Brand valuation

Brand Valuation Model:Personal Banking

#

Summary:

Questionnaire p. 1

Votes & Ranking p. 3

Brand Strength p. 6

Brand Lifetime Value calculation p. 8

Brand drivers p. 9

Brand drivers p. 10

Sensitive analysis p. 14

Analysis of brand valuation modeling p. 15

Specific detailed analysis p. 17

Personal Banking driversQuestionnaire

Personal Banking driversQuestionnaire

VOTES VOTES VOTES VOTES VOTES VOTES SUM% BANK OF AMERICA CITIGROUP TD BANK JPMORGAN CHASE Other bank WELLS FARGO VOTES

Brand strength 5.66% 1 2 0 0 0 0 3Customer service 1.89% 0 0 1 0 0 0 1Fees 3.77% 0 1 1 0 0 0 2N. of branches 15.09% 4 1 1 2 0 0 8Location/convenience 24.53% 5 1 3 2 2 0 13I like their marketing 0.00% 0 0 0 0 0 0 0Personal recomm. 3.77% 0 0 1 0 0 1 2Credit card options 0.00% 0 0 0 0 0 0 0Variety of products 0.00% 0 0 0 0 0 0 0Corp. responsibility 0.00% 0 0 0 0 0 0 0Security 1.89% 1 0 0 0 0 0 1Internationality 7.55% 0 2 0 0 2 0 4ATM 7.55% 1 1 0 2 0 0 4Incentive 0.00% 0 0 0 0 0 0 0The family bank 3.77% 0 1 0 1 0 0 2Other 24.53% 3 2 1 4 3 0 13TOTAL NUMBER OF VOTES 100.00% 53

Personal Banking driversVotes & Ranking

HIERARCHY VOTES %Location/convenience 13 24.53%Other 13 24.53%N. of branches 8 15.09%ATM 4 7.55%Internationality 4 7.55%Fees 2 3.77%Brand strength 3 5.66%Personal recomm. 2 3.77%The family bank 2 3.77%Security 1 1.89%Customer service 1 1.89%Corp. responsibility 0 0.00%Incentive 0 0.00%Variety of products 0 0.00%Credit card options 0 0.00%I like their marketing 0 0.00%TOTAL NUMBER OF VOTES 53 100.00%

Personal Banking driversVotes & Ranking

BANK OF AMERICA CITIGROUP TD BANK JPMORGAN CHASE Other bank WELLS FARGOBrand strength 33.33% 66.67% 0.00% 0.00% 0.00% 0.00%Customer service 0.00% 0.00% 100.00% 0.00% 0.00% 0.00%Fees 0.00% 50.00% 50.00% 0.00% 0.00% 0.00%N. of branches 50.00% 12.50% 12.50% 25.00% 0.00% 0.00%Location/convenience 38.46% 7.69% 23.08% 15.38% 15.38% 0.00%I like their marketing #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Personal recomm. 0.00% 0.00% 50.00% 0.00% 0.00% 50.00%Credit card options #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Variety of products #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Corp. responsibility #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!Security 100.00% 0.00% 0.00% 0.00% 0.00% 0.00%Internationality 0.00% 50.00% 0.00% 0.00% 50.00% 0.00%ATM 25.00% 25.00% 0.00% 50.00% 0.00% 0.00%Incentive #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!The family bank 0.00% 50.00% 0.00% 50.00% 0.00% 0.00%Other 23.08% 15.38% 7.69% 30.77% 23.08% 0.00%

SUBTOTAL 269.87% 277.24% 243.27% 171.15% 88.46% 50.00%MAXIMUN SCORE 24.533799533799500% 25.203962703962700% 22.115384615384600% 15.559440559440600% 8.041958041958040% 4.545454545454550%

MAXIMUN SCORE 0.25 0.25 0.22 0.16 0.08 0.05

Personal Banking driversVotes & Ranking

MAXIMUN  SCORE Location/convenience Other N.  of  branches ATM Internationality Fees Brand  strength Personal  recomm. The  family  bank Security Customer  serviceCITIGROUP 25.20% 7.69% 15.38% 12.50% 25.00% 50.00% 50.00% 66.67% 0.00% 15.38% 0.00% 0.00%

