European bank stocks are running out of steam with cautious announcements on investment banking prospects and credit quality concerns prompting investors to challenge their near-term earnings growth expectations.

Commerzbank is maintaining a neutral stance on the sector although it acknowledges that market expectations on nearterm bank earnings may be too aggressive. Brokers concur with the Federal Reserve's statement that suggests there are sufficient risks ahead to generate weakness in the sector for the foreseeable future.

Commerzbank believes, however, that European banks are more insulated from the present capital markets downturn than those in the US.

It is feared that the second quarter reporting season, due to begin in the third week of this month, will prompt widespread downward revisions to earnings forecasts, with the sector losing its safe-haven appeal, according to Commerzbank.