The recent stock market rally that has driven European indices to a four-month high has left banking stocks overvalued, a Swiss bank has said in a new report, which suggested the market has been overly-optimistic in predicting an end to the difficulties facing the sector.

Since the beginning of March, stock markets have risen across Europe, with the UK's FTSE 100 index up 24%; France's CAC up 27%, and Germany's DAX up 32%.