The massive sell-off in European bank stocks and bonds is overdone and presents a “phenomenal” buying opportunity, according to some of Europe’s top hedge fund managers.

Despite a 28% slump in European bank stocks this year, including a 38% fall in Deutsche Bank and a 34% drop in Societe Generale, some hedge funds are telling clients the sell-off won't develop into a crisis like in 2008. They point to the backstop offered by the European Central Bank, reduced bank leverage and low exposure to the energy sector.