The Banking Industry Lost Nearly One-Third of Its Market Value Over the First Three Quarters of 2008, Says The Boston Consulting Group
Since the Onset of the Crisis -- in Mid-2007 -- the Banking Industry's Market Value Has Plunged Almost $3 Trillion
| Source: The Boston Consulting Group
NEW YORK, NY--(Marketwire - October 9, 2008) - Following a steady run of strong growth, the
global banking industry has experienced a massive loss in market value,
according to The Boston Consulting Group (BCG).
"The market capitalization of the global banking industry fell from $8.3
trillion at the end of 2007 to $5.7 trillion at the end of the third
quarter of 2008," said Lars-Uwe Luther, a BCG partner and coauthor of BCG's
annual report on value creation in banking. "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.
"The decline started in 2007. In the second half of that year, as the
crisis began to intensify, banks lost $269 billion in market value. In
total, banks have lost nearly $3 trillion in market value since mid-2007."
The decline in market value corresponds with a sharp fall in stock market
performance. Over the first three quarters of 2008, the industry's total
shareholder return (TSR) plunged by 34 percentage points, to -32.5 percent.
It was nearly 60 percentage points below the precrisis average for 2006.
A Global Crisis
"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 ten
most developed markets, banks had double-digit negative TSRs over the first
three quarters of 2008. Germany had the lowest banking TSR, at -45.1
percent, while Canada had the strongest, at -6.6 percent."
Even banks in developing markets, which had been relatively insulated from
the turmoil in 2007, have seen dramatic falls in TSR. In the so-called BRIC
countries -- Brazil, Russia, India, and China -- banks' TSR fell from an
average of 50.0 percent in 2007 to -40.8 percent over the first three
quarters of 2008.
"The crisis has also moved well beyond the banking sector," Luther said. In
all industries -- not just banking -- TSR has fallen precipitously. The
average TSR for all industries fell more than 42 percentage points -- from
15.2 percent at the end of 2007 to -27.1 percent at the end of the third
quarter.
A New Hierarchy
The crisis has continued to shake up the hierarchy of the world's largest
banks, measured by market value. Among the 30 largest banks, there have
been several double-digit changes in rankings over the first three quarters
of 2008.
Each of three Canadian banks moved up more than a dozen places since the
end of 2007. Two U.S. banks -- JPMorgan Chase and Wells Fargo -- had the
biggest gains among the ten largest banks, moving up four and five places,
respectively.
About This Update
BCG is releasing data that update its annual report on value creation in
banking. This year's report, "Managing Shareholder Value in Turbulent
Times," was released in March. The report covered the performance of the
global banking industry for the whole of 2007.
To arrange an interview with one of the authors, please contact Eric
Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.
About The Boston Consulting Group
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