A peer group analysis from Markables covers 34 brands of retail and commercial banks from 18 countries. Based on both royalty rates and brand value as percentage of enterprise value, brands are of minor importance in the banking sector. The core deposit intangible (CDI) is the most important intangible asset. The analysis suggests a median royalty rate for banking brands of 1.0% and a share of enterprise value of 2.2%. The multiples observed are much lower than what the various league tables on the most valuable global brands (as released by Brand Finance, Millward Brown, and Interbrand) suggest for brands such as Wells Fargo, HSBC, Royal Bank of Canada, Toronto Dominion Bank, and others.
The valuation of banking brands can be a challenging task, for a number of reasons:
- It is important to make a clear distinction between the customer intangibles (i.e., the core deposit intangible and the customer relations) and the brand name.
- It is quite difficult, if not impossible, to find comparable royalty rates for banking trademarks.
- The revenue base must be clearly defined. The revenue base for banks is typically defined as “net interest income plus noninterest income.”
- The effects of the financial crisis on the reputation and trustworthiness of banks need to be considered, depending on the subject bank to be valued.
Markables has a database of over 6,500 trademark valuations published in financial reporting documents of listed companies from all over the world. The database reports value solely for the use of trademarks (not bundled with other rights).