represents the overall uplift goodwill accumulated with customers, staff and in shareholder value that the business derives Brand Finance helped to craft the internationally other stakeholders) and finally the impact of In the more usual situation where a company from owning the brand rather than operating a recognised standard on Brand Valuation, ISO those on business performance. owns multiple brands, business value refers to generic brand. 10668. That defines a brand as “a marketing- the value of the assets and revenue stream of related intangible asset including, but not limited Following this analysis, each brand is assigned the business line attached to that brand Brands affect a variety of stakeholders, not just to, names, terms, signs, symbols, logos and a BSI score out of 100, which is fed into the specifically. We evaluate the full brand value customers but also staff, strategic partners, designs, or a combination of these, intended to brand value calculation. Based on the score, chain in order to understand the links between regulators, investors and more, having a identify goods, services or entities, or a each brand in the league table is assigned a marketing investment, brand tracking data, significant impact on financial value beyond combination of these, creating distinctive rating between AAA+ and D in a format similar stakeholder behaviour and business value to what can be bought or sold in a transaction. images and associations in the minds of to a credit rating. AAA+ brands are maximise the returns business owners can stakeholders, thereby generating economic exceptionally strong and well managed while a obtain from their brands. benefits/value” failing brand would be assigned a D grade. 4. Brand Finance Banking 500 February 2017 Brand Finance Banking 500 February 2017 5. Methodology Understand Your Brand’s Value League Table Valuation Methodology Drivers of Change Brand Finance calculates the values of the 2 Determine the royalty rate range for the respective Brand Value Dashboard Three key areas impact Brand Value (EURm) 18 131 brands in its league tables using the brand sectors. This is done by reviewing $707m $882m $10,216m 34 (EUR) [XXX] Brand Value (EUR) Brand Value Enterprise Value (EUR) AA+ 729 729 ‘Royalty Relief approach’. This approach comparable licensing agreements sourced from €650m €729m €9,399m 78/100 616 616 650 Historic brand value performance (EURm) Peer Group Comparison (USDm) $6,265 2015 Brand Strength Business Performance External Changes 2016 Brand Finance’s extensive database of license 800 729 involves estimating the likely future sales that are $3,031 650 $2,328 $1,913 $707 700 607 Brand Strength Business Outlook Economic Outlook 600 attributable to a brand and calculating a royalty agreements and other online databases. [XXX] [XXX]’s brand strength has increased compared to last year. Brands drive higher revenues. An investor would therefore All future returns are subject to risk. If the risk of not 500 pay more for a brand that makes more money. receiving the forecast returns is higher (increasing the As the brand continues its sustainability drive, [XXX] has discount rate), the brand’s market is not growing as quickly 320 400 Brand Value by Product Segment been improving across all CSR scores. It now has the [XXX]’s revenue base and the 5 year forecast growth have as expected (lower long term growth rate) or the tax rate in 3 Calculate royalty rate. The brand strength score is 275 highest CSR scores it has had in the last four years across fallen this year, resulting in a loss of $177m USD to total the brand’s regions of operation is higher, then the brand’s rate that would be charged for the use of the 300 213 Environment, Employees and Governance. brand value. value is reduced and vice versa. 37% Nutrition 200 The premium approach is also leading to significant margin However, it is important to note that this has arisen as a advantages – positively affecting “performance”. result of the company divesting a number of divisions. 100 Performance Materials brand, i.e. what the owner would have to pay for applied to the royalty rate range to arrive at a royalty 58% 0 Other Activities 4% 2011 2012 2013 2014 2015 2016 2016 2015 2016 2015 2016 2015 Brand 5 Year Forecast the use of the brand—assuming it were not rate.