Nigeria and global 500 banks report
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The recent conference trip in Atlanta, Georgia, themed around the recently published 2012 report on global 500 banks by Brand Finance, received more than a passing mention giving expression to the groupthink which unfortunately still suffuse the minds
of many Europeans against financial institutions in Nigeria.
According to the result released by the London based Brand valuation consultancy, Brand Finance, First Bank of Nigeria was ranked as the number one bank brand in Nigeria in the most valuable 500 world banking brands. The study incorporates data from banks in over 50 markets.
First Bank earned the highest brand value from Nigeria at $170 million, closely followed by Guaranty Trust Bank with $169 million. Zenith Bank came third with a brand value of $147 million whilst United Bank for Africa had a brand value of $121 million.
The banks' brands are also amongst the World's top 50 by Total Brand Value by Country. South Africa led the African pack with a total brand value of $8,207 million followed by Nigeria with $607 million and Morocco having $463 million. Within the Top 500 World Bank Brands South Africa has 10 banks, Nigeria has four banks and Morocco has two banks.
The top 10 bank brands in the world remain outside Africa, with the number one bank brand in the world being United Kingdom based HSBC, followed by American banks Wells Fargo and Bank of America, Santander in Spain, Citi and American Express both in the United States, BNP Paribas in France, Bradesco in Brazil and China Construction Bank.
Brand Finance uses the Royalty Relief Methodology (RRM) that determines the value of the brand in relation to the royalty rate that would be payable for its use were it owned by a third party. The royalty rate is applied to future revenue to determine an earnings stream that is attributable to the brand. The brand earnings stream is then discounted back to a net present value.
Perhaps, what will pass as an extremely important development is the conformity of the brand rating with requirements under the International Valuation Standards Committee (IVSC) to determine Fair Market Value of brands. The Royal Relief methodology is also favoured by tax authorities and the courts because it calculates brand values by reference to documented third-party transactions; including the use of publicly available financial information. It is conceptually similar to a credit rating. The data used to calculate the ratings comes from various sources including Bloomberg, annual reports and Brand Finance research.
One of the shocking revelations of the conference was the combined brand value of the 17 African banks is US$9,462 million slightly more than Goldman Sachs with US$9,332 million. What this means is that African banks in spite of the much touted regional expansions are still crouching like their parent country brands from where they derive complimentary value.
The BRIC economies (Brazil, Russia, India and China), present more banks in the top 20 than there are from Europe, representing seven of the top most valuable banking brands. This is expectedly so because brand is an asset that represents the sum total of the associations that influence preferences.
Through its year 2050 global dominance strategy, the BRICs have since sought opportunities for cooperation in trade, investment, infrastructure and development. Brazil's successful bids to host the 2014 FIFA World Cup and 2016 Olympic Games, is expected to quadruple its overall CBI.
Using the Country Brand Index (CBI) measures: the quality of a country's workforce and ability to attract foreign talent, perceptions to its quality of life and its projected GDP growth and Human Development shows Nigeria attaining 57th position in the top 100 country ranking with a brand rating of ''B'' behind Egypt and South Africa. Both attained brand ratings of BBB and A- respectively.
Generalised statements by Nigerian banks on their purpose of business outside of profit show limited understanding about the potential costs of failure to get to grips with Governance, Risk management and Compliance (GRC) which constitute foundational elements to post global crisis ratings. While there are tools and techniques for managing monetary risks, not much has been achieved in the area of reputational risk, considered as 'the mother of all risks'. Building an Enterprise Risk management framework which acknowledges risk to reputation issues including providing for periodic stress-testing will yield better result than throwing excessive cash at risk governance as a means of regaining lost reputations, credit rating and access to capital.
Nigerian banks must genuinely recalibrate their operational and reputational capabilities to earn the trust of stakeholders along the lines of people, planet and profit.
In this case, their internal ethical behaviour vis-a-vis employee rights, corporate governance, and occupational health and safety need to be revisited. Nigerian banks seem to be lagging behind in the global movement on green financing and sustainable development. To date, few Nigerian banks can boast of a robust Corporate Sustainability (CSR) framework; whilst even fewer have commitments to the Equator Principle (EP); which unarguably provides the most far reaching guide for voluntary environmental governance.
The brand finance sectoral analysis of banks also points to the success recorded in creating access to affordable financial services for the bottom of the pyramid. The report shows retail banking accounting for 37% of the total sectoral performance followed by commercial/wholesale banking (24%) and investment banking (14%) whilst credit cards banking was (10%). Retail penetration through product promotion amongst Nigerian banks is yet to liberate the poor, who still hold multiple dormant accounts without significant advancement to banking culture. Conversely, the success recorded by such non-traditional banks as the WIZZIT Bank in South Africa and Safarisom's M-PESA have benefitted the unbanked and underbanked.
Regardless of individual positioning, banks across the globe have had their image tarred by the general perception of bankers as being responsible for the global financial crisis. The now popular Occupy Movement which began in New York in September last year has successfully drawn attention to this sentiment. In Nigeria, the demonization of bank CEOs as criminals-in-chief seem to have overshadowed expected critical reviews of ongoing financial reforms hence making investors and customers dine with banks with a long spoon.
A new thinking focusing on economic stability rather than profiteering from volatility is needed to market the banks and renew their emotional licence to operate. In an era when banks do not have cash to throw at advertising brain waves, Heskett, Sasser, & Schlesinger's ideas on the Profit-Service chain value becomes key; how for instance a five percent increase in customer satisfaction can grow profits to 25 per cent. Multisensory rather than Psycho-demographic models have proved to be more relevant in rebuilding brands.
With over N5 trillion naira being already spent by the apex Central Bank of Nigeria (CBN) in stabilising the banking sector, we ended the conference with the optimism that 2013 will bring more Nigerian banks closer to better ratings based on strategic growth rather than raw resilience.
By Nduneche Ezurike