RTRS: Europe shares gain on relief over Citi; RBS jumps
* FTSEurofirst 300 .FTEU3 up 0.7 pct
* Financials rally as U.S. bank nationalisation fears ease
* Royal Bank of Scotland surges on restructuring
By Sitaraman Shankar
LONDON, Feb 23 (Reuters) - European shares rose by midday on Monday to put them on track for only their third day of gains in the last 10, as banks gained on relief that Citigroup (C.N: Quote, Profile, Research, Stock Buzz) may not be nationalised as equities investors had feared.
At 1158 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.75 percent at 741.27 points after having hit a six-year low on Friday.
Citi shares gained 28 percent in Frankfurt (TRV.F: Quote, Profile, Research, Stock Buzz) and Bank of America (BAC.F: Quote, Profile, Research, Stock Buzz) soared 34 percent after a source said Citigroup was in talks that could see the U.S. government take a bigger stake.
The shares had fallen on Friday on worries that the government would take over large U.S. banks.
Financials were the top performers in Europe, led higher by Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), which rose 14 percent on expectations the bank was set to announce a revamp to create a non-core division into which unwanted assets would be placed.
The FTSEurofirst 300 is down 11 percent this year after a 45 percent slide in 2008, and analysts said the outlook is dim.
"It's going to be a bit of a struggle to reclaim the thresholds hit earlier this month before markets gave the thumbs down to the U.S. Treasury's plan," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"The newsflow has been staggeringly and unremittingly poor -- GDP figures for the final quarter of last year are incredibly bad, it's as if international trade has come to a grinding halt, and companies are cutting back on output, which can only mean one thing: more job cuts," he said.
Hans-Juergen Delp, equity market strategist at Commerzbank in Frankfurt, said he did not think a recovery was sustainable.
"We are fighting to find a bottom," Delp said, noting the gains achieved early in the session paled in comparison with last week's losses.
Across Europe, Britain's FTSE .FTSE was up 0.2 percent, France's CAC .FCHI and Germany's DAX .GDAXI were 1 percent higher.
SWISS BANKS STANDOUT LOSERS
Underlining the troubles that financial stocks have faced over the past year, shares in UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz), Switzerland's largest bank, tumbled 6 percent to an all-time low after its top executives met with a barrage of criticism for the way they handled a U.S. probe into tax fraud.
Italy's UniCredit (CRDI.MI: Quote, Profile, Research, Stock Buzz) rose 8 percent after Chief Executive Alessandro Profumo said he trusted that the Italian bank had reached its 2008 net profit target of 4 billion euros ($5.03 billion).
Other banks were also higher, with Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) up 7.5 percent and Societe Generale gaining 4.7 percent.
French bank Natixis (CNAT.PA: Quote, Profile, Research, Stock Buzz) rose 10 percent after French Economy minister Christine Lagarde said the investment bank's majority owners would get an extra 2.5 billion to 5 billion euros of state aid.
Insurers gained on hopes of industry consolidation after a newspaper said Resolution (RSL.L: Quote, Profile, Research, Stock Buzz) was eyeing the UK insurance business of Prudential (PRU.L: Quote, Profile, Research, Stock Buzz). Prudential rose 2.5 percent, while Legal & General (LGEN.L: Quote, Profile, Research, Stock Buzz), Axa (AXAF.PA: Quote, Profile, Research, Stock Buzz) and Allianz (ALVG.DE: Quote, Profile, Research, Stock Buzz) gained between 2.5 percent and 10 percent.
Analysts said there were still several stress points for global equities.
"In addition to quarterly earnings reports, the markets will be affected by fears about the state of the East European economies and worries about the health of the financial sector," German bank Helaba said in a morning note to clients.
Monday's economic data calendar is thin but on Tuesday strategists expect new impulses for investors from the German Ifo business sentiment index and U.S. consumer confidence. (