WASHINGTON — Public confidence in banks has begun to recover this year from the reputational damage stemming from a series of high-profile failures in 2023, according to a study conducted by RepTrak, a reputation consulting group. But while the overall perception of banks' stability has improved, the public showed persistent support for government regulation and ethical and sustainable business practices.
For the study, RepTrak measured both customer and noncustomer sentiment across 38 of the nation's largest retail banks. They collected over 16,000 ratings from the general public in May and June 2024, with the online survey targeting participants who were highly familiar with the banks they evaluated.
The reputation score ranges from 0-100 and measures the emotional connection that individuals have with a company. It is a composite score based on 4 different questions measuring the degree of trust, respect, admiration and good feelings toward the company.
Last year banks faced the most
The results show that the public is slowly putting the 2023 banking crisis behind them. The turmoil began in March 2023 when Silicon Valley Bank, a crucial financial partner for tech startups and venture capital firms, collapsed due to liquidity issues and large paper losses on securities as rising interest rates undermined depositor confidence, triggering a bank run. Shortly after, Signature Bank, which primarily served commercial real estate and crypto clients, also failed due to a similar loss of depositor trust. These events sparked widespread uncertainty and a wave of regional bank failures.
In response, federal financial regulators
While regulators' efforts helped prevent a broader contagion, regional banks' reputations still suffered significantly in 2023 and dragged down the industry as a whole. Customers of midsize firms were five times more likely to consider switching to other banks and were far more concerned about their institution's financial stability compared to customers of other kinds of banks, according to Sven Klingemann, research director at RepTrak.
"Having that uncertainty and that concern really negatively impacts your reputation," he said. "That was one of the big reasons why the regional banks last year were much more impacted by the financial crisis and the perceived lack of stability and that spillover effect from other regional banks that were suffering."
In a positive sign for the industry, RepTrak's 2024 survey found 50% of regional bank customers feel completely confident in their bank's financial soundness, representing a double-digit increase in customer confidence. Only 39% of regional bank customers expressed no concern about their bank's ability to meet financial obligations the year prior.
The overall industry saw gains as well. While last year's survey gave the overall industry a 67.1 reputation score, that number has modestly improved to 67.8 in 2024. Regional banks Huntington and Cullen/Frost Bankers received among the highest reputational ratings from their customers, showing significant yearly gains.
Huntington Bank's 2024 score among customers was 81.5 — the 5th highest customer reputational score — up from 76.1 in 2023 — and a 5.4 increase in the firm's overall score.
The $193.5 billion-asset bank has emphasized expansion over the last year, extending its reach into the Carolinas and launching new business lines in fund finance, health care, and Native American banking.
Huntington has debuted in new markets including the
In addition to geographic growth, Huntington has focused on strengthening its auto lending business, which significantly boosted earnings in 2024.
Cullen/ Frost received the third highest reputation from its customers earning an 83.9 score, up 6 points from the previous year.
Cullen/Frost, operating as Frost Bank, has also focused on significant
USAA — which primarily serves members of the U.S. military and their families — was the favorite of customers and non customers alike, despite troubles the bank had earlier in the year.
Despite the settlement, USAA's reputation did well in 2024. It received the top rating of 85.7 from its customers in 2024, a moderate drop from 2023 but still strong marks. Among non-customers, the bank also received the top mark, earning a 74.2.
Synovus saw the most significant gain in reputation from 2023 among non-customers, receiving a 68.7 — a 4.9 boost from the previous year.
While concerns about banks' financial stability overall have moderately decreased over the past year — particularly among regional bank customers — the survey suggests significant uncertainty remains among non-customers who exhibit persistently lower trust levels. Additionally, following a period of uncertainty about banks' financial health, the study showed a persistent public desire for government intervention in bank industry affairs to prevent future crises.
57% of respondents this year believe the government should regulate investment risks at banks, while 46% support mandating an increase in capital reserves. Likewise, 46% of respondents think the government should insure all customer deposits, including those above $250,000. This marks an increase in demand for regulatory measures compared to 2023, when only 55% of respondents favored regulating investment risk and 44% said banks should be forced to hold more capital.
This year's survey also measured what RepTrak calls the 'drivers' of a bank's reputation.
Klingemann says consumers' perception of bank leadership — characterized by a strong, appealing leader and a well-managed organization — is crucial particularly for large banks. The 2024 study shows there are opportunities for improvement by focusing on ethical practices, transparency and effective leadership.
