SOCIAL MARKET FOUNDATION
Chart 1: HSBC’s share price and quality perceptions, January 2008 – September 2009 14%
120
12%
100
10%
80
8% 60 6% 40 4% 20
2% 0% Jan 08
0 Mar 08
May 08
HSBC quality (LHS)
Jul 08
Sep 08
Nov 08
Jan 09
HSBC share price (RHS)
Mar 09
Sep 09
Jul 09
r2=0.65086
Sources: YouGov BrandIndex and Google Finance historical share price data.9 Share price: 4th January 2008 = 100.10
HSBC’s high quality rating may be deserved (in the eyes of the public, at least), but what about the perceived quality of banks that fared less well in the crisis? Chart 2 shows how incumbency remains a major advantage in the wake of the crisis, irrespective of institutional failure. The chart averages consumers’ quality ratings for the incumbents (which controlled 79% of the current account market in 2007),11 and the seven newer entrants, which make up most of the rest of the market. Before the collapse of Lehman Brothers and the banking crisis that ensued, the established players enjoyed a six to nine percentage point advantage in quality ratings. 9 YouGov’s BrandIndex data asks their consumer panel daily whether they think a range of firm are ‘good’ or ‘bad quality’, or whether they are neutral. On the charts that follow, a positive figure shows that more consider the FSI to be good quality than bad – as a percentage of people who are neutral. The ‘established players’ are Royal Bank of Scotland, Barclays, HSBC, LloydsTSB, Halifax-Bank of Scotland, and NatWest. The seven ‘new entrants’ are Bradford and Bingley, Cheltenham and Gloucester, Egg, First Direct, Northern Rock, Sainsbury’s Bank, Santander and Tesco Bank. 10 A common measure of correlation, r2, measures the proportion of variance of one series against another. 1 is perfect correlation, 0 is absolutely no correlation. The r2 of HSBC’s share price to its quality rating was 0.650 between January 2008 and September 2009, showing a fairly close correlation. In a financial crisis, the rating for quality becomes much more strongly driven by the risk of losing deposits. The r2 of the HSBC share price to quality rating was 0.782 between the insolvency of Lehman Brothers, announced on 15th September 2008, and one year later. 11
Mintel, ’Finance intelligence: current accounts’ data, June 2007.
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