How to do PR for banks
Big banks — at least in Europe — are putting on a new, highly branded, and more contrite face. Barclays is embarking on something it calls “Project Transform”’; Deutsche Bank has announced its “2015+” strategy and is pushing for what its CEO has called “deliberate” “uncomfortable change”. UBS has its own 2015 strategy, and the head of its investment banking unit publicly proclaimed that the industry has become “too arrogant, too self-convinced”.
Should we buy any of this? William Cohan, for one, isn’t a fan of Barclays CEO Anthony Jenkins’s “new morality”. Cohan’s right to point out that all of this hat-in-hand talk comes after a long period of transgression at Barclays:
Among other indiscretions, the good folks at Barclays manipulated the London interbank offered rate, shredded unflattering reports about the U.S. wealth-management division and, according to British authorities, may have fraudulently loaned money to Qatar to invest back in the bank to help Barclays avoid a government bailout in 2008.
Cohan’s definitely not thrilled by Barclays naming Hugh “Skip” McGee, a former Lehman exec, as the head of its corporate and investment banking division in the Americas. Changing banking, Cohan argues, means holding bankers “financially accountable, up to their entire net worth, when things go wrong.”
Of course, we all know that no bank CEO is going to do this kind of thing willingly — and bank shareholders probably wouldn’t ever force this kind of revolution. But in order to dismiss the new European attitude to banking as merely an exercise in branding, as Cohan does, you also have to believe that the message doesn’t really matter.
It’s impossible to put a value on bad press, but contrast Europe’s banking rhetoric with the way US banks handled PR post-crisis. It’s not hard to remember how prominent bankers helped draw their own caricatures. In 2009, Lloyd Blankfein declared Goldman Sachs was doing “God’s work” and made stumbling, irritated defenses of during Senate hearings. Goldman spokesman Lucas van Praag openly ridiculed the financial press. In 2011, Jamie Dimon, not one to bite his tongue, called new Basel rules “un-American” and seemed to describe foreclosure as an act of mercy. As result, Goldman and JPMorgan aren’t companies to most of us now, they’re The Squid and the Whale.
After a financial crisis that the GAO says took some $22 trillion out of the US economy, US banks have lost nearly every battle in the messaging war. Last summer, Americans’ confidence in banks fell to a record low. In a recent Bloomberg poll, 60% of investors said they weren’t confident or just “somewhat confident” that banks were taking appropriate risks; 29% said big banks should be broken up. And those are investors — former bankers like Sandy Weill and Phil Purcell have already jumped on the break-up-big-banks bandwagon.
None of this is to say that banks could somehow stop all bad press by saying the right things — or that big banks should be excused for things like manipulating Libor. Still, it can’t be a bad idea to take a leaf out of the European banks’ book, acknowledging that public opinion exists and that relating to the public actually matters. Cohan’s often good at criticizing bank culture, but it seems gratuitous to write off Barclays public self-flagellation and multi-year plan before it starts.
There’s a corollary to the public opinion problem for banks: the market opinion problem. Big global banks these days routinely trade well below their book value — the investing public simply doesn’t believe their financial disclosures or is waiting for the next big scandal. Whether it’s purely, partly or largely spin, we should be applauding when big, complex and frustratingly opaque banks at least sound like they’re trying to get us to believe them.