MISSION INTANGIBLE

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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Banking on reputation

Nir Kossovsky - Friday, May 15, 2009
On May 11, JD Powers released a study showing that nearly a third of consumers who switched banks said the deliberately excluded ones seen as financially unstable, or as having a bad reputation or questionable ethics.

Reputation is the impression formed by stakeholders of how a company manages its intangible assets. Risk management and ethics compliance are exemplary business processes for intangible asset management.

Stakeholders comprise employees, suppliers, customers, competitors, and investors. Reputation creates among stakeholders a set of expected behaviors. The Steel City Re Reputation Index is designed to capture the financial implications of both the aforementioned stakeholder behaviors and expectations of stakeholder behaviors as determined by corporate reputation. We used the Steel City Re Corporate Reputation (IA) Index to determine if there was a relationship between a bank’s financial stability, as reflected in its one-year ROE, and its reputation.

The table below shows the top 10 companies in the 175-company Regional banks sector. Over the past year, their median ROE was -10%. The median ROE for the year for the sector as a whole was -49% and the ROE for the bottom ten banks in this sector was -89%.

The data suggest that banks may benefit from transforming their current risk management processes into holistic risk and reputation management systems.
 

Rank

Ticker

Name

Index Value
11 May

Volatility Percentile

1

IBKC

IBERIABANK Corp.

1

7%

2

FFIN

First Financial Bankshares Inc.

0.99

2%

3

CFR

Cullen/Frost Bankers Inc.

0.98

3%

4

PFBX

Peoples Financial Corp.

0.98

54%

5

BMRC

Bank of Marin Bancorp

0.97

4%

6

UMBF

UMB Financial Corp.

0.97

25%

7

WABC

Westamerica Bancorp

0.96

3%

8

CBSH

Commerce Bancshares Inc.

0.95

2%

9

NKSH

National Bankshares Inc.

0.95

79%

10

BOKF

BOK Financial Corp.

0.94

6%


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