By Claudia De Meulemeester
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Everyone understands the importance of branding. Each of us is influenced by it every day – in the toothpaste we use, the fast food we order, the clothes we wear. Companies spend billions of dollars every year marketing their brands to ensure that we choose theirs next time we are at the (increasingly online) checkout.
The importance of building a brand among the financial community for companies is less well understood. But don’t underestimate its importance.
Having a good reputation as a business among the key constituents of the financial markets can, one could argue, make almost as much difference to the bottom line as a viral campaign that persuades thousands of people to drink a new brand of beer or wear a different pair of trainers.
How so? Looking at the first group of brand influencers, a good reputation among financial analysts means they are more likely to favour your stock, which can have an impact on your share price.
Second, those shareholders will appreciate a corporate management that delivers on its strategic and financial policies, creating a virtuous circle of people who want to buy your stock, helping to boost it even more.
Third, as companies increasingly turn to the debt capital markets for funding, building a financial brand known for good risk management, strong cashflow, correct leverage levels and a reputation for delivering beyond expectations will only help persuade more bondholders to buy your debt at better rates.
Finally, if you appeal to all of these stakeholders, then the chances are you are going to be top of the list when banks come calling with offers of lines of credit, trade finance facilities, or even strategic M&A opportunities.
One of the best
So, the standing of your brand among the financial community really can make a difference. But how do you make it one of the best?
Asiamoney sought to find this out in its inaugural best brands in finance survey, which asked all the key stakeholders in Asian financial markets to nominate the companies whose brands impressed them most. Asiamoney analyzed the factors determining the strength of a brand among the financial community and spoke to the top-ranked companies.
Trust and integrity are perceived as core values in establishing a beneficial working relationship in the financial community, and scored the highest out of 10 monitored factors. When looking at financial aspects, the quality of the finance team and a solid balance sheet rank second and third. The importance of a clear corporate strategy follows fourth in order of importance. Other factors that were examined included credit ratings, access to capital, accuracy of financial forecasts, risk management, investor relations and corporate social responsibility.
Deputy managing director of India’s HDFC Bank, Paresh Sukthankar, says: “In the financial services sector, a lot of what we do has necessarily a risk factor. On the one hand we have commitments to our customers, on the other we need to deliver strategic targets to stakeholders.”
Eugene Galbraith, deputy president director of Bank of Central Asia in Indonesia, adds: “The most important thing is making sure to be able to deliver.”
A healthy balance sheet, the right leverage targets and the balancing of risks are core to a successful performance. “The quality of financials is universal,” says Michael Foong, group chief strategy officer at Maybank. “Whether we like it or not, analysts prefer this metric to judge the quality of a bank.”
For businesses to stay relevant they also need to be willing to innovate and hold a long-term perspective. Datuk Fazlur Rahman, chief financial officer of Malaysia’s Tenaga Nasional Berhad, provides an example: “Given we deal in utilities, things change fast in our business, and we do not only look at increasing profits but also take into account the reality of resource consumption and global market influences. We are building a meaningful portfolio of renewables in the long term as we need to have them in our organization make up. When we bring such changes along, we need adequate communication with our shareholders. We achieve trust through transparency, and financial results without a proper reputation are not possible.”
Cooperation
Cooperation between banks and corporates is also important. From finding funding in the international community to assuring the lowest costs of borrowing, banks play a crucial role in the success stories of many companies. “We like to think of our banks as our partners,” says Augusto Toti Bengzon, chief financial officer of Ayala Land in the Philippines. “We work with investment banks, corporate banks and retail banks, which provide us the support we need.”
Most of all, the quality of a finance team can make a big difference. With 29.5% of votes it is regarded the most important financial factor in determining the strength of a company, according to our survey respondents. Even more so than a solid balance sheet, which had 28.54% of the votes.
“Our finance team is crucial in understanding raw numbers and they have a critical role to fulfil as they are the focus of shareholders and regulators,” says Foong from Maybank.
Although strong financials are a universal metric to assess the quality of a business, numbers do not tell the whole story of a brand in the financial services. The understanding of the overall corporate strategy of an institution also needs to be properly communicated to all players involved.
“We are equally focused on delivering strong financial performance and ensuring that our strategy is well understood,” says Diana Cesar, chief executive officer at HSBC Hong Kong. “Both are clearly instrumental in delivering attractive returns to our shareholders.”
“It’s not just the numbers. All needs of our stakeholders should be considered,” adds Bengzon from Ayala Land.
A recurring theme in conversations with senior management at the winning banks and companies is the importance of engagement.
Takayoshi Futae, chief executive officer of Asia & Oceania at The Bank of Tokyo-Mitsubishi UFJ, bases his model on three dynamics: communication, fact-finding and passion.
“Our internal and external communication needs to reflect who we are and what we are good at,” he says. “We will strengthen our brand name by simplifying it to MUFG Bank from next April. We won’t go away from the market, we commit to the market.”