Conduct — defined as fair and ethical behavior and transparent business practices — holds an outsized significance in the banking industry when compared to other sectors. When it comes to large banks, Klingemann said prospective customers often prioritize ethical behavior above all when deciding whether to engage with a bank.
"For non-customers, the ethical behavior of large banks, or the perception of it, is even more important than products and service considerations when it comes to evaluating, 'who do I want to do business with?'" said Klingemann. "Conduct is among the highest weights across industries. In the banking industry, conduct tends to carry a disproportionate weight as compared to other industries."
Financial performance is another critical factor, especially for the relatively less sizable regional and non-traditional banks, where customers often prioritize the bank's financial stability and growth prospects over other considerations.
"Customers clearly give banks the highest score when it comes to their products and services," Klingemann noted. "Whether it's large, regional, non traditional, and in terms of their financial performance."
According to the study, banks must also perform a delicate balancing act in weighing the expectations of increasingly polarized customer segments with varying political affiliations. Social justice measures like diversity, equity, and inclusion and environmental, social, and governance (ESG) practices, which came to prominence in corporate America after the George Floyd protests in 2020, still offer a net benefit to bank reputations. However, banks must carefully navigate how they discuss and frame these issues to avoid alienating any customer groups.
Despite a decline in the overall importance, there is still a positive demand for these initiatives, which provide a net benefit to banks' reputations when implemented, the study showed.
Banks perceived to invest heavily in D&I and ESG initiatives gain significantly in reputation. Even among Republicans, who are generally less favorable towards these concepts on paper, banks receive a higher reputation score when they are believed to invest in these areas. This suggests that while the term ESG may carry some political baggage, the underlying principles of ethical, inclusive, and sustainable business practices are broadly supported.
Klingemann says it's smart for most banks and companies to stay the course on implementing such practices but should adjust the way they describe such programs. The underlying principles of diversity and fairness are more popular with the public than the corporate monikers of D&I and ESG used as shorthand for such principles.
"Diversity, equity and inclusion and environmental, social and governance practices still have a positive impact on reputations, however, when companies focus on more specific actions without using these labels, there is an even greater perceived benefit from high investment in these areas," Klingemann said. "Once you start explaining to [the public] what this is really about, without talking about DEI and ESG, look at what it does for you."
But with some banks leaning heavily into the language of socially conscious practices, it's unclear how customers from various demographics respond to the underlying initiatives. Younger respondents, particularly those between 18 and 24 years old, and Republicans show declining interest in these practices.
Interestingly, independents tend to be more skeptical of banks than Democrats or Republicans, perceiving them as less ethical, innovative and financially stable. This skepticism likely contributes to the lower reputation scores banks receive from independents compared to Republicans, who generally hold banks in higher esteem.
The RepTrak study indicates that several risks related to fees and ethical behavior significantly harm a bank's reputation. Key risks include charging excessive fees and engaging in unethical or discriminatory practices.
The Biden administration has taken a strong stance against such fees in the financial sector — labelling them "junk fees" — to highlight what regulators call the unfair impact on consumers.
The extent to which such factors affect consumer perception varies by customer status and political affiliation. For instance, Republicans generally penalize banks less severely for ethical missteps like discriminatory practices compared to Democrats and independents. However, when it comes to security breaches that result in the loss of personal or financial information, Republicans view these incidents as more severe, demonstrating a different prioritization of risks.
This differentiation is also evident in how customers and non-customers perceive these risks; customers tend to be more critical, particularly when aware of "junk" fees, potentially reflecting an impact on their relationship with the bank.
Another politically salient issue impacting banking is inflation. Over the past two years, rising inflation has increased the costs of products, services, and interest rates for loans and mortgages. Customers generally perceive that banks did not exploit inflation to burden them excessively, but there is still considerable skepticism, particularly among non-customers. Large banks, however, are viewed less favorably compared to non-traditional banks, and efforts to keep fees and loan rates low have led to significant reputational gains for some large banks. However, perceptions of banks' efforts to keep rates low decreased among younger customers and independents.
Klingemann says those banks perceived to act in the public's best interest by keeping rates low are rewarded with higher reputation scores, especially among large banks. Conversely, banks that appear to exploit inflationary conditions face significant reputational risks.
"Respondents were much less likely to think that those large organizations really did their best. To keep prices down in the midst of inflationary pressure," he said. "It's not that they believe the bank screwed them over, but the data indicates the public think large firms certainly didn't put their best foot forward."
