Bank Reputation: Getting Just a Little More Love

For most large companies, products and services are what cements a strong reputation. Not so for banks. At least since the crisis, consumers have cared more about the governance of banks. And even more than governance, what they care about now is performance. According to the 2011 American Banker/Reputation Institute survey of bank reputation, consumer sentiment toward the industry is on the mend, coinciding with an improvement in the financial performance of big institutions.

The lift in scores for the 30 large banks in the survey was not enough to pull the industry off the lower rungs of corporate reputational rankings; the industry remains among the least esteemed of 17 sectors tracked by Reputation Institute, the private advisory firm that conducts the annual bank study for American Banker. But after finishing nearly last in 2010, banks — not including diversified financial services companies — fared better this year than both the telecommunications and energy sectors. (Banks get blamed for many things, but dropped calls and big oil spills are not among them.)

For most enterprises, such as the food and consumer product companies that consistently dominate Reputation Institute's annual ranking of corporate reputations across industries, products and services account for the biggest driver of reputation score — 17.7 percent. For banks, the weighting is smaller, and shrinking. As a component of overall reputation, products and services accounted for 15.2 percent of banks' scores, down from 15.7 percent last year.

The idea of products and services being a declining influence on bank reputation scores comes as no surprise to Anthony Johndrow, a managing partner at Reputation Institute. "The banking industry has always been about relationships," he says. "Obviously what you do in the products and services you offer are important to people — that's ultimately how they interact with you. But because there's so much similarity across banks, the days of being able to differentiate with free checking or a free toaster ... that isn't the path going forward."

Instead, he suggests a bank can distinguish itself by listening to customers, focusing on their needs and helping them understand how it makes business decisions.

That goes directly to governance, and the extent to which consumers believe a company behaves ethically and transparently. As the rawness of the crisis recedes, governance may become a smaller factor. It already declined in importance some from last year, but it still matters.

The emergence of financial performance as the biggest component of bank reputation speaks less to a desire by consumers to think like Wall Street stock analysts, and more to their very Main Street concerns about whether a bank is going to survive. But the public is not so sure which banks are in fact producing the strongest results. Zions, which has yet to buy back the government's stake in it, was rated second in financial performance among banks in the 2011 survey, while Ally, which is majority owned by the government, ranked third.