Once people lose trust in a financial brand, its owners may as well give up, shovel their millions into a removal van and drive off into the sunset.
A brand is nothing less than a promise. It pledges to refresh, protect, make you look cool or taste good. Its word is its bond. If it doesn’t do what it says on the tin, it is finished.
For a bank, trust is its number one brand value, the sine qua non without which it cannot exist. But trust is in alarmingly short supply at present.
The unfolding financial catastrophe sweeping the globe is devastating the public’s confidence in banks, building societies and insurance companies. As financial contagion spreads and institutions collapse worldwide, it is little wonder that Government-backed banks earn the greatest consumer confidence.
New research reveals that UK consumers trust state-owned National Savings & Investments more than any other UK bank. So says a survey of 2000 adults carried out on September 25th by Mintel. The survey found that 25% of adults say they trust NS&I, compared with an average of 16% trusting other high street banks.
Nationwide and Lloyds TSB take second and third spot in the ranking with 20% and 18% of adults trusting the brands respectively. Down at the bottom of the league come Co-operative Bank and Tesco Personal Finance, though Mintel says this is because they are less well-known than their rivals rather than because of any marked distrust.
Mintel concludes that British consumers feel more secure putting their money into institutions backed by the Government rather than privately-run banks. This gives hope that Gordon Brown’s financial rescue package unveiled this week will restore confidence to the whole banking sector.
Brown’s plan offers the seven top banks plus Nationwide Building Society a chance to boost their reserves by selling a stake to the Government. But this will come at a high price, hurting shareholders by diluting their stakes and incurring heavy interest payments to the tax-payer – not to mention threatened curbs on executive pay.
The banks will seek to avoid taking up tax-payers money if possible. But underpinned by the State, the banks cannot fail. It is one sure-fire way to restore trust in these brands. However, the package has a number of nasty barbs for bank brands. Any bank that does not take up the Government cash – and it looks like HSBC need not – could experience leakage as consumers switch their savings into the ultra-safe state-backed banks.
At the same time, for a bank to accept tax payers’ money could be seen by consumers as a sign of weakness. Take Lloyds TSB. It trumps its high street rivals in terms of trust after milking the positive public relations from its plan to take over HBOS. Here was a conservative, responsible bank that had avoided the low margin, pile it high, sell it cheap approach of its takeover target. Lloyds chief executive Eric Daniels was feted as a responsible, risk-averse role model for other bankers.
Lloyds advertising boasts it is the UK’s most trusted bank as winner of Readers’ Digest awards for the past eight years. In the past month, its high street savings balances have more than doubled as customers switch their cash into the black horse brand in search of a safe harbour.
Yet here is Daniels holding out the begging bowl to the state to assure Lloyds TSB’s survival. It doesn’t exactly fill you with confidence. In reality, it is the HBOS take-over which is sending Lloyds into tax-payers’ arms. It might weather the storm alone if not for the HBOS purchase. So this may yet damage its trustworthy reputation.
Likewise, Nationwide Building Society is also one of the institutions which may plead for state help. So much for its claims to immunity from financial woes because of its customer ownership and conservative lending practices.
When the dust settles on the financial sector, a vital role will fall to the image makers and marketers of bank brands as they seek to restore faith in financial institutions. But Government support may become the only brand value that matters.