Economic Outlook – october 2007
Banks think global but still give local
Those bank constellations gave about $161 million in 1994 and kicked it up to $403 million in 2001 before slipping to $323 million in 2004. The study was done by consultant Becky Sherblom for the National Committee for Responsive Philanthropy.
Why is it good business for banks to give any of their profits to charity?
It makes the corporation more stable and buys goodwill. You’re less likely to have a community react negatively to a corporation. In cases where corporations have not built that goodwill, a negative occurrence can be really detrimental and destabilizing, and that’s not what stakeholders want. It also reduces turnover, and employee turnover is a significant cost for corporations.
How do these banks determine the right giving level?
It varies by bank and where they are in their life cycle. Wachovia gives away 1% of its pre-tax profits. Some of the others are more nebulous about it. If they’re getting ready for a merger or acquisition, they may spike their giving in a region to buy some good will. Or just after an acquisition, they may do a lot of giving because they bought a bank in a place they’ve never been.
What about Bank of America?
They wouldn’t give me an answer to that. Lots of ambiguous PR language.
What if a bank buys a business without a clear geographic footprint?
As the retail bank operations become less and less of the overall structure, the question remains: What’s that going to do to giving patterns? At most banks we studied, giving lines up with where their branches are, and yet, if you look at Bank of America, it bought MBNA and has a large credit-card business. How much of that profit will it give away?
Giving rose in the South, yet fell in some other regions.
The South benefited from all seven banks, which is surprising because even West Coast banks such as Washington Mutual and Wells Fargo gave in the South. We weren’t able to delve into why.
But the big contributor here is BofA.
Yes. And on the dollar level overall, Bank of America looks exceedingly generous. But when you look at how that relates to profits, some might say it’s stingy — less than 1%.
Its profits have been rising quickly. Do banks sometimes wait to see if gains are sustainable before they increase giving?
It may be that they’re not sure if they have the internal infrastructure. And that’s a very legitimate issue. It’s probably more that than a fear that next year might not be as profitable.
Philanthropy often is negotiated during mergers, as when what’s now Wachovia bought Core States in Philadelphia.
Yes. If Core States’ CEO wasn’t making it a priority and the community hadn’t been there as very strong advocates, the merger probably wouldn’t have resulted in a regional foundation. That foundation maintains a specific level of giving in that region. It can’t be shifted somewhere else, because the foundation is a separate legal entity. Even if Wachovia were to leave the region, the foundation has to stay there. It’s a very unusual setup.
Did you see post-merger dips in giving?
Nonprofits in the Northeast feel like they’ve gotten short shrift from Bank of America after the Fleet merger. But that happened in 2004, and not all of the 2005 numbers are in. It will be interesting to see if the Northeast did lose.
BofA giving has leveled off since 2000.
Maybe they’re saving their pennies for an acquisition, or it may be that they’ve made recent acquisitions that are not in retail banking, such as MBNA, so they haven’t had to show the same increase in philanthropy.
Wachovia giving dipped just before 2000.
Some of the data was missing. That’s a limitation of the research. There probably is more giving than what is documented here. What we wanted to look at were the trends.
In general, you documented less giving than the banks tout.
Corporations give money outside of their foundations, and they don’t have to report it.
What about BofA and Wachovia?
The difference wasn’t as big for them. Bank of America does 95% of its giving through foundations. Wachovia does about 98%.
Will giving here drop if a bank outside the South buys BofA or Wachovia?
There would likely be a flattening or a decrease in giving in the South because a new headquarters will have a different focus.