With the Dow Jones Industrial Average near May 2008 levels, many have rejoiced at the psychological milestone of Dow 13,000. However, it has been a rough road for the financial sector since the beginning of the credit bubble explosion. Investors and customers still view major banks with heavy criticism.
Shares in major banks such as Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C) have rallied hard this year, but are still well below May 2008 levels. In fact, since May 2008, the financials have been the worse performing sector. The SPDR Select Sector Fund (NYSEARCA:XLF) has dropped 40 percent, while Bank of America (NYSE:BAC) shares have plummeted 75 percent.
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Investors are not alone in hating big banks. Harris Interactive, a New York custom market research firm, recently conducted its 13th annual Reputation Quotient Study. The report asked 17,000 people to select companies that are most visible to them on a daily basis. The respondents were then asked to rank the top 60 most visible companies by 20 attributes folded into 6 dimensions. Not one financial name cracked the top 50. The highest ranking financial institution on the list was Wells Fargo (NYSE:WFC), which ranked 52. The report explains, “Industries that are perceived to be hurting the economy tend to have lower reputations.”
Financial companies suffered four of the five worst losses in reputation in the past year. Bank of America lost 9.08 points, while Wells Fargo, Goldman Sachs (NYSE:GS) and JP Morgan Chase (NYSE:JPM) all declined more than 6.3 points. The report cautions, “Bank of America, AIG (NYSE:AIG) and Goldman Sachs find themselves in dangerous territory, occupying same sub-50.0 space that defunct companies occupied in years past before expiring…these include Enron, Adelphia and WorldCom.” Warren Buffett’s Berkshire Hathaway (NYSE:BRKB) also declined 7.28 points. Although not strictly a financial company, Berkshire Hathaway holds a large stake in Wells Fargo. Furthermore, Buffett has done private deals with Goldman Sachs and Bank of America during the financial crisis.
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Overall, only 2 in 10 Americans believe that corporate America’s reputation is positive. Over the past year, 60 percent believe the reputation of corporations have declined, while only 9 percent of respondents believe it has increased. The tobacco industry is the only industry to receive a less reputable rating than financial services.
To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com
To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com
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