European shares fell from five-year highs on Monday, hit by weakness in leading banks as some investors worried that recent market gains were outstripping firms' earnings expectations.

Germany's No.2 bank Commerzbank fell 4.8 percent as sources said it may offer shares at a step discount in a rights issue this week, signalling limited appetite for the stock and weighing on the European banking sector.

Asia-focused Standard Chartered added to the sector's gloom, falling 4 percent in volume of 133 percent of its 90-day average. Traders cited a Bloomberg report that Carson Block, who runs short-seller research firm Muddy Waters, is betting against the UK-listed firm's debt because of deteriorating loan quality.

They were the top fallers on the pan-European FTSEurofirst 300, down 0.4 percent at 1,228.57 points at 1030 GMT, after closing at a five-year high on Friday. Banks shed 1.7 percent.

The STOXX 600 Europe, which fell 0.4 percent, trades at 12.58 times its forecast earnings for the next 12 months, its highest valuation multiple since early 2010, as a rise in price has not been matched by expectations of higher profits, Datastream data showed.

The European earnings season has so far been disappointing, with 53 percent of companies that have reported missing analyst expectations, Thomson Reuters Starmine data showed.

"In the last couple of months we have increased our equity exposure quite significantly, but we'd be a little bit more cautious at today's level," said Edi Truell, chairman of London Pensions Fund Authority, which has 4.7 billion pounds ($7.22 billion)under management.

"I could easily see a 10 to 15 percent decline in the market. It has gone a long way (but) it has been buoyed up by flows of money rather than fundamentals."

But Fidelity's head of pan-European Equities, Paras Anand, said European stocks still offered good value on a multi-year view as support measures taken by global central banks showed policymakers' commitment to tackling the global economic crises.

He cited oversubscribed auctions of riskier sovereign bonds as evidence investors' appetite for risk was on the rise.

"Take all of those things together and it could suggest that rather than this being the end of this (bullish market), it's just the beginning," Anand said.