Most European bank shares are overvalued, according to more than half (54 per cent) of UK fund managers polled by accountancy giant EY.
German banks managed to buck the trend however, with two-thirds of managers polled believing them to have the best growth prospects in Europe.
On top of that, 80 per cent rated the outlook for the German economy as “good” or “very good.”
The strength of the Germany and its banks compared to the rest of Europe have caused concern the Eurozone is over reliant on the economic powerhouse.
Andy Baldwin, EY’s Global Financial Services Leader, says: “The apparent reliance of the Eurozone on the German economy, bolstered by its strong banking system, is more pronounced than many would expect.”
The positive sentiment towards Germany is driven by record low unemployment and the growth of its domestically driven economy.
“The short term health of economies including France, Italy and Spain, is dependent on the continued growth of the German economy – a major component of which is the further strengthening of its banking sector,” Baldwin said.
The French economy didn’t fair well with only four per cent of investors predicting its outlook to be “good”. Almost half (42 per cent) said the economy’s outlook as ‘poor’ or ‘very poor’.
Investors raised concerns that the downbeat view of the French economy in particular could act as a drag on the overall health of Europe.
Only two per cent of investors say that French banks have the best growth prospects.
“It is clear that for a sustained return to economic health in Europe, growth needs to be more evenly spread across the continent,” Baldwin added.