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Leading U.S. Banks Boosted Marketing Spend in 2022

An EMI Strategic Marketing analysis of 30 leading U.S. banks found strong overall growth in marketing budgets for the second consecutive year. Following an 18% decline in 2020 in the midst of the COVID-19 pandemic, these leading banks have grown their marketing budgets by 53% over the past two years.

Five banks – American Express, Capital One, JPMorgan Chase, Citi and Bank of America – each spent more than $1 billion in advertising and marketing in 2022. Discover was just below this threshold.

These banks’ average marketing ratio (marketing spend as a percentage of net revenues) rose by 34 basis points (bps) to 3.65% in 2022.

There is significant variation in bank marketing ratios between – and within – different banking categories.

  • Card-centric banks like American Express and Discover tend to have high marketing ratios as they have national reach but no branch networks.
  • Direct banks also have relatively high marketing ratios as they lack branch networks. Newer challenger banks are also investing significantly in marketing to build customers, deposits and assets.
  • More ‘traditional’ bricks-and-mortar banks typically have marketing ratios in the 1-3% range, although even in these categories we see significant variation as individual banks pursued different marketing objectives. Regional banks like Cadence Bank (+285% to $42 million) and BMO (+23% to $128 million) ramped up budgets in 2022 to promote brand overhauls. Super regional banks like Citizens (+38% to $184 million) and M&T Bank (+41% to $91 million) significantly grew their marketing spend to support entry into new markets following recent acquisitions.

Going into 2023, the projected trajectory for bank marketing spend is less clear, with rising inflation and slowing economic growth forcing banks to look for ways to reduce expenses. In addition, because they have grown budgets in recent years, some leading banks may decide to pause or even scale back their marketing budgets in 2023. However, many have stated their commitment to maintaining or even growing their marketing investment to support specific business strategies.

  • Discover expects double-digit growth in marketing spend as it pursues growth opportunities in credit card and deposits. It also claims that it continues to see strong returns on its investments.
  • Fifth Third plans to increase marketing spend in the mid-single digits in 2023 as it targets customer acquisition in the Southeast.
  • Axos Bank is maintaining higher spend levels as it seeks to grow deposits in an increasing competitive market.

Banks Cut Marketing Spend in 2020, But Expect to Ramp Up Investment in 2021

A detailed analysis of FFIEC call reports revealed that leading banks significantly reduced their advertising and marketing expenditure in 2020. However, as the economy rebounds strongly from the economic downturn caused by the coronavirus pandemic and increased competition from new entrants, banks seem poised to ramp up their marketing spending in the second half of 2021 and beyond.

Change in Marketing Spending Between 2019 and 2020

EMI Strategic Marketing studied data from 28 leading banks and found a 17% decline in advertising and marketing budgets, to $451 billion. This decline follows increases of 7% in 2019 and 15% in 2018.

Although most banks cut their marketing budgets, some banks bucked this trend, actually increasing their 2020 marketing spending:

  • Most notable in this regard was American Express, which at nearly $3.5 billion already has the largest advertising and marketing budget among leading U.S. financial firms. It spent $1 billion in 4Q20 alone as it ramped up investments in new card acquisition. Furthermore, it plans to continue this investment and recently reported that it could spend up to $4.5 billion in marketing in 2021.
  • Direct bank Ally Bank launched a new online advertising campaign in September 2020, which contributed to an 8% y/y increase in its marketing spend, to $161 million.
  • Challenger bank Radius Bank increased its advertising and marketing budget by 45% to $1.9 million in 2020, although its marketing ratio fell from 2.6% to 1.7% as its revenues jumped by 127%. (Radius Bank was recently acquired by LendingClub.)

It is also worth noting that some banks cut marketing budgets in 2020 following a ramp up in spending the previous year. A good example is BBVA, which grew its marketing budget from $83 million in 2017 to $111 million in both 2018 and 2019 as it changed its brand name from BBVA Compass to BBVA. It then cut the budget back to $76 million in 2020.

With Wells Fargo cutting its budget by 45% to $600 million, it reduced the number of banks with billion-dollar marketing budgets to five (American Express, JPMorgan Chase, Capital One, Bank of America and Citi).

Trends in Bank Marketing Ratios

The average 2020 marketing ratio was 2.8%, down more than 40 basis points from 2019, and back at levels seen in 2017.

