European Bank Stocks Are On Fire Today

European bank stocks are rallying hard today.

Shares in European banks have been enduring a nasty sell-off since the Cypriot financial crisis in March sparked fears that deposit outflows could weaken the position of banking systems elsewhere in the euro zone. Yesterday, they dropped to 7-month lows.

Earlier this morning, the "troika" of international lenders at the EU, ECB, and IMF said they recommended a seven-year extension of the bailout loans given to Portugal and Ireland during the euro crisis. The proposal may be discussed at the meeting of Eurogroup finance ministers this weekend.

In Portugal, the market is up 4 percent, and bank stocks are leading the way. Banco Espirito Santo is up 10.8 percent, Banco BPI is up 10.7 percent, and Banco Comercial Portugues is up 9.3 percent.

Italian banks are moving higher as well. The overall market is up 2.4 percent, led by Banco Popolare (+8.2 percent), Banco Popolare dell'Emilia Romagna (+6.3 percent), and Monte dei Paschi (+6.2 percent).

In Spain, Bankinter and Banco Popular are up 7 percent and Banco de Sabadell is up 5.9 percent, and in France, Crédit Agricole and Société Générale are both up 6.3 percent, while BNP Paribas is up 5.2 percent.