Values Banking Pays Off According to Recent Study
A report commissioned by the Global Alliance for Banking on Values and funded by the Rockefeller Foundation, published in March, shows that over the 2007-2010 period, 17 values-based banks outperformed 29 leading mainstream banks by a number of key measures, including loan and deposit growth, capital strength, and return on assets. The values-based banks, which include Triodos, VanCity, New Resource Bank, and OnePacificCoast Bank, were compared with traditional banks, including Bank of America, JP Morgan, Barclays, Citicorp, and Deutsche Bank.(To be a member of the GABV a bank musthave a balance sheet of at minimum $50 million, a strong retail presence, and demonstrate a deep and transparent commitment to environmental and social concerns in every aspect of its banking practices.)
The study shows that GABV banks were twice as likely to invest their assets in loans than traditional banks, lending more than 70 percent of their assets between 2007 and 2010 on average. Their lending increased 80 percent during this period, while mainstream banks increased their lending by just over 20 percent. The GABV banks also registered an average equity/asset ratio of over 9 percent while the mainstream banks averaged just over 5 percent during the period covered. The GABV institutions’ return on assets averaged above 0.50 percent while the big banks earned an average of just 0.33 percent. Values-based banks also had returns on equity averaging 7.1 percent, compared to 6.6 percent for the traditional banks. While the strategy of the GABV members has always been to extend loans to the real economy with a goal of earning sustainable long-term returns for shareholders, the network is now seeking to step up its game to meet the challenge of better serving the needs of communities traditionally unserved or underserved by the big banks.The GAGV recently announced that it will create a new financial vehicle in 2012 to raise capital required for that express purpose. In 2009, a similar push to meet the needs of the underserved ended up raising $400 million in the first year of the campaign.