Private sector banks trump PSB counterparts in ad spend growth

Written by Pradip Kumar Dey | Mumbai | Updated: Dec 21 2008, 04:15am hrs
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The ad spend of private banks grew at a faster pace than that of public sector banks (PSBs) during 2007-08. Whereas the ad spend of private banks was up around 33% compared to the previous year, PSBs ad spend was up 28%.

Advertisement expenditure as percentage of total income of private banks was also higher as compared to that of PSBs during the fiscal.

An analyst from a rating agency said, Even if PSBs and private banks have the same ad spend, the ratio of ad spend to total income will be much higher for private banks since their total income in absolute terms is lower than that of PSBs.

Also, since the market penetration of PSBs is better than their counterparts in the private sector, they dont need to advertise aggressively.

Besides, most private banks are relatively new players; hence, they need to be more visible in market place, the analyst added.

In absolute terms, the total income of 17 private banks was Rs 83,181 crore in 2007-08 as against Rs 58,459 crore in 2006-07 (a rise of 42.3%). Their ad spend was Rs 658 crore in 2007-08 as against Rs 494 crore in the previous year (a rise of 33.2%). Significant increase in ad spend was seen in the case of Axis Bank, followed by Federal Bank and Ratnakar Bank. In case of PSBs, the total income of 27 banks was Rs 2.47 lakh crore in 2007-08 as against Rs 1.90 lakh crore in 2006-07 (an increase of 30.4%). Their ad spend was Rs 547 crore in 2007-08 as against Rs 427 crore in the previous year (an increase of 28.2%). A significant increase in ad spend was seen in the case of IDBI Bank, followed by Bank of Maharashtra and SBI.

HDFC Bank, ICICI Bank and Axis Bank, among private banks, in that order, were the top three spenders on advertisements during 2007-08. Among 27 PSBs, the top three spenders were SBI, Canara Bank and Union Bank. The highest increase in advertisement expenditure during 2007-08 was seen in the case of Axis Bank among private banks and IDBI Bank among PSBs.

The ratio of advertisement expenditure to total income of 17 private banks decreased from 0.85% in 2006-07 to 0.79% in 2007-08. In case of PSBs, the ratio decreased from 0.23% to 0.22% during the study period.