Motley Fool analyst Matt Koppenheffer joins Rick Engdahl for an interview about banks. Are they really that hard to understand? Can the big banks be trusted? Join us for a discussion that sheds light on banks from Citigroup To Wells Fargoas well as some of the smaller players.
The crisis is over and banks are on the road to recovery, but many consumers are left with a bad taste in their mouths. In this video segment, Matt discusses what actions the big banks should take to bolster confidence—and how investors should keep an eye on those actions as they consider a return to the sector.
A full transcript follows the video.
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Rick Engdahl: Given the bad press they have received over the last few years – and it is waning; they are certainly not in the headlines every day like they used to be – do you think that your Bank of America and Citigroup need to spend a lot of time and attention restoring their brands, or do you think that will pay off in the long run?
Matt Koppenheffer: Yes, I think so. I think to some extent it’s a kind of “time heals all wounds” problem. You only get so many media cycles on an issue, and there have been many media cycles on this particular issue. We’re going to get to something else, for better or for worse.
But at the same time, they also need to continue to advertise and explain to people why these institutions are so valuable, why they’ve turned a new leaf; they’re not necessarily doing what they’ve been doing. I think they can also, to some extent, demonstrate where they haven’t gotten into trouble.
Yes, I think it’s a combination of things. I think they need to be proactive in repairing the brand, but I also think time will heal the wounds.
Part of it is also just providing good service and offering customers compelling value. No customer wants to feel like they’re being ripped off, so I think that’s fundamentally important.
But in terms of ease of use and convenience, when you hear about Bank of America, for example, they offer mobile deposits, a great mobile banking experience, a great online banking experience.
If you’re someone who cares about the convenience of banking, this goes a long way toward rebuilding Bank of America’s brand because people start thinking less, “Well, Bank of America is playing around with mortgage modifications,” and more, “Bank of America is a very technologically advanced bank that makes banking very convenient.”
Rick: Yes, from my work in branding, I would say that that experience is much more important in building a brand than advertising or anything like that that people think of when they think of brand building.
Frosted: Well, when I think back… one of the biggest brand destroyers of recent years was the Blood pressure Disaster, right?
I think back to the… they did a torrent of advertising after that, and I’m not sure it really did much. But the fact that BP Phillips stations are convenient for people and they offer gas… I don’t know.
Rick: Do you have any final advice for someone who wants to invest in financial assets and is perhaps just getting started?
Frosted: Well, I would advise not to invest based on general impressions. When we talk about the headlines, the negative headlines, that is obviously a problem. You don’t even bother to look at the sector because you read the headlines and think, “Oh, the banks are terrible.”
The other side of the coin is just looking at the surface. You might look at a rating or think, “Oh, I’m a customer of Bank of America,” or “I’m a customer of Citigroup and I think they’re great.” It’s very important to dig in, do your homework, do your research and really understand what you’re investing in.
Yes, the big banks are a little bit complex, but I don’t think they’re incomprehensible to investors. I think if you open up the annual report, read what’s going on, listen to some conference calls, hear what they’re talking about, hear what they’re focusing on, you get an understanding.
I think understanding what each bank does – because like I said, they’re not all the same – the Big Four banks are not all the same. The banks underneath them are not all the same. I think it’s important to really understand the individual banks that you’re investing in.
The article “Damage Control: What Should Big Banks Do to Restore Their Brands?” originally appeared on Fool.com.
Matt Koppenheffer does not own any of the stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup and Wells Fargo. Try one of our Foolish newsletter services free for 30 days. We Fools may not all agree, but we all believe that considering a broad range of insights makes us better investors. The Motley Fool has a disclosure policy.
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