BANK  OF  AMERICA 24.53% 38.46% 23.08% 50.00% 25.00% 0.00% 0.00% 33.33% 0.00% 23.08% 100.00% 0.00%TD  BANK 22.12% 23.08% 7.69% 25.00% 0.00% 0.00% 50.00% 0.00% 50.00% 7.69% 0.00% 100.00%

JPMORGAN  CHASE 15.56% 15.38% 30.77% 12.50% 50.00% 0.00% 0.00% 0.00% 0.00% 30.77% 0.00% 0.00%Other  bank 8.04% 15.38% 23.08% 0.00% 0.00% 50.00% 0.00% 0.00% 0.00% 23.08% 0.00% 0.00%

WELLS  FARGO 4.55% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 50.00% 0.00% 0.00% 0.00%= 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Other  bank HSBC Other They  bought  my  bankCAPITAL  ONE My  old  bank,  North  Fork  Bank  was  bought  out  by  Capital  One.

MAXIMUN  SCORE Location/convenience Other N.  of  branches ATM Internationality Fees Brand  strength Personal  recomm. The  family  bank Security Customer  service BRAND  STRENTHBANK  OF  AMERICA 24.53 9.44 5.66 12.27 6.13 0.00 0.00 8.18 0.00 5.66 24.53 0.00 71.87CITIGROUP 25.20 1.94 3.88 3.15 6.30 12.60 12.60 16.80 0.00 3.88 0.00 0.00 61.15TD  BANK 22.12 5.10 1.70 5.53 0.00 0.00 11.06 0.00 11.06 1.70 0.00 22.12 58.27JPMORGAN  CHASE 15.56 2.39 4.79 1.94 7.78 0.00 0.00 0.00 0.00 4.79 0.00 0.00 21.69Other  bank 8.04 1.24 1.86 0.00 0.00 4.02 0.00 0.00 0.00 1.86 0.00 0.00 8.97WELLS  FARGO 4.55 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.27 0.00 0.00 0.00 2.27= 10.67 12.22 10.62 14.08 16.62 23.66 16.80 13.33 12.22 0.00 22.12

MAXIMUN  SCORE BRAND  STRENTHBANK  OF  AMERICA 24.53 71.87CITIGROUP 25.20 61.15TD  BANK 22.12 58.27JPMORGAN  CHASE 15.56 21.69Other  bank 8.04 8.97WELLS  FARGO 4.55 2.27= 0.00 0.00

Personal Banking driversBrand Strength

MAXIMUN  SCORE BRAND  STRENTHBANK  OF  AMERICA 24.53 71.87CITIGROUP 25.20 61.15TD  BANK 22.12 58.27JPMORGAN  CHASE 15.56 21.69Other  bank 8.04 8.97WELLS  FARGO 4.55 2.27= 0.00 0.00

Personal Banking driversBrand Strength

CITIBANK Simple Brand Valuation - Income Model 5All numbers in thousands

Year 0 1 2 3 4 5 62011 2012 2013 2014 2015 2016

Initial InvestmentSales (Revenue) $78,880,350 $102,744,589.80 $133,828,650 $174,316,794.10 $227,054,108 $295,746,420.95Other expenses (R & D + …) ($2,106,203) ($2,743,407.28) ($3,573,390) ($4,654,473.42) ($6,062,625) ($7,896,794.24)General, Admin ($62,964,648) ($82,013,795.99) ($106,826,020) ($139,144,864.13) ($181,241,361) ($236,073,613.97)Expenses ($65,070,851) $84,757,203 ($110,399,410) ($143,799,338) ($187,303,986) ($243,970,408)EBITDA $0.23 $0.23 $0.23 $0.23 $0.23 $0.23Net Income $13,809,499 $17,987,387 $23,429,240 $30,517,457 $39,750,122 $51,776,013

Present value $16,608,027 $19,973,683 $24,021,397 $28,889,390 $34,743,893Net Present Value $124,236,389Terminal Value $1,051,131,986 *(Year 6 and beyond)NPV + Terminal Value $1,175,368,376 Present value of Future cash flows in perpetuityor Lifetime Enterprise Value

