February 3rd, 2012
A review of reported marketing/advertising expenditure by leading financial institutions revealed the following trends:
- 2011 spend levels: Five FIs (JPMorgan Chase, American Express, Citigroup, Bank of America and Capital One) each spent more than $1 billion on marketing in 2011.
- 2010-2011 trend: Of the 12 FIs included in the review, six increased marketing spend by double-digit percentages in 2011, led by Citigroup (+43%) and Capital One(+40%). Four FIs reduced marketing spend in 2011.
- 2007-2011 trend: Taking a longer-term view, we see that although Citigroup and Capital One had very strong growth in 2011, spending was actually down relative to 2011, indicating that these banks’ recent strong growth is more of a return to historic norms. JPMorgan Chase, Wells Fargo and PNC all had strong growth between 2007 and 2011, but each of these FIs had made a big bank acquisition during this period.
- Marketing as a percentage of revenues: To eliminate the effect of merger and acquisition activity, and get a gauge on marketing investment intensity, we also looked at marketing as a percentage of net revenue for 2007 and 2011.
- American Express has the highest level of marketing spend intensity, with its 2011 marketing expenditure representing 10% of net revenues in 2011, up 70 basis points from 2007
- Other leading FIs for marketing investment intensity are Discover (no branch network, national credit card operation) and Capital One (regional branch network, national credit card operation)
- Among the regional national banks, JPMorgan Chase has the highest level of marketing intensity (3.2%), ahead of Citigroup (3.0%). Chase, which has both an extensive branch network and a national credit card operation, actually increased marketing intensity by 33 bps from 2007 to 2011. Citigroup has a limited U.S. branch presence, but again has a national credit card franchise.
- Bank of America’s market spend intensity fell from 3.5% in 2007 to 2.4% in 2011
- Wells Fargo maintains significantly lower marketing spend levels than its national bank competitors, with a marketing spend intensity of 0.7% in 2011. However, it was recent named as the leading U.S. bank in The Brand Finance Branding 500 rankings, indicating that topline marketing spend does not necessarily correlate to brand strength. However, it should also be recognized that, unlike some of the other leading banks, Wells Fargo’s operations are mainly concentrated within its retail banking footprint.
In terms of setting optimal levels of marketing investment in 2012, financial institutions face competing forces. On the one hand, many FIs have established cost containment programs with defined targets, and this will put downward pressure on marketing spend. On the other hand, the above table shows that many FIs have reduced their marketing intensity levels in recent years. With signs of economic recovery now emerging, these FIs may need to increase their marketing investment to compete effectively in a growing market.
Tags: advertising, bank, Marketing
Posted in Banking, Marketing | No Comments »
January 30th, 2012
Much of the coverage of U.S. banks during the 4Q11 earning reporting period focused on their continued struggles to generate revenues, with some noninterest income categories under pressure. However, most of the big banks did show signs of growth in lending, with commercial lending at the forefront.
The table below looks at y/y and q/q changes in average non-CRE commercial loan portfolios for some of the leading U.S. banks. Of the 12 large banks listed below, eight enjoyed double-digit average commercial loan growth over the past year.
In reporting quarterly financials, most banks indicated strong potential for additional commercial lending growth in 2012, although most were at pains to point out that this is dependent on continued economic recovery and improving business confidence.
Of course, the strong growth in 2011 follows declines in loan portfolios in 2008 and 2009, and relatively anemic growth for many leading banks in 2010. Due to acquisitions and changes in organizational structures, long-term comparisons are not always relevant, but in many cases, leading banks have a long way to go to build average commercial loan portfolios up to pre-financial crisis levels. And banks also need to recognize that, while an improving economy, should boost overall commercial lending, they will need to make significant investments in marketing and sales to maintain and even build their share of the commercial loan market.
Tags: bank, commercial loan
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January 18th, 2012
EMI recently carried out an analysis of current FDIC data on the C&I loan portfolios of U.S. banks. This analysis revealed the following trends:
- Large banks (with more than $10 billion in assets) had the strongest growth in their total C&I loan portfolios between 3Q10 and 3Q11. This is consistent with recent financials from the largest banks, most of whom have reported strong growth in commercial lending in recent quarters
- Looking at small business loan portfolios (defined as C&I loans of less than $1 million), at first glance the trend is more consistent: larger banks still outperform their smaller counterparts, but the gap is much narrower than for C&I loans.
- However, when we drill further into small business loan portfolios, we see that the largest banks grew their portfolio of very small business loans (original amounts of less than $100,000) by 5%, while the other three bank segments experienced loan portfolio declines in this category (note that this loan category has a high concentration of small business credit card loans).
There are now some indications that small business lending will grow in 2012. Will larger banks continue to outperform smaller banks in overall loan portfolio growth? And will loan growth continue to be concentrated on the smallest category of loans, or will it be extended to loans of $100,000 to $1 million?
Tags: bank, C&I, loans
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January 17th, 2012
The 4Q11 financials from both JPMorgan Chase and Wells Fargo underline the extent to which mobile banking has emerged as a key banking channel, while also indicating that online penetration may have reached a ceiling.
- Chase:
- Between 4Q10 and 4Q11, Chase grew its active mobile banking customers by 57%, while during the same period active online banking customers increased by 3%
- Active online banking customers as a percentage of total Chase checking customers rose from 62% in 4Q10 to 65% in 1Q11, but has remained at 65% for the three subsequent quarters. Active mobile customers as a percentage of checking customers rose from 20% in 4Q10 to 32% in 4Q11
- Active mobile customers as a percentage of active online customers rose from 32% in 4Q10 to 48% in 4Q11
- The rate of growth in active mobile customers does not yet show signs of abating. The quarterly growth rate fell from 13% in 1Q11 to 9% in 2Q11, but then increased to 10% in 3Q11 and again to 16% in the most recent quarter
- Wells Fargo:
- Active mobile customers increased 55% between 4Q10 and 4Q11. During this period, active online customers rose 8%
- Active mobile customers as a percentage of active online customers rose from 26% in 4Q10 to 37% in 4Q11
Tags: JPMorgan Chase, mobile banking, online banking, wells fargo
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January 13th, 2012
In recent quarters, there has been significant growth in U.S. commercial lending, with many leading banks predicting that this strong recovery will continue in 2012. And now the small business lending market, which has been in the doldrums since the onset of the financial crisis in 2008, is starting to show some signs of life.
JPMorgan Chase reported today that it grew EOP business banking loans for the fifth consecutive quarter in 4Q11. Business banking loan originations increased 24% in 2011 (although the stop-start nature of the recovery is seen in the fact that business banking originations were down 4% y/y in 4Q11).
Other positive signs in the small business loan market:
- The most recent issue of the Federal Reserve’s Beige Book highlighted a pickup in business loan demand (some leading banks have claimed that weak demand, rather than more restricted access to credit, has been the main impediment to small business loan growth).
- There are signs of improvement in the broader economy (notably a decline in unemployment rate) , and these macroeconomic factors tend to have a strong impact on consumer and small business optimism.
- And small business optimism is indeed recovering. The National Federal of Independent Business’s Index of Small Business Optimism rose 1.8 points to 93.8 in December, which is still below the key 100-point threshold, but up from a low of 81 in March 2009. Signs of an improved outlook can also be seen a recent TD Bank small business survey.
So, banks have significant opportunities to build their small business franchises. However, many banks need to recognize that they have suffered reputational damage in recent years, and should focus on developing an integrated sales and marketing strategy to re-position themselves as a trusted provider of financial products, services and advice to U.S. small businesses.
Tags: JPMorgan Chase, NFIB, small business lending
Posted in Banking | No Comments »
