The Hindu Business Line : MNC banks expected to slash ad spend

Mumbai, Sept. 19 Multinational banks are expected to slash their advertising spend in the context of the recent financial turmoil in the US. HSBC, Citi Bank and StanChart along with more players in the financial sector are expected to get prudent with their ad budgets, predict advertising head honchos.

The Chairman of Saatchi & Saatchi, Mr V. Shantakumar, feels that large banks may be prudent with their spends more than the others although it is unlikely that any agency has felt any impact.

“Ad spends are a function of consumer spending and as long as there is no increase in the cost of borrowing and there is better liquidity, there is no cause for immediate concern . But at the same time if the high inflationary rates do not correct itself quickly, consumer spending could get affected,” said Mr Shantakumar.

Mr Sam Balsara, Chairman, Madison Group, added, “There will definitely be an impact in the financial sector as they would be more cautious and less optimistic about the future and to that extent ad spends would get affected.”

But the positive parameters in the Indian economy would ensure that consumer spending does not halt with immediate effect. Observes, Mr Arvind Sharma, Chairman, Leo Burnett, “Back in their home countries, MNCs may get impacted in some markets but not so much in the domestic market. As long as the economy grows there should not be a problem but if in the long term it continues to slowdown, MNCs may reduce their spend in the country.”

While there may be no short term repercussions for ad agencies, long term slow down in the Indian economy is bound to take its toll on most agencies. Taking an optimistic view of the ad industry, Mr M.G Parameswaran, Executive Director, Draft FCB says, “As long as the Indian economy continues to grow between 7-8 per cent there will be no immediate fallout of the global financial issues. There may be some implications and as inflation and interest rates come down, we expect consumers to take loans and buy products. The ad industry will continue to grow at 15 per cent.”

But if the stock markets do not recover for a long time, consumer spends could get impacted in categories like consumer durables, financial products and real estate. “In the long run, consumer sentiment in the market and the economy will be hurt if the stock market does not recover. While there has been no immediate reaction from any of our clients, my prediction is that there will be a slow down in ad spends and 2009-10 will be bad for the ad industry,” claims Mr Aniruddha Banerjee, President & COO, Ambience Publicis.

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