Tag Archives: Marketing

Leading U.S. financial institutions grow marketing spend in 1Q11

Financial institutions (FIs) reported continued strong growth in advertising/marketing spending in their quarterly financials.  The 10 leading financial institutions in the chart below spent a combined $3.0 billion on marketing in the first quarter of 2011, a growth rate of 19% over the first quarter of 2010 (and this comes on top of a 18% increase between 1Q09 and 1Q10).  8 of these FIs reported double-digit growth rates in 1Q11, with particularly strong growth rates for Discover (+60%), Capital One (+53%) and Citi (+31%).

 

For most FIs, this increased marketing has not yet translated into significant revenue growth.  In the coming quarters, they will be expecting to leverage some of the beneficial impacts of their investment (such as growth in checking accounts, as well as improved customer retention and satisfaction) into increased revenue as economic recovery continues.

One FI that can show the bottom-line impact of its marketing investment is American Express.  Following the financial crisis, Amex shifted its marketing focus to drive increases in card spending, which has resulted in strong growth in recent quarters.  In the most recent quarter, its U.S. Card unit reported an increase in card spending of 15%, which translated into a 9% rise in noninterest revenue.

Financial marketing spend continues to recover

Third-quarter financial data released by the large U.S. banks this week pointed to the continuation of a trend observed in the previous quarter: year-on-year growth in marketing spend. Marketing represents a leading indicator for banks, as it is one of the first expense categories to be hit at the start of a downturn. The corollary is that an increase in marketing spend is indicative of banks’ expectation that economic conditions are improving.

The following are changes in marketing spend for leading financial institutions between 3Q09 and 3Q10 (quarterly changes are not generally regarded as reliable, due to seasonal factors):

  • Huntington: +152%
  • Capital One: +140%
  • American Express: +68%
  • Discover: +68%
  • Chase: +48%
  • PNC: +40%
  • SunTrust: + 13%
  • Key: +11%
  • Wells Fargo: +6%
  • Bank of America: +6%
  • U.S. Bank: -21% (although note that U.S. Bank 3Q09 marketing spend was much higher than usual, due to the launch of a number of marketing initiatives)

Signs of life in bank marketing spending?

Recent bank advertising campaigns (from Bank of America, American Express, Chase, Discover, and Visa) is leading to speculation that banks are once gain increasing bank advertising/marketing spend.  However, the latest financial data does not support this contention.  Most financial institutions reported year-over-year declines in advertising/marketing spend in 3Q09, and for many of these, the level of the y/y decline in 3Q09 was higher than that reported in 2Q09.  An exception was U.S. Bank, which grew ad spending 83% y/y to $137MM.

The following table tracks trends in advertising/marketing spend for some leading U.S. financial institutions:

Financial Institution

3Q09 Advertising/
Marketing Spend, $MM

Y/Y Change in 3Q09

Y/Y Change in 2Q09

American Express

                   $504

         –22%

         –47%

Bank of America

                   $470

         –22%

         –13%

JPMorgan Chase

                   $440

           –3%

          +1%

Citi

                   $317

         –36%

         –43%

Visa

                   $283

         -12%

         -15%

Wells Fargo

                   $160

           -2%

         -44%

U.S. Bank

                   $137

        +83%

        +21%

Morgan Stanley

                   $126

         -24%

         -35%

Capital One

                   $104

         -61%

         -53%

Discover

                     $78

         -44%

         -22%

PNC

                     $58

         -21%

         -27%

Key

                     $19

         -30%

         -19%

Huntington

                       $7

        +17%

          +2%