Hungarian bank OTP and Austrian Raiffeisen International, which has led an aggressive expansion in the region over the past 10 years, "provide the strongest upside potential based on current share prices," the report said.
Polish PKO BP and Czech Komercni banka, part of the Societe Generale group, provide "comfortable funding quality," while Serbian AIK Banka is a high-growth, profit play that "includes a bet on improving politics," it said.
"The new EU members Bulgaria and Romania, as well as Ukraine and Russia, will offer the highest growth rates in the coming years, converging to mature market levels," the report said.
But the pace of growth in the region is likely to slow slightly despite the fact that the banks don't have direct exposure to the subprime crisis. Indirect effects of subprime, such as a reduction in spending by Western countries on imported goods may start to bite, Erste Bank said.
The most stretched banking systems -- with the highest loans to deposits ratio -- are the ones in Russia and Ukraine, followed by Slovenia, Hungary and Romania, the report said.