Advertising is Delivering Results for Banks Despite Economic Uncertainty

Tim Cross 29 January, 2024 

Despite continued uncertainty around how the global economy will fair in 2024, a number of major banks are signalling they plan to up their marketing spend this year, with advertising proving fruitful in driving growth.

American Express, Bank of America, and Capital One all spoke about their marketing investment in recent quarterly financial results. Executives at the banks said that, amid tough economic conditions, marketing continued to drive results last year, and they indicated that spend will remain elevated in 2024 as they seek out opportunities for further growth.

Justifying investment

Bank of America, which released its results a few weeks back, didn’t give much detail on its ad spend, simply stating that marketing costs had been higher in Q4.

But CEO Brian Moynihan did explicitly highlight advertising as having driven customer sign-ups for the bank, specifically for its Merrill Edge digital investing platform. “In our Merrill Edge programme, advertising has driven the business,” said Moynihan on an earnings call. “We have 10 percent more customers […] which is 300,000 to 400,000 customers added in the last 12 months.”

The other two banks went into more detail on their marketing investment.

For American Express, marketing investment has been a key part of the bank’s post-COVID aim to drive annual revenue growth of over ten percent. “In executing the plan, we focused on listening to our customers and understanding their needs, and we invested in innovating our value propositions, as well as uplifting our marketing and technology capabilities and backing our colleagues to meet those needs,” said Steve Squeri, American Express’s chairman and CEO. “Looking back over the two years since we announced the growth plan, I’m pleased to say that we achieved what we set out to do, and in fact we’re ahead of where we thought we’d be on our journey”.

Across 2023 as a whole, the bank actually spent less on marketing than had been expected. “On the marketing line, we invested around $1.2 billion in the fourth quarter and $5.2 billion for the full-year,” said CFO Christophe Le Caillec. “This is a bit below last year and our expectations to have marketing spend at around $5.5 billion. Marketing expense came in lower than we expected for the quarter, reflecting lower demand given the softer T&E [travel and expenses management, a line of business for AMEX] environment.”

But Le Caillec said the company saw increased demand throughout Q4, and that it plans for increased marketing spend in 2024, adding that the company’s investment in its marketing tools will enable it to do so in an efficient way. “Marketing expenses will dial up or down based on opportunities that we see based on the efficiencies that we create as well,” he said on the company’s earnings call.

Capital One meanwhile announced that marketing spend in Q4 hit $1.25 billion, which was up 12 percent year-on-year. And CEO Richard Fairbank said this expenditure justified itself with strong results.

“Our marketing continues to deliver strong new account growth across the Domestic Card business,” said Fairbank. “And in the fourth quarter, marketing also included higher media spend and increased marketing for franchise enhancements, like our travel portal, airport lounges, and Capital One Shopping. We continue to lean into marketing to drive resilient growth and enhance our domestic card franchise.”

Like AMEX, Capital One says it has invested significantly in its marketing capabilities, allowing it to more efficiently reach audiences. “I think our technology transformation of course has really been beneficial, but it allows us to leverage more data and more machine-learning models to identify basically more attractive opportunities for investment and to create better and more customized solutions for customers along the way,” said Fairbank. “So just the overall opportunities continue to be very strong.”

Fairbank didn’t commit to further raising marketing spend in 2024, stating in response to a question from an analyst that the bank doesn’t give full-year marketing guidance since marketing spend depends on “the opportunities we see when we get there”. But he did say that the bank “continue[s] to like the opportunities that we see”.

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About the Author:

Tim Cross is Assistant Editor at VideoWeek.
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