The Fragile State of Bank Reputations: Results from Our 2012 Study

Trust. Admiration. Respect. Good feelings. The science behind the formulation of consumer perceptions about brands says these are the building blocks of corporate reputation.

So when was the last time you heard people use words like those to describe how they feel about their bank? For that matter, when was the last time they used them to describe the way they feel about somebody else's bank?

It turns out not to have been as long ago as one might think. In 2011, 24 of the 30 large banks in an American Banker/Reputation Institute survey garnered higher reputational ratings from consumers compared with the previous year. Even more impressive, two institutions in 2011, Harris Bank and Zions Bank, scored above 70 on our 100-point scale, crossing into territory that Reputation Institute, a reputation management consultancy, considers the difference between strong corporate reputations and merely average ones.

But this year, both of those banks are back below the 70-point mark, along with everyone else in the survey. The number of banks scoring below 60, a hallmark of a weak or vulnerable reputation, rose from six to eight. And that was before JPMorgan Chase set off the latest wave of public anxiety over banking with its headline-grabbing disclosures of recent trading losses.

Our online survey was conducted in January and February-too early to capture the impact of the JPMorgan Chase news, but certainly timely enough to measure the buildup of frustration Americans have been feeling toward banks.

If any of the initial anger over the financial crisis has dissipated with time, it easily has been replaced with more recent indignation over increased fees (both real or proposed) and over the interminably long wait for a recovery in the broader economy, with the heightened rhetoric of election-year politics only serving to fan the flames.

Consumers appear to have less patience now for distinguishing between big bank brands, except when it comes to differentiating between large banks and the very largest banks (since the inception of our ranking three years ago, the giants have consistently populated the bottom tier). Reputation scores for most regional banks, meanwhile, landed within a tight range of one another. With so few points separating the best from the rest, it looks as though reputation isn't the differentiator that some banks might have hoped.

There's an advantage, though, to a scenario in which you're tarred with the same brush as everyone else: it forces you out of a relative value mindset, which Reputation Institute's Anthony Johndrow says is exactly what companies need to do if they want to build a sustainable approach to managing their reputation.

"Banks are very competitive, so they tend to think of reputation as another chance to beat their rivals. But it's not a race, or if it is, then it's a very long one, especially given where banks are right now," says Johndrow, a managing partner at the firm.

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At its core, corporate reputation is the accumulation of feelings that come out of the direct experiences people have with a company, along with the messages the company puts out about itself and the messages others put out about the company.

Direct interaction-the experiences people have as a customer, investor or employee of a company-makes a big difference to reputation scores. Every bank in our survey was rated by at least 100 people who reported having some level of familiarity with the brand. But in cases where respondents reported having had a direct experience with a company, their ratings yielded reputation scores that on average were 10 points higher than the scores from respondents who had no direct experiences with the company.