Nigeria, Russia, and Malaysia recorded the biggest decline in the value of banking brands among 50 countries within a year, according to a new report by Brand Finance, a London-based brand valuation consultancy.
The 2024 banking brands report, which analysed data from March 2023 to March this year, showed that only 11 of the top 50 countries experienced a decline in aggregate value, led by Russia (69 percent), Malaysia (20 percent), and Nigeria (14 percent).
“Unsurprisingly due to the international sanctions imposed on Russia, the country’s two largest brands – VTB and Sber – feature at the top of the fallers in brand value by percentage, with 91 percent and 63 percent plunges, respectively,” the report said.
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It said Hungary managed to increase its brand value by the greatest amount among the top 50 countries, a feat accomplished single-handedly by OTP Bank and that the country’s sole lender in the ranking jumped 58 percent, which positions it among the top 20 climbers by percentage increase.
“This helped the country’s largest commercial bank move up 46 places in the ranking to 177th. There are 31 new entrants to the ranking, compared to 19 in the previous edition. Malaysia’s CIMB Group is the highest placed new entrant, jumping into the ranking at 134th place,” the report added.
For Africa’s most populous nation which saw a decline of 14 percent to $1.35 billion, Babatunde Odumeru, managing director at Brand Finance Nigeria, said the steep decline of the naira negatively impacted the revenues attributable to banking brands.
“Just like any other asset class, brand assets can also be subject to the effect of a decline in the currency in which they are denominated. However, despite this, the sector maintained its brand strength which indicates a continued level of trust, familiarity, and emotional closeness that consumers have with these brands,” he added.
Brand value refers to the present value of earnings specifically related to brand reputation. Organisations own and control these earnings by owning trademark rights.
Brand Finance analysed banking brands’ internationality to better understand their positioning and performance in an increasingly globalised market. It adopted the royalty relief approach in measuring organization brand value. The method involves a combination of the market and income valuation approaches.
The value of the intangible asset is based on the costs that the company would avoid by not having to pay a license fee or royalty to use the asset. This is compliant with the industry standards set in ISO 10668, according to the firm.
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Other African countries like Egypt, Morocco, and Kenya had an increase of 12.3 percent to $1.37 billion, 16.7 percent to $1.26 billion, and 7.5 percent to $794 million respectively. South Africa recorded a decline of 2.7 percent to $7.52 billion.
“Our research indicates that local and regional banks are performing as well as – and, in many cases, outperforming – global banks in terms of positioning their brand in the hearts and minds of customers. Three African brands, Equity Bank, First National Bank, and Kenya Commercial Bank, as well as Romanian Banca Transilvania all rank amongst the top five strongest brands globally, earning AAA+ ratings,” David Haigh, chairman & CEO, of Brand Finance, said.
According to authors of the valuation report, Africa shines in the realm of brand investment, particularly regarding people, with a score of 9.8 in perceptions of ‘Ease of Dealing’ and ‘Customer Service’.
“These dimensions are crucial drivers of brand consideration in the region, highlighting the importance of human-centric service and operational excellence,” they said.
They added that however, African brands grapple with the lowest analyst recommendations, suggesting a perception of higher risk for investors.
“Nonetheless, for leading brands like Equity and KCB of Kenya, there lies a potential goldmine, given their strong BSI and burgeoning analyst endorsement, indicating promising growth and investment returns.”
Brand Finance noted that across the banking sector, Environmental, Social, and Governance ESG efforts have sometimes surprising impacts, as indicated by drivers of brand reputation. “Certainly, ESG is a key driver of overall reputation, but a brand’s ESG efforts are not a major driver of consumer retail banking choice.”
The report also revealed that the combined value of the world’s 500 most valuable banking brands reached a record of $1.44 trillion, almost double its level a decade ago.
It said the Chinese banking sector demonstrates a notable recovery, with the ‘big four’ banks remaining well ahead of their US counterparts, and that the Industrial and Commercial Bank of China maintains its position as the world’s most valuable banking brand for the eighth consecutive year, boasting a three percent rise in brand value to $71.8 billion.
“China Construction Bank, Agricultural Bank of China, and Bank of China secure second, third, and fourth positions, respectively, following single-digit percentage increases in each of their brand values.”
