How to calculate brand value of banks?
As Brand Finance elaborates on the methodology used while evaluating banks across the world, there are a couple of points the company considers, which are basically brand strength, brand loyalty, brand revenues and value. According to the report by Brand Finance, the steps in this process are as follows:
Calculate brand strength on a scale of zero to 100 based on a number of attributes such as emotional connection, financial performance and sustainability, among others. This score is known as the Brand Strength Index, and is calculated using brand data from the BrandAsset Valuator database, the world's largest database of brands, which measures brand equity, consideration and emotional imagery attributes to assess brand personality in a category agnostic manner.
Determine the royalty rate range for the respective brand sectors. This is done by reviewing comparable licensing agreements sourced from Brand Finance's extensive database of license agreements and other online databases.
Calculate royalty rate. The brand strength score is applied to the royalty rate range to arrive at a royalty rate. For example, if the royalty rate range in a brand's sector is between 1-5 percent and a brand has a brand strength score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4.2 percent.
Determine brand specific revenues estimating a proportion of parent company revenues attributable to a specific brand.
Determine forecast brand specific revenues using a function of historic revenues, equity analyst forecasts and economic growth rates.
Apply the royalty rate to the forecast revenues to derive brand revenues.
Brand revenues are discounted post-tax to a net present value which equals the brand value.
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