U.K. banks rallied on Thursday, after nearly two weeks of post-Brexit punishment. In Britain Royal Bank of Scotland (RBS) was up nearly 5% by mid-morning, while Lloyds (LYG) was up over 5.5% and Barclays (BCS) was up 4.4%. 

The better mood for financial stocks followed in part from yesterday's rally on Wall Street and strengthening oil. Both West Texas Intermediate Crude and Brent Crude were recently up 1.33%, respectively, at $48.06, and $49.45.

Analysts at Australian bank Macquarie Group  (MQBKY) fed the optimism, upgrading both Royal Bank - still 79% owned by the British government - and Lloyds from neutral to outperform. However, it left Barclays unchanged, because, while it said it liked the bank's "attractive core franchise" its valuation was overshadowed by its investment bank business. It said the same about Swiss rival Credit Suisse  (CS - Get Report)  . And it said with both banks there was a "complete lack of earnings visibility"  in their investment banking divisions for the third quarter.   

Meanwhile, Moody's said that non-U.K. global investment banks would likely incur additional costs and revenue pressures as they reconfigure their European businesses in response to Brexit. At the same time it said they were facing pressures from subdued market activity, regulation and competition. Moody's did not announce any re-rating actions at this stage, saying the costs for adaptation will relate to whether only client-facing staff or more substantial parts of the operation will need to be reconfigured.

"Although we expect any immediate revenue loss to be modest, Brexit's lasting credit effects on GIBs will depend on the nature of the new EU/UK trade model," Moody's said.

In a note on European banks entitled "Fearing Fear," the Macquarie team admitted that the June 23 Brexit vote had come as much of a shock to them as to the rest of the market. But their attitude was that while U.K. political risks were at peak levels now and likely to diminish in the coming months, the political risks in the rest of Europe look set to grow. Examples of upcoming risks on the continent: another Greek bailout due by the fall; an Italian referendum by October and; in early 2017, French and Dutch elections. In both countries there will likely be strong showings by parties with similar anti-European Union views to those that informed the U.K. referendum.

Despite those eurozone worries, in Paris Societe Generale (SCGLF) , (SCGLY) ticked up close to 3%, Dutch bank ING Groep (IND) , (ING) rose 1.3% and, even in Frankfurt, Deutsche Bank (DB - Get Report) was up a more modest 0.4% after falling to record lows on Wednesday. ING benefited from a Macquarie upgrade from underperform to neutral. (However, the analysts also downgraded Switzerland's UBS (UBS - Get Report) from neutral to underperform. The stock was recently up 1.5%).

Taking as their reference the period from June 23 to July 4, the Macquarie analysts said the European bank sector was down 18% and U.K.-focused banks had fallen 26%. Now, the note said, Macquarie was taking a more positive view on U.K. banks because leaving the EU was unlikely to cause the damage that the most extreme assessments have predicted.

"We are highly skeptical that being a member of a command and control organization like the European Union offers significant benefits or that departure will throw us straight back to the 1970s," it said.

Lloyds, still 21.8% taxpayer-owned, has now been added to the bank's conviction buy list, and its price target has been lowered from 70 pence to 65 pence. Royal Bank's target price has been lowered from 220 pence to 200 pence, making both targets easier to achieve. 

By late morning in London on Thursday,  Royal Bank was trading at 155.20 pence and Lloyds was at 49.86 pence.

But in a separate note, the analysts argued that Royal Bank has been working hard over the past seven years, simplifying the group, cutting non-core operations and focusing on retail and commercial banking with de-risked portfolios, yet "the market broadly prices the shares back to 2009 levels when the company was insolvent."

Recent weakness has left the shares with an estimated price to tangible book value for 2016 of 0.45 times, the note said. "For a business that has undertaken 7 years of balance sheet de-risking and will ultimately be a simple retail and commercial banking operation [...] this is too cheap, in our view."

Similarly, the analysts say that after the post-Brexit slump, Lloyds is trading on an estimated price to tangible book value for 2016 of 0.9 times.

"This looks extreme," they say for a UK focused retail and commercial banking operation, that generated an adjusted [return on tangible equity in] 2015 of 16% and which we conservatively estimate can generate a sustainable ROTE [return on tangible equity] of 12% through the cycle."