Bank Investment Consultant
Reports of job losses at banks are rife, but one area most aren’t cutting is ad budgetsin fact, many are bolstering their marketing efforts to capitalize on public unease. And it seems to be working.
U.S. Bancorp, which is in the middle of a national ad campaign launched in August, said its third-quarter marketing and ad budget increased 5.6% from a year earlier to $75 million, despite concerns about a contracting economy. The company’s third-quarter deposits rose 3% from the second quarter, to nearly $140 billion. U.S. Bancorp’s deposits grew every business day in October, and on several days it gathered more than $100 million. “We’ve had some of the best deposit growth days we’ve seen” in three decades, says Richard Hartnack, vice chairman of consumer banking.
The ads include lines such as “145 years without missing a dividend” and “the future looks brighter with U.S. Bank.” Hartnack says the campaign will continue through December. “We’ve seen a correlation between advertising in markets where there are institutions getting negative headlines and where we did well,” he says. “It’s working now, so we wouldn’t want to stop it.”
Likewise, PNC also ramped up promotions in the third quarter. Its marketing budget grew 5.5% from a year earlier to $38 million. The effect? Average deposits rose 1% from the second quarter and 8% from a year earlier, to $85 billion and it added 36,000 accounts in the third quarter.
Given that ad spending overall is down, observers say a commitment to advertising sends a strong message. “Many banks with strong capital positions are repositioning their ads around safety and soundness,” says Les Dinkin, a managing director in the New York consulting firm Novantas.Mark Hendrix, executive vice president and director of corporate marketing at PNC, says marketing the company’s name to new customers is critical as competitors falter. “We have increased our advertising at the height of a recession to opportunistically attract prospects,” Hendrix says.
Smaller banks suddenly empowered by larger banks’ weakness are also taking the opportunity to gloat. Among regional banking companies, KeyCorp has been especially aggressive, increasing its third-quarter marketing spend 29% from a year earlier to $27 million, to lure customers from troubled competitors such as National City, which is selling itself to PNC. One of the primary messages in KeyCorp’s ads: “In turbulent times, turn to those you trust.” “It is intended to make us the beneficiary of the turmoil,” says Beth Mooney, KeyCorp’s vice chair and head of community banking. “As others struggled, we actually grew.” Third-quarter deposits in its community banking division grew 1% from the previous quarter and 7.8% from a year earlier to $50 billion.