Is Worst Over for Europe’s Banks?

Financial stocks boosted European markets with better-than-expected performance, but headwinds remain, Gemma Godfrey of Brooks Macdonald Asset Management said Tuesday.

"It's the fact that they didn't disappoint as much as analysts expected," she said, noting one bank's quarterly earnings: "Profits fell by 50 percent – by 50 percent – but expectations were a lot worse."

On CNBC's "Fast Money," Godfrey said that the global trend for financial names was toward shoring up their balance sheets.

"We would say that the divergence is stark," she added, noting that valuations were increasingly attractive.

However, Godfrey said, it wasn't clear sailing from here.

"The pressure on profits is going to remain," she said. "Going forward, how are they going to be extract growth? Retail banking is still stagnating, and it's a very tough situation."

Even Germany, whose economy was relatively strong, still had banks with "a lot of exposure to periphery debt," she said.

Trader disclosure: On May 7, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Stephanie Link is long AAPL; Stephanie Link is long GS; Stephanie Link is long JPM; Stephanie Link is long CSCO; Stephanie Link is long FB; Stephanie Link is long TKR; Stephanie Link is long EMC; Stephanie Link is long CSCO; Josh Brown is long AAPL; Josh Brown is long XLU; Josh Brown is long TGT; Josh Brown is long DIS; Josh Brown is long GLD; Josh Brown is long APC; Josh Brown is long DD; Simon Baker is long AAPL; Simon Baker is long JPM; Simon Baker is long WFC; Simon Baker is long XLF; Simon Baker is long FB; Simon Baker is long MSFT; Simon Baker is long GOOG; Simon Baker is long EBAY; Simon Baker is long NFLX; Simon Baker is long DIS; Simon Baker is long AMZN; Simon Baker is long BBY; Simon Baker is long CSCO; Mike Murphy is long BAC; Mike Murphy is long INTC; Mike Murphy is long FB; Mike Murphy is long IP.