The growth of Islamic finance as an alternative to conventional banking has prompted a 78 percent growth in the brand value of the Middle East banking sector, according to a new report.
The Middle East contributed 2 percent to total global brand value, according to the fourth edition of the BrandFinance Global Banking 500, an annual review of the top banking brands in the world.
According to the report, which measures companies by both brand strength and brand value as of 31st December 2009, the banking sector has begun to show tangible signs of recovery, with the world's 500 most valuable banking groups growing by 62 percent in terms of market capitalization, and their brand values registering a cumulative increase of 49 percent.
Almost all of the top ten banks in the Middle East, led by Emirates NBD, saw an increase in their brand values. Some saw their brand value soar by as much as 100 percent, while the region contributed six new brands to the Top 500.
The two largest Islamic banks in the Gulf region by market capitalization, Al Rajhi Bank and Kuwait Finance House, experienced differing fortunes with regard to their brand values over the last year, with the former almost doubling its brand value and the latter suffering a slight fall.
"Investors that suffered from the credit crisis sought the comfort of stricter lending rules imposed by Islamic law," said David Haigh, CEO of Brand Finance plc. "It will be interesting to see if other big international banks will begin to offer Islamic banking services in 2010 and try to make inroads in the Middle Eastern market in addition to providing their existing customers with greater choice.”
In the report, HSBC retains its place as the most valuable banking brand in the world for the third year in a row, increasing in brand value by 12 percent to US$28.5bn. Bank of America, the second most valuable global banking brand increased in brand value by 24 percent to US$26.1bn.
However, smaller US brands showed much higher percentage increases than Bank of America including Goldman Sachs, Chase and JP Morgan (106 percent, 53 percent and 45 percent respectively).
US dominance of the global banking industry has declined with a decrease in the number of US banks in the Global Top 500 down from 95 in 2008 to 85 in 2009. Although US bank brands recovered during 2009 the overall increase in brand value was only 29 percent.