EUROPEAN BANKING COMMUNICATIONS STRESS TEST – A CALL FOR MORE TRANSPARENCY

By Joakim Lundquist, Head of Italy, Switzerland and Austria, Comprend

As banks continue to struggle with the consequences of the financial crisis and a lack of transparency over events such as Libor rigging and tax avoidance become ever more ingrained in the public’s conscience, the importance of clear and transparent communication has never been greater.

It is clear that the web, blogs and social media are now people’s impulse port of call for information and explanation. While the interactive world of social media can seem a daunting place for large corporations, there is one channel they still command: the corporate website. But, to be effective, it is key that companies use this tool to respond to external pressures.

At Comprend we have been measuring the performance of corporate websites for 18 years through our annual Webranking survey, a comprehensive study that evaluates corporate websites based on feedback provided by 500 financial journalists, analysts and investors in Europe and globally. The answers are used to refine a 140-part protocol that ranks everything from the availability of financial and non-financial information such as debt, investment strategy, risk management and CSR, to the quality of information about executives and board members.

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Webranking works like a transparency “stress test”: the stresses in this case originate on the one hand from the demands of the most critical, time pressed audiences and on the other hand from the need to gain competitive advantage with respect to their peers. The banks that pass this test demonstrate a minimum ability to govern their reputation in digital channels: they create an opportunity to build a “premium” status with key stakeholders, which can facilitate access to capital markets and translate into higher trust among customers, the ability to attract the best talent or to set the agenda on the issues of importance to the sector.

So how do banks perform?

Results from the Webranking surveys over the last year show that investors and analysts need to understand how a company is managed, what investment strategies it applies and what financial results are. Whether the capital markets consider a company a trustworthy investment is partly in the hands of the organisation itself by communicating efficiently and effectively.

This year’s results show that only a handful of the 56 European banks we analysed – including Danske Bank, Swedbank, Credit Suisse and UBS – performed well, with many of their competitors failing to satisfy stakeholders’ most basic online needs. Considering 50 points out of 100 as the threshold at which companies respond adequately to market requirements, less than 1 out of 5 of Europe’s top banks passed the test, with 40% of them failing to present even a minimum of content expected by the market (30 out of 100). In fact, the banking sector is one of the few sectors that saw its average score decline compared to last year.

So why does this matter? In the absence of information, people make negative assumptions, disconnect and head elsewhere. Refraining from being open and transparent enough to give people the information they want, even if it’s not always what the bank wants to stress, undermines trust.With analysts, investors and journalists revealing that easy access to decision critical information is crucial in order to make informed decisions, this is clearly in need of improvement.

Key areas of strength and weakness

A particular weak spot for the sector, evidenced by our research, remains in investor relations and corporate governance, where banks lag behind the top 500 European companies in explaining their investment proposition (5% vs. 12%); only 13% of banks convey their financial targets and 9% describe the growth drivers of their business. With the banks constantly plagued by a number of issues, including regulation and capital weakness, it is surprising that this continues to be a deficiency for European banks.

Most of the banks assessed also do not provide efficient communications towards potential employees, even though more than half (54%) post vacancies on their websites. Only 34% present their pay and benefits structure, although some banks are better than others, with Danish bank Danske Bank a particular standout in this area.

Yet where many of the banks analysed do excel is in the area of corporate social responsibility, with 71% presenting a CSR report, up from 60% the previous year. Banks such as UBS, Intesa Sanpolo and Nordea Bank lead the pack in this area as they provide ample information on the subject. Considering how corporate responsibility tends to presuppose a long-term view of the business, it is encouraging to see that more than two thirds of the banks examined are taking this seriously.

A need to transform with the times

Hand-in-hand with the issue of transparency is that of remaining competitive. Banks risk being outflanked by innovative new players who are disrupting areas such as payment transactions and private banking. As more users interact with banks’ digital ecosystems, it is imperative to be able to communicate with a broad range of stakeholders on corporate as well as commercial matters. The Webranking survey is a barometer of this digital readiness and has evidenced key areas that are critical for major banks in understanding how they are positioned.

For example, the survey shows that being able to adapt to mobile is a key priority, and with Google recently changing its algorithm to prioritize mobile web pages, it is crucial that banks move to a more adaptable screen resolution for different devices, to allow their customers the digital experience they are after. Progress on this front is still gradual, with the percentage of responsive websites climbing to 14% from 6% in last year’s survey.

Looking ahead

With a PR or reputation crisis now taking place at the speed of digital, and new players continuously entering the market, more needs to be done to get these banks digitally ready. For instance, 83% of journalists say they use social media to find information about companies, yet only 50% of the examined banks indicate their corporate social media accounts and only one in four integrate their social media activity into their corporate websites.

This is not good enough, as it shows European banks are poorly positioned in terms of their digital corporate presence and that there is a substantial gap between the expectation of key stakeholders and the banks’ response. With the digital world constantly evolving, this should be seen as an opportunity for banks to grab digital by the horns and reinvent themselves in order to satisfy their customers’ and stakeholders’ growing needs.

Keeping an eye out on next year’s Webranking survey will reveal if they have done just that.

EUROPEAN BANKING COMMUNICATIONS STRESS TEST – A CALL FOR MORE TRANSPARENCY

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