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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Wells Fargo: Regulators and Litigators Want Board Member Scalps

C. HUYGENS - Thursday, June 22, 2017
Regulators and litigators want board member scalps--Buffet may be outgunned. The reputation crisis at Wells Fargo now enters the regulatory phase, which by Steel City Re's metrics, is typically a very costly process.

"I urge you to exercise your legal authority to remove the holdover Wells Fargo Board members. Federal Reserve regulations and guidance impose clear risk-management obligations on the Board — obligations that are quite demanding for a bank as large and complex as Wells Fargo," Warren wrote. "The Board did nothing to stop rampant misconduct in the Community Bank that resulted in more than 5000 bank employees creating more than two million fake accounts over four years."

Read more in Business Insider.

Board Allowed Long-lasting Reputational Damage to Wells Fargo

C. HUYGENS - Wednesday, June 21, 2017
Senator Warren, writing to the Fed demanding the removal of all 12 directors of Wells Fargo…

…argues in the letter that the directors failed in their risk-management obligations, resulting in "massive financial losses" and "long-lasting reputational damage to the bank that has eroded the bank's customer base."

Read more in the Business Insider.

Paying Down the Costs of a Reputation Crisis

C. HUYGENS - Tuesday, May 09, 2017
More going-forward costs of #reputation #risk -- now burning furniture.

San Francisco-based bank Wells Fargo & Co. is considering selling its insurance brokerage unit for about $2 billion, Bloomberg reported Tuesday.

Citing “people familiar with the matter,” Bloomberg said Wells Fargo is contacting private equity firms to determine the interest in Wells Fargo Insurance Services USA Inc. The bank is planning to move forward with a sale, Bloomberg reported, but it hasn’t set a timeline for holding a formal auction, one of the people said.


Read more in the Business Insurance.

Paying the Ongoing Costs of a Reputation Crisis

C. HUYGENS - Monday, May 08, 2017
#Reputation #Risk “Corporate names are resilient: when their images get damaged, a change of management or strategy will often revive their fortunes. But personal reputations are fragile: mess with them and it can be fatal,” wrote John Gapper for the Financial Times in August, 2016.

Wells Fargo is preparing to unveil new cost-cutting measures as the scandal-hit US bank tries to rebuild Wall Street’s confidence after a bruising annual meeting with shareholders.

Tim Sloan, chief executive, is this week expected to reveal plans for annual savings at Wells, the world’s third-biggest bank by market capitalisation, of as much as $3bn — on top of an existing $2bn expense-reduction plan.


Read more in the Financial Times.

Wells Fargo: Legal Bills Pile Up

C. HUYGENS - Friday, May 05, 2017
#Reputation #risk Entry level losses based on 6000 events average 24% market cap, 13% sales, and 12% net income. Values vary by industry sector, year, and underlying causes.

Wells Fargo has warned its litigation bill could be $200m higher than previously thought as the US bank sheds new light on a series of lawsuits it is facing over the bogus account scandal.

In a quarterly filing on Friday, Wells said “reasonably possible” losses from legal actions against it could exceed its existing provisions by $2bn — up from a $1.8bn figure it disclosed three months ago.

The document shows how lawsuits are piling up against Wells after thousands of its employees, under pressure to hit sales targets, turned to fraud. Workers signed up as many as 2.1m customers for cards and accounts over several years without their authorisation or consent, in some cases faking signatures.


Read more in the Financial Times.

Wells Fargo: Crediting the regulators

C. HUYGENS - Thursday, December 12, 2013
In a comment on Wells Fargo last week, reputation consultant Jonathan Salem Baskin wrote, "the Feds are forcing Wells Fargo to improve its reputation and, as a huge consumer-facing brand because of the nature of its business, it can’t help but communicate that operational rigor to its customers." Do the metrics bear him out?

The Consensiv reputation metrics, powered by Steel City Re's measures of reputational value, reflect stakeholder expectations and their economic effects. Of the 49 firms in its sector, Major Banks, Wells Fargo has generally hovered above the third quartile of the metric, Reputation Premium. Its most recent value was the 88th percentile. Its stakeholders are confident that this premium is appropriate as evidence by an extremely low Consensus Trend metric of 1.6%. This is especially notable since the 3rd quartile of the Consensus Trend measured off the scale at nearly 300%. The Consensus Benchmark,which is based on a one-year average standard deviation of the Reputation Premium, indicates at 8.1% a previously more volatile course. In short, Mr. Baskin is correct; it appears, the "Fed's made 'em do it."



For more background on the Consensiv reputation controls, click here. To view the November 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here.

JPMorgan Chase: The limits of reputation resilience

C. HUYGENS - Tuesday, October 15, 2013
A strong reputation among a diversity of stakeholders can sustain a firm for years through thick and thin. Witness the 25-year run enjoyed by Johnson & Johnson (JNJ) after the famed 1982 Tylenol poisoning, and the less famed but much more important 1986 Tylenol poisoning II. Alas, resilience has its limits as Johnson & Johnson discovered in recent years.

Enter JPMorgan Chase (JPM), an integrated bank led by Jamie Dimon, a CEO with rock star-like cult status as a risk manager extraordinaire, who guided his firm through the ugliness of 2008 unscathed. Since the London Whale event hit the news 18 months ago, sturm und drang have played out amongst stakeholders, especially those at the periphery comprising regulators, litigators and mommy bloggers, who have piled on the opprobrium -- and the fines. The New York Times' pithy summary comprises the headline: The Bloodlust of Pundits Swirls Around Jamie Dimon. See cartoon clip starting at 0:56/2:31 - http://www.youtube.com/watch?v=KNCz0-CYj8M

The damage has been incremental, but measurable; the largest U.S. bank by assets, on Friday reported a $380 million loss, or 17 cents per share, in the third quarter on lower revenue and massive legal bills. That compares with net income of $5.7 billion, or $1.40 per share, a year earlier. Excluding litigation expense, the New York financial giant posted a profit of $5.82 billion, or $1.42 per share.

The Steel City Re reputational value metrics reflect the lowered reputation (CRR) ranking (reputation premium) driven by the volatility of stakeholder (RVM Vol) expectations (consensus trend). Wells Fargo (WFC) now enjoys a greater premium and greater return on equity, and lower current volatility. The projections are for Wells Fargo to continue gaining premium value, and for JP Morgan Chase to continue losing.

Credit: Seeking an environmentally clean balance sheet

Nir Kossovsky - Tuesday, August 31, 2010
The New York Times reports today  that major lenders are backing off from companies that present the potential for material environmental risks. It's a reputational thing.

According to the report by Tom Zeller, "After years of legal entanglements arising from environmental messes and increased scrutiny of banks that finance the dirtiest industries, several large commercial lenders are taking a stand on industry practices that they regard as risky to their reputations and bottom lines." Major financial institutions now factoring sustainability issues into their lending decisions include Wells Fargo (NYSE:WFC), Credit Suisse (NYSE:CS), Morgan Stanley (NYSE:MS), JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citibank (NYSE:C), HSBC (NYSE:HBC), and Rabobank (AMS:ROBA).

In the parlance of the Society, it appears that sustainability policies and practices are emerging as material credit risk factors. And for those of you who were wondering what all the fuss is about at the Society, this is an example of what we mean by "intangible asset finance."

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