The recent announcement of the BB&T and SunTrust merger signifies not only the creation of the sixth-largest national lender but also the first major consolidation in the banking industry since the 2008 financial crisis. While the proposed merger will allow this new super-regional behemoth to more effectively compete with the leading national banks from a products/services/ technology perspective, it is also likely to have far-reaching implications for corporate reputation. Leveraging data from Ri's 2018 US Bank RepTrak measuring 40 of the largest US banks with a total of 15K respondents, we investigated the following questions three questions:
Q1: How do both banks’ reputations among their customers compare and what impact may the merger have on SunTrust?
A: Based on customer ratings of each bank, we know that BB&T and SunTrust can each rely on the strong emotional attachment these customers feel towards both organizations.
Figure 1: BB&T and SunTrust Customer Reputation
As shown above, BB&T only has a small and statistically insignificant reputational edge over SunTrust, suggesting that, at least from an emotional perspective, a merger would not create any challenges due to an imbalance in reputational capital between both banks.
While we do not see any big discrepancies between the companies’ overall reputations among its customers, differences do emerge when it comes to perceived performance on some of the key business drivers of reputation.
Figure 2 illustrates that, except for Innovation, BB&T consistently edges SunTrust on all other metrics. This is especially pronounced on perceptions of Citizenship and Governance — the degree with which the bank is deemed to contribute to society/the environment as well as its fairness, transparency and ethical behavior.
Figure 2: BB&T and SunTrust Customer Reputation Dimension Scores
This discrepancy is insofar important as Citizenship and especially Governance are among the top drivers of reputation overall. Figure 3 shows which dimensions are the most predictive of the overall emotional attachment that customers have with their bank, reputation.
Figure 3: Customer Reputation Dimension Drivers for the Banking Industry
In the Banking Industry and its customers most specifically, perceived Products/Services performance are the single most important driver of reputation, closely followed by Governance and both Citizenship and Financial Performance.
Emphasizing BB&T’s strengths in Products, Governance, and Citizenship may help overcome some perceived shortcomings around SunTrust’s performance in these areas and create a positive halo effect. This would then have to be sustained by actual local initiatives in SunTrust’s operating territories.
Q2: Are BB&T’s and SunTrust’s reputations going to facilitate or hinder regulatory approval for the merger?
A: It is well established that companies with higher reputation garner more stakeholder support. It's easier, for example, for these companies to be granted a license to operate in the way they wish. Reputable businesses are much more likely to receive the benefit of the doubtin times of crisis or uncertainty, and they are more trusted to do the right thing by their customers and the public at large. While the current regulatory environment seems to be more conducive to the proposed merger at hand, both banks will still have to make a case with regulators that combining their businesses will result in positive consequences.
While both banks have avoided scandals comparable to those faced by Wells Fargo, Stephen Nielander, an adjunct lecturer at San Diego State University and a partner at financial services firm Cerity Partners says that, “The Fed will look at how [BB&T and Suntrust] have been operating in their communities; have they done the right thing to help all groups of people." This is where both companies’ record on Citizenship – i.e. their societal and environmental contributions will most likely come under scrutiny. Both banks’ perceived performances are highlighted in Figure 4 below.
Figure 4: Citizenship Scores for BB&T and SunTrust for Customers and Non-Customers
Customers have a fairly positive perception around both companies’ Citizenship performance, but this is less the case among non-customers among which both banks earn a low average score. As regulators look for broader public feedback on the positive impacts BB&T and SunTrust have made over the years, it will be key for the latter to convey a compelling narrative to that effect, especially since a lot of non-customers will not be familiar with the banks’ initiatives.
In sum, both companies’ overall strong reputation among customers as well as the absence of significant negative press/scandals should resonate well with regulators. While emphasizing technological upsides and an increase in industry competitiveness may also help create a case for the merger, it will be key to illustrate how the latter will benefit, or at least not significantly damage, the communities in which the banks operate.
Q3: What reputation-related risks – if any - is the new bank going to face assuming the merger is successful?
A: In the banking industry, growth often means opportunity, but also risk. We consistently see that regional banks have a reputational edge over national ones, as exemplified in Figure 5.
Figure 5: Average Customer Reputation Scores for Regional vs. National Banks
While regional banks have a strong reputation among customers, national banks merely have an average one. Figure 6 shows some of the underlying differences in perceived performance on the seven drivers of reputation.
Figure 6: Customer Reputation Dimension Scores for National vs. Regional Banks
Regional banks are consistently perceived as outperforming national ones in all business areas, but especially in Leadership and Corporate Responsibility metrics — including Workplace, Citizenship, and Governance, the latter two being especially critical for driving overall reputation among customers. From a BB&T and SunTrust Merger perspective, it is going to be imperative that the new entity try and keep as much of a local and personalized feel as possible by leveraging the advantages its bigger size conveys while continuing to highlight its regional roots and community embeddedness.
As SunTrust and BB&T spearhead what many see as a new phase of mergers and acquisitions in the banking industry, the success of the merger hinges in part on each of the banks' reputation. As other financial institutions, or any other businesses looking to forge alliances, consider similar journeys, they will need to have clear answers to the following:
As stakeholders increasingly look beyond Products/Services performance as the main driver of giving their support, companies’ intangible assets, including what they stand for and how trustworthy they are will increasingly be more important.
Sven Klingemann, Ph.D.
Global Research Manager