For investors who are wary of the stock markets after the recent global sell-off, some analysts are advising them to put aside any preconceptions and buy banking shares in central Europe's former communist countries. Hungarian, Polish and Czech banks are significantly cheaper than their Western counterparts and, providing the countries' economies continue improving ahead of EU membership, analysts suggest share prices in the region's underdeveloped financial sector could rise by about 20 per cent in the next couple of years.

Komercni Banka, OTP and Pekao have high profit margins and are likely to see operating costs reduced through restructuring with existing or future foreign strategic partners. Furthermore, the stocks are underpinned by the region's progress towards European Union membership, healthy economic growth and booming expansion in services, particularly retail.

Fund managers believe now is the time to buy into these markets, with recent falls in prices offering a good buying opportunity after last year's healthy rises.

Despite some unfavourable macroeconomic factors, central and eastern European countries are enjoying a number of external economic benefits that bode well for the banking sector.