It is no secret that the global financial sector has suffered dramatically since the outbreak of the subprime mortgage crisis, and that the image of banking has been damaged. The public has reacted strongly against the financial assistance offered to some banks, the bonuses given out to executives of troubled companies, and the shortage of loans provided to consumers. Today, “[banks] have a terrible reputation, but with certain qualifications,” says Joaquin Garralda, professor at the IE Business School. It is necessary, he notes, to distinguish between commercial banks and investment banks in the current scenario. “In the U.S., investment banks were criticized most heavily because they set off the crisis. But in Europe, where there is not such a clear separation between the two types of banks, all banks have been viewed as a single type of institution.”
In Europe, it was the bonuses that bothered people the most, according to Garralda. “And within Europe, you have to distinguish between the United Kingdom, which is similar to the U.S., and France, Germany and Spain.” According to a recent article in the Financial Times, between 65% and 79% of continental Europeans believe that bonuses should play a smaller role in executive compensation, while in the U.S. and the United Kingdom, only one third of the population favors that idea.
Fundamentally, adds Garralda, “there is the feeling that not everyone is equal. [Governments] don’t let a single bank fail; they can cut off an arm, but not the heart. Although there is a lot of logic and reason in that, it generates quite a lot of hostility against the banks because from the public’s view, the banks have gotten them into this crisis and now they don’t make loans while their executives get enormous bonuses. They connect all these dots, and they feel an enormous antagonism.”
Garralda notes that banks are doing a variety of things to counteract the negative sentiment. For starters, “they have begun to question the bonuses. This is one of the things that emerged from the latest meeting of the G20 leaders. Ultimately, the bonuses given to young people will be in the form of money, but senior executives will receive bonuses in shares, and those payments will made over time; not in the first year, but in several years, and it will depend on the results they achieve. They have introduced the time factor, which used to be very short-term, as well as compensation in shares.”
Some big European bank managers are engaging in philanthropy in order to clean up their image, Garralda adds. “In the U.S., because of tax factors, and especially because of the liberal conception of the economy, there are more philanthropists than in Europe; the government plays more of a protective role, and philanthropy has less raison d’être. Now [in Europe] we find that we want to wash our faces a little, and we are saying that openly, which is the ugly thing about all this.”
Banks in Spain
In Spain, the image of banks has deteriorated across the board, Garralda notes. However, the savings bank, a special type of financial institution, has strong roots in the country. Although they contribute a significant percentage of their profits to society through “social activity,” savings banks have not figured out how to take advantage of this position, he argues.
According to Garralda, nowhere else are savings banks as strong as in Spain, where more than 50% of bank deposits are held in these institutions. Theoretically, savings banks emerged in part to help those who had trouble accessing credit and developing wealth in particular regions. Nevertheless, because of a change in the law in 1977, they were permitted to do business in the entire country. With this change, the goal of regional development — or “social activity” — was abandoned. Given the extent to which Spaniards use banks, their existence also didn’t make much sense because people were able to access loans and bank accounts elsewhere.
Nevertheless, Garralda notes that “social activity is separate from business activity, an area in which the savings banks and commercial banks compete on equal terms. The difference is that commercial banks have shareholders, and savings banks have ‘social activity.’ Without [this component], they behave like commercial banks.” According to Garralda, savings banks have failed to figure out a way to benefit from the fact that commercial banks have suffered a loss of prestige. He believes this is due to the fact that “they have not remained loyal to what is means to be a savings institution. They have taken risks, have made loans to dubious businesses and have received assistance from the government. Consumers think, ‘You are not so good.’ When the crisis began, consumers were distinguishing between the two types of institutions, but they are not doing that now.”
Beatriz Soler, professor of marketing at ESADE, agrees with Garralda that the savings banks have, in recent years, begun to compete with commercial banks. This has led to a revival of their efforts to differentiate themselves, since the products that the two types of financial institutions offer are very similar and are easy to duplicate. “They do this by depending a lot on their brands — each one positioning itself against the others,” she says.
Generally speaking, “banking has a cold image,” Soler notes. “It generates fear and distrust around the world. Now, the banks are trying to make their brands seem less cold, and more neighborly.” Soler adds that the savings banks are “more human in the sense that they support and develop more social activities. Traditionally, they have been closer to young people; commercial banks are perceived with more distrust by that segment of the population.” What savings banks hope to do, she says, “is capture the younger population, and keep it for life, by providing products and services that fit in well with their life cycle.” For example, La Caixa, the Catalonian savings bank, created the sub-brand LKXA, which offers young people between 18 and 25 years of age products and services that are adapted to their needs. (LKXA is the mobile SMS spelling for the La Caixa brand.)
On the other hand, savings banks are also looking to take advantage of their proximity to consumers. Soler points out that the slogan of La Caixa is “La Caixa, can we talk?” This message “doesn’t help you if your offices are full of walls,” Soler says, noting that the bank has literally restructured its offices by knocking down walls and bringing in round tables in order to interact with the public. “Communication is the tip of the iceberg in their strategy.” Soler also cites the case of Caja Navarra (CAN). A few years ago, the savings bank launched a campaign that is still running, entitled “You choose; you decide,” where customers can choose which of CAN’s social projects they would like the bank to dedicate its profits to.
