The global banking industry has lost almost one-third of its market value so far this year, the Boston Consulting Group announced Thursday.

The market capitalization of the industry fell from US$8.3 trillion at the end of 2007 to US$5.7 trillion at the end of the third quarter of 2008.

This is a continuation of eroding value that began during the onset of the financial crisis in mid-2007. In the second half of 2007, banks lost US$269 billion in market value. The total is now nearly US$3 trillion of lost market value since mid-2007.

“The crisis has wiped out nearly three years of growth in market capitalization. The banking industry’s market value is now close to where it was at the end of 2004,” said Lars-Uwe Luther, a Boston Consulting Group partner and coauthor of the group’s annual report on value creation in banking.

The decline in market value corresponds with a sharp fall in stock market performance, the group found. Over the first three quarters of 2008, the industry’s total shareholder return plunged by 34 percentage points, to -32.5%. It was nearly 60 percentage points below the pre-crisis average for 2006.

“The crisis, which began with a downturn in the U.S. housing market, has reverberated in markets around the world,” Luther said. “In nine of the 10 most developed markets, banks had double-digit negative TSRs over the first three quarters of 2008.”

He noted that Canada had the strongest banking TSR, at -6.6%, while Germany had the lowest, at -45.1%.

The turbulence has shaken up the hierarchy of the world’s largest banks, measured by market value. Strength in Canada’s banking sector has helped push up three Canadian banks more than a dozen places in the hierarchy since the end of 2007.

The crisis has impacted other sectors too. The average TSR for all industries fell more than 42 percentage points, from 15.2% at the end of 2007 to -27.1% at the end of the third quarter.

IE