Only 3 of the 28 banks – American Express, Ally and Bank of the West – increased their marketing ratios in the past year.

American Express and Discover – which have national card franchises that account for a significant percentage of assets and do not have to support branch networks – have the highest marketing ratios. Capital One’s marketing ratio is a mix of its card unit (6.8%) and retail bank unit (3.1%). Regional banks tend to have marketing ratio of 1% to 3%.

It is interesting that digital banks like Ally Bank, Axos Bank, Radius Bank and CIBC U.S. – which like American Express and Discover do not have to support branch networks – have marketing ratios that are in line with their regional bank competitors. This can be attributed to a number of factors, including devoting significant time and resources into improving the digital experience rather than brand advertising.

Bank Marketing Spend Trends for 2021

Looking forward to 2021, we expect that bank marketing spend will recover as the economy gradually reopens following COVID-19 (The Congressional Budget Office expects real GDP to return to pre-pandemic levels by mid-2021). Many banks have signaled their intent to increase their marketing spending in 2021. JPMorgan Chase stated that it expects marketing spend to return to pre-COVID levels in 2021. And while Citi’s marketing spend fell by 20% in 2020, it actually grew spending 2% y/y in 4Q20.

Bank marketing budgets will be impacted by growing merger and acquisition activity in the industry. Mergers that are expected to be completed in 2021 include First Citizens and CIT, Huntington and TCF Financial, PNC and BBVA USA, and M&T Bank and People’s United. Merging banks typically highlight long-term cost savings, but there will be a critical short- to medium-term need for marketing investment as they create new branding, launch new advertising campaigns, update branch signage, and revamp digital and social media channels).

While overall bank marketing spend is likely to recover in 2021, the composition of marketing budgets should change, in particular due to banks investing more in digital and social media marketing channels to match customer preferences and behavior. In addition, banks will be developing new messaging to address post-pandemic financial challenges and to communicate an effective and consistent experience across all their service channels.

Steady Growth in Marketing Spend and Marketing Ratios for Top U.S. Banks in 2019

EMI’s annual analysis of marketing expenditure for 25 leading U.S. banks reveals that they grew marketing spending by 7% in 2019 to $15.4 billion. This rate was down from the 13% growth between 2017 and 2018.

The banks’ marketing ratio (defined as advertising and marketing spend as a percentage of net revenue) has risen steadily in recent years, growing 18 basis points (bps) to 2.92% in 2018, and by an additional 21 bps to 3.13% in 2019.

The chart below summarizes marketing ratios, marketing budgets and y/y change in marketing spending for these 25 banks.

The following are some additional takeaways from our bank marketing spend analysis:

  • 16 of the 25 banks increased their marketing spending in 2019, with 5 increasing their budgets by more than 10%.
  • 6 banks invested more than $1 billion in advertising and marketing. Wells Fargo joined this group for the first time in 2019, with marketing spending rising by 26%, driven in large part by the launch of the ‘This is Wells Fargo’ integrated marketing campaign in January 2019 . It has invested strongly in advertising in recent years as it seeks to rebuild its reputation following the fallout from fake account and mortgage mishandling scandals.
  • 11 banks increased their marketing ratios in 2019, with 6 of these growing the ratios by more than 10 basis points. The largest rise was reported by Bank of America, whose 15% increase in its marketing spend led to a 38 bps rise in its marketing ratio (to 2.3%).
  • Banks that do not have branch networks and have national credit card franchises (American Express and Discover) had the highest marketing ratios. Capital One’s credit card bank charter – Capital One Bank (USA), National Association – had a marketing ratio of 10.3% in 2019, while its retail banking charter – Capital One, National Association – had a ratio (3.2%) more in line with peer regional banks.

It is almost impossible to project bank marketing spending for 2020, given the impact of the coronavirus pandemic on the U.S. economy in general, and the banking sector in particular. In the short term, marketing budgets will trend downwards as bank revenues are impacted by decreased economic activity. However, unlike the 2018-09 Financial Crisis, the country’s fundamentals were strong heading into this disruption, which increases optimism that the economy can recover quickly once the pandemic abates. This may lead to a robust bank marketing spending in the second half of 2020. What is more clear is banks will continue to shift their marketing budgets from traditional media (e.g., TV and print) to digital and other nontraditional media.