Although in principle savings banks start from a more advantageous position when it comes to emotional connection, commercial banks also appeal to that factor. Soler explains that the strategy of BBVA and Santander, both international banks, has nothing in common with that of the savings banks. “By and large, those banks that have an international presence try to maintain a global image that does not differ very much from country to country.” However, Santander has made a pronounced effort in recent years in what Soler calls the “architecture of brands.” That is to say, it “homogenizes” its visual identity by sponsoring the F1, a series of global events that can be associated with its brand. The positioning of Santander with “the value of ideas is one of strength as well as humanity. The ‘Forward’ [slogan] of BBVA involves a positioning that also looks for ways to humanize.”
An Instrument of Analysis
Consumers take into consideration much more when they evaluate the image of banks. According to a recent study published in Universia Business Review, every institution that wants to improve its image must focus its efforts on five elements: services offered; localization; corporate social responsibility; global impression, and personnel. According to Rafael Bravo-Gil, one of the authors of the study, entitled The Corporate Image of the Commercial Bank: Differences between Consumer Segments, the goal of the research was “to search for an instrument for analysis; a way for institutions to be able to verify that all of the communications efforts they have been undertaking are perceived in a positive way by consumers.”
In addition, Bravo-Gil, along with professors José Miguel Pina-Pérez and Teresa Montaner-Gutiérrez, built a map which positioned the five institutions that have the greatest presence in Aragon – Santander, BBVA, La Caixa, Ibercaja and Caja de Ahorros de la Inmaculada (CAI). The chart revealed the differences between local institutions and those that were not local. The best valuations given to local institutions emphasized the importance of institutions’ efforts to adapt to local conditions by setting up operations and making a commitment to those institutions in order to improve their image. “The consumer would prefer something closer; something that has more roots [locally]. That got us to thinking about where they were setting up, with respect to the shares that these institutions had to issue. Local institutions had to emphasize this aspect a great deal because consumers put a higher value on it. And those institutions that were not local had to be perceived as such by having a greater number of offices and deeper local roots,” says Bravo-Gil.
On the other hand, the study noted a number of differences between groups of consumers when it came time to evaluating an institution’s image. “Corporate social responsibility (CSR) gets a lower rating from groups of men and self-employed than from women and housekeepers. This should suggest doing an analysis of the factors behind these differences, as well as an investigation into the possible profitability of making communications efforts for CSR that would be specially directed at those groups who [currently] value the bank least,” the authors write.
In addition, those people who used an institution’s services the least had a lower evaluation of the services that the institution offered. “The first conclusion would surely be that this low evaluation is the result of their ignorance of the services offered by the bank, because they use them less. As a result, an interesting project would be to analyze if the solution is to offer more information about the services that are offered, or perhaps offer information that is more adapted to this particular [market] segment (for example, young people or older people). That could be a way to improve [the institution’s] image,” they write. In addition, customers who owe money to the bank, and those who have a lower level of satisfaction rank the image of the bank lower. According to the authors: “These results, despite the fact that they are less remarkable, should help institutions try to improve their image among these groups of consumers.”
The study was undertaken before the crisis erupted, and Bravo-Gil believes that now, of the five factors that figure in the study’s scale for rating corporate image, “global impression” is the one that has been affected the most. This factor measures a company’s association with feelings of trust, sympathy and honesty.
According to Soler, banks cannot overlook the factor of confidence in times like these because “there is a tendency on the part of customers to seek refuge in those brands that communicate greater strength, [such as] the major financial institutions.” Generally speaking, there is a temptation on the part of companies to say: “Since there is a crisis, I won’t invest in communication, and I’ll just hope for the best.” But silence can be misinterpreted, she notes. “In times of uncertainty, it is worse to keep silent. Everything that involves confidence and strength is good, and it all relates to the crisis. You may like or dislike the answer, but there is nothing worse than remaining silent if you want to communicate ‘confidence.’”
Soler observes that the savings banks continue to communicate about ‘social activities.’ “Advertising is not the only component of communication; I have also seen news in the press about the activities of certain savings banks. The savings banks continue to have a different image — one that is closer [to the public]. But at a time like this, being closer is not everything, and [the projection of] strength is vital.”
Garralda believes that savings banks cannot stress their social activities too much because this year they are going to be giving out less money. He recalls the advertisement of Caja de Ahorros de Navarra, in which that institution published a long list of companies to which it had provided loans. “As an advertisement, it was very boring, but as a message it was very powerful: We continue to help people by loaning them money.”
Otherwise, banks are trying to ride out the storm without attracting too much attention, he says. “There is a trend toward caution. A month ago, when despite all the assistance received by the banks, the banks did not provide loans to consumers or companies, they were attacked fiercely for that.” Now, through means of the ICO, the Spanish government’s loan institution, the banks are loaning more. However, “they have to deal with the second half of this year, when some enormous loans are coming due, and there are fears that those who borrowed the money won’t be able to refinance it.”