The euro zone's biggest bank, Santander, met expectations with a 2.8 percent drop in nine-month net profit, boosting bad debt provisions to offset the effects of Spain's housing boom hangover.

European banks still have upside potential despite the recent rally, as the worst is over for the continent's financial institutions, analysts at financial services investment bank KBW, who upgraded the European banking sector to 'Overweight', said Monday.

The results of the stress tests on 19 of the biggest US banks have left European banks exposed, as they now look vulnerable to recapitalization needs and to claims that not all checks were made to ensure rules were being followed, analysts said on Friday.