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LONDON (Reuters) - Big European bank stocks, mired by a seemingly endless list of investor concerns, are being sold-off more brutally than they were at the start of the financial crisis in 2008.
Europe's lenders have lost nearly a quarter of their value - over $240 billion - since the start of the year, faced with the reality that spiraling macro-economic worries could undo eight years of cost cuts, safer balance sheets and risk averse strategies.
Slumping oil prices, soaring technology costs, a slowdown in China - and the global market volatility that has followed - are just a few of many factors making investors jittery about banks.
There are also fears that the industry is undercapitalised for bad debt, and that negative interest rates will soon gut net interest margins and force lenders to charge for deposits.
Higher shareholder returns seem all-too-distant if banks have so many hurdles to overcome.
"There are no buying signals in the banking sector. Why own them?" Neil Dwane, global strategist at Allianz Global Investors, said.
ING ING.AS and Nordea Bank (NDA.ST), down 21 percent and 15 percent respectively, are the only banks among Europe's top 15 with share declines less steep than the same period eight years ago.
Since its conception in 2011, euro zone banks have taken full advantage of cheap cash from the European Central Bank's (ECB) long term refinancing operation (LTRO) to restructure debt that some investors say should have been written off.
"There is huge denial on the bad debts sitting in many 'zombie' euro zone banks," Dwane said, estimating that this could result in losses of 1-1.5 trillion euros ($1.12-$1.68 trillion) across the industry, or 5 years of industry profits.
The STOXX Europe 600 banking index .SX7P has tumbled 24 percent since the start of the year, compared with a 17 percent decline in the same period eight years ago.
The credit default swap (CDS) market, which reflects the market cost of insuring exposure to bank debt, also points to looming stress for bondholders, Thomson Reuters data shows.
Each lender is subject to a cocktail of individual concerns that have sent investors running for the exit.
Deutsche Bank slumped to multi-year lows on Monday over worries about its ability to maintain bond payments, while HSBC and Standard Chartered are tumbling largely due to their massive exposures to China's slowing growth.
Meanwhile, Barclays, whose shares were temporarily suspended on Monday during volatile trading, has aroused speculation it may need to tap shareholders for cash to shore up its common equity tier one ratio, a key measure of balance sheet strength.
Despite the overall market's deeply skeptical take on European banks - timed well with portentously somber results from big U.S. banks - some investors feel the outlook is still better than it was at the financial crisis.
"It is a worrying time to be a shareholder in banks but I don't feel it's as bad as the Lehman crisis as the ECB is more ready to act, and stresses in the financial system are not yet present," said Andrea Williams, a senior fund manager at Royal London Asset Management, pointing to continued confidence in the inter-bank market.
To promote positive sentiment, Williams said the ECB may need to take more radical action than simply cutting rates, suggesting that it could start to buy some of the toxic assets that have weighed on bank balance sheets.
Other fund managers including Aviva's head of European Equities Mark Denham are watching for signs of a faster approach to restructuring among the global heavyweights and a willingness to consolidate among smaller players, as investors evaluate ways to benefit from the chaos, at least in the longer term.
"We have not done anything yet but it is top of our agenda to sit down and decide whether the baby has been thrown out with the bath water," said Denham.
"When you list all the problems, you do wonder how this system is ever going to recover properly. But we do need a functioning banking system, and one or two valuations are starting to look appealing enough to persuade us to ride out the uncertainty."
($1 = 0.8909 euros)
Reporting by Richa Naidu and Sinead Cruise; editing by Janet McBride