Brand Strength index 61Discount Rate 8.3%Brand earnings (Net Income x Role of Brand index) $10,972,306 $14,291,836 $18,615,648 $24,247,575 $31,583,368Brand earnings PV (discounted) $10,130,896 $12,183,947 $14,653,052 $17,622,528 $21,193,775Brand NVP SUM $75,784,197Brand Terminal Value $641,190,512 *(Year 6 and beyond) 5.0% <--Growth rate in perpetuity(you can change this field)Brand Lifetime Value Total $716,974,709

Personal Banking driversBrand Lifetime Value calculation

Brand drivers:

HIERARCHY VOTES %

1.Location/convenience 13 24.53%

2.Other 13 24.53%

3.Number of branches 8 15.09%

4.ATM 4 7.55%

5.Internationality 4 7.55%

6.Fees 2 3.77%

7.Brand strength 3 5.66%

8.Personal recommendation 2 3.77%

9.The bank used by my family 2 3.77%

10.Security 1 1.89%

11.Customer service 1 1.89%

12.Corporate responsibility 0 0.00%

13.Incentive 0 0.00%

14.Variety of products 0 0.00%

15.Credit card options 0 0.00%

16.I like their marketing 0 0.00%

TOTAL NUMBER OF VOTES 53 100.00%

9

Brand drivers:Brand strength: With brand strength I determine the benefits of having a strong brand

name in the Personal Banking sector. Benefits to a bank firm include expedited product acceptance, enabling market share penetration by advertising, and resisting price/fee erosion. 

Customer service: With Customer service I determine the benefits of having a good

customer's perception of them(I don't understand this sentence... are you trying to say

"With customer service I determine the benefits that the customers perceives by our services"?). Customer service include personnel, online, phone, email, app, etc.  A good

customer service ensures loyalty and a proper alignment of investments with customer needs. Disaffected customers are punitive. The way employees resolve problems is crucial. 

Fees: With Fees I determine how important are service fees for customers. Service fees include minimum required balance fee, minimum deposit requirement fee, checking

account fee, maintenance fee, debit card fee, fees on checking accounts, fee for banking

services, overdraft fee, monthly maintenance fee, fee for using phone banking and ATM

charges. An unexpected fee kept a significant percentage less with the bank than did those who had a positive impression about fees. The perception of service fees are extremely

important these days. The 2010 legislation that limited banks' ability to charge some fees made lenders dream up new fees that aren't necessarily on the customers radar. 

Number of branches: With the number of branches I determine how important is the number of branches for bank users.  Nationally, the number of branches are falling.

Factors cited range from a still-elevated number of bank failures to greater use of online banking, but those branches are attracting more deposits. The number of bank branches seems to be a determinant factor for many customers.  

Location/convenience: With Location/convenience I determine how important the location of the branches are and their level of convenience for the banks customers. Many

bank users and branch representatives have stated that the proximity and convenience of a bank branch is a determinant factor in bank selection for customers. 

Like their marketing/advertisement campaigns: With marketing/advertisement campaigns I determine how important the likability of the bank communications for their customers is. Like other institutions, banks spend heavily on marketing campaigns to

increase customer loyalty, for increased customer retention, to gain buy-in, as well as to

10

increase conversion rates (new customers from other banks), and to sell more products to

current customers.

Personal recommendation: With recommendations I determine how important word of mouth is in bringing the customer to the bank, or switching to a new bank. Subcategories include buzz, blog, viral, grassroots, brand advocates, cause influencers and social media marketing, as well as ambassador programs, work with consumer-generated media and

more. The receiver of a personal recommendation tends to believe that the communicator is speaking honestly and is unlikely to have an ulterior motive. Personal recommendations depends on the extent of customer satisfaction with the product or service, and on the degree of its perceived value. 

Credit card options: With Credit card options I determine how important is the offer of the bank credit cards to the customer. Credit card options include bank credit card

options, co-branded cards, monthly fees, usage fees, miles program and usage rewards. Credit card options designed to meet customers individual needs would be important for students, customers with bad credit record, small business.

Variety of products: With Variety of products I determine how important is/was the variety and amount of products offered by a bank. Variety of products include loans, mortgages, investments, certificates of deposit, individual retirement accounts, first health

savings account as well as the variety of savings and checking accounts. Personalized

services with a variety of products to satisfy customer needs has proved to be an

important conversion and retention driver.

Corporate responsibility: With Corporate responsibility I determine how important is/was the set of values and ethics of a bank for the customer. Corporate responsibility

include providing a needed service to a community or to the world, employment of workers, environmental issues, employees treatment, etc. Corporate responsibility guides to what the company stands for and will uphold to its consumers. Customers are more likely to invest in a bank that has shown corporate responsibility.

Security: With Security I determine how important is/was the banks protection of customers banking and ID information for the customer. Security includes ID thief,  hack

attacks that could had breach banks data and steal card data and mobile-banking

application security.

Any possibility of ID theft is worrisome for consumers. Nearly a third of bank new

customers enroll in bank's Identity Alert service that offer credit monitoring, which tracks

11

credit reports for changes indicative of fraud, such as a new inquiry for a credit card or an

address change, and then alerts a customer by phone, email or text.

Hackers are stealing card data more and more often. They have realized that most banks have not properly protected databases. Customers have had their names, account numbers and email addresses stolen by hackers who broke into bank’s online account site.

Mobile-banking application security is also a big concern for customers. Mobile banking

is a popular and fast-growing activity on smartphones, as cellphones become more sophisticated and consumers use them to organize their lives. Mobile apps allows customers to check balances, transfer funds and pay bills. About 18 million adults, or 7%

of the adult population, are "active users" of mobile banking, meaning they use it at least once every three months (WSJ).

Internationality: With Internationality I determine how important is/was the presence of the bank in diverse markets and cultures. Internationality presents several advantages for customers, such as familiarity, stability, strength, protection, expansion, distributed rick,

as well as convenience and low/free international fund transfer rates, increased ATM

network, low/free international cash withdrawal, among others. The Internationality of a bank significantly boosts the chances of a international customer choosing a bank for his banking needs.

ATM: With ATM I determine how important is/was the number of ATMs, location, the services they offer and their UI for bank customers. An ATM is an important entity for a bank. It is a facility through which banks can reach out to customers and provide banking

services without the customer having to visit the bank branch. Some of the services banks offer through ATMs are cash withdrawal, balance inquiry, statement advise, fund transfer, cash deposit, check deposit and prepaid mobile recharge. The presence of a good ATM

network, significantly boosts the chances of a customer choosing a bank for his banking

needs.

Incentive: With Incentive I determine how important is/was an incentive to open a new

account on this bank or offer better terms to customers with multiple accounts at the same

institution. Incentives include "relationship products" such as cash reward, free services, free maintenance, higher interest rates on deposits, and mortgage discounts. Banks are increasingly offering a cash reward, free services and/or free maintenance to customers who open a checking account and set up direct deposit. Banks are also offering rewards like high rates on certificates of deposit, mortgage discounts and investment advice to

people who keep multiple accounts under one roof.

12

The bank used by my family: With The bank used by my family I determine how

important is/was fidelity to a bank as a driver for choosing a bank. The bank used by my

family include factors such as fidelity, loyalty, familiarity, band strength, personal advice and tailored products, convenience, low/free transfer rates, incentives for keeping

multiple accounts under the same bank,  word of mouth, resistance to switch your bank

account to another institution even if been rewarded, etc.

13

Sensitive analysis:

In general terms, the Brand Stealth model developed based on a web questionnaire have performed satisfactorily. The pros of using this system are that it is base on real insight and that It have revealed common sense findings. The cons of this system are the narrow

sample of population that responded to it is not representative and that some questions should have been restate in different ways to obtain a cleared understanding of what customers really appreciate about their bank.

Validity of questionnaire: A questionnaire was developed and used as the base to create this Valuation model. Unfortunately, due to scarcity of time and lack of reach the questionnaire was replied by just 27 people, mostly in the NYC area, mostly students. This means that the the results obtained represent a very small fraction of the American

population, leaving in a very specific geographical area, with very similar needs, situation and perhaps interests. Very different results would be obtained if the sample of the questionnaire were done to a broader population.

As an example, the driver ¨Variety of products¨was not selected by any respondent. While it could be true that any respondent have chosen their bank for this reason, research have shown that this factor is today one of the main reasons why mature customers have chosen their bank.

Although this is true, the results and the way chosen to analyze them had show a variety

of considerations, and revealed clearly why people have chosen their bank.

As an example, TD Bank ranked higher than any competitor in Customer Service, and I believe that the majority of the bak users would agree that Customer service have had a great importance when choosing TD Bank as their bank as a differentiator.

Internationality: A selection of just American banks was used to create this Valuation

model. But studies have shown that many residents in the USA have bank accounts in

foreign institutions. For this reason, this customers would rank higher other drivers like “Internationality,” “Fees” or “Number of branches.” Users with bank accounts in other countries would rank higher other ways to do banking, such as web banking or app

banking.

More than one bank: Many customers may have more than one bank account and may

have chosen each bank for very different reasons. Some repliers may have a Checking

account at Bank of America, giving priority to “Location / Convenience”, while having a Savings account at other bank, giving then priority to “Variety of products.”

14

Analysis of brand valuation modeling:I was talking yesterday with the son of one of the Cofounders of Interbrand, and he told

me that his father, when creating Interbrand as an accountant, really didn’t know if Brand

Valuation would make sense or succeed. Well, I have just to say that today Interbrand is the world's leading brand consultancy, has offices in over 30 cities in more than 20

countries around the globe and clients from among the most respected businesses.

The brand valuation process increases the amount of information held by the company

about its brand and it should be developed so that it can be used not just for accounting

purposes but mainly as a management tool for value creation. A good brand valuation

process is a tool that helps maintain a coherent strategy over time and assign marketing

resources consistently. Brand valuation, as I like to say, helps achieve sustainable, competitive growth and increase value by crating and developing long term business strategy

Why was it needed?

“There was huge buying and selling of branded-goods businesses where what was essentially being bought and sold was brands. But nobody knew how to value brands.”

John Murphy, Interbrand founder, Holdsworth, 2001

For most of the century, tangible assets were regarded as the main source of business value. The market was aware of intangibles, but their specific value remained unclear. Brands, technology, patents and employees were always at the heart of corporate success, but rarely explicitly valued. Major brand owners were aware of the importance of their brands, but on the stock market, investors focused their value assessment on the exploitation of tangible assets.

Today the majority of business value is derived from intangibles. The brand is a special intangible that in many businesses is the most important asset. This is because of the economic impact that brands have. They influence the choices of customers, employees, investors and government authorities. Some brands have also demonstrated an

astonishing durability. Today, leading companies focus their management efforts on

intangible assets.

Many of the brands that perform brand valuation are owned by Omnicom Group. Among

them BBDO, TBWA, DDBA, Wolff Olins and Interbrand, among many others. This seems to me to be a monopoly, where all brands are validated by the same holding

company. This can be very harmful, as we have seen that brand valuation can influence

15

very much in the price of a company when acquired or when sold. Is it fair to be validated

downward if your a company is going to be acquired by a company favorite by

Omnicom? This confusion seems to me to be premeditated and generating billions of dollars in revenue for some institutions aligned with Omnicom.

“A brand’s real value is nothing, except in the eye of the beholder.”Wally Olins

For the future, I believe that things will continue the same path because I believe that creating confusion is one of the most popular valuation systems strength. Also, and

talking in ignorance and after developing this model, It seems almost impossible to create a universal valuation system, as different assets can be valued in different ways. Drivers should be constantly updated based on polls, as values are shifting in society constantly

this days. for instance, not so far ago, brick-and-mortar presence could be a determinant factor of brand strength, while today I believe is totally the opposite case for many

brands.

Social media presence and popularity as indicator of brand strength seems to be exploiting during the last two years. This is because the way in how users interact with

brands is switching in this direction. Having a strong social media presence could rocket the strength of a brand. This is the case of Starbucks.

16

Specific detailed analysis:

Interbrand: This model have very bad reputation among their peers. Keeping the system

hidden for competitors seems to indicate some kind of subjectivity. Finally, the fact that their valuations differ in their results dramatically from the ones performed by other firms seems to me to be another indicator of weakness. It seems that Interbrand performs valuations for brands depending on the country they are developed. If so, I believe that this is a great idea and a path to follow for other models.

Millward Brown: This models seems to be more complete than Interbrand's model for several reasons. One is that they value the consumer-brand relationship, which seems to

me to be a wise decision. It seems to understand better the different kind of relationships that a consumer have with a brand.

It is difficult for me to develop a compelling critique about this model, as I have not been

exposed to it enough to find disadvantages r failures, although critics seem to find

problems in the way the perform their calculations.

❦

17

Personal Banking Valuation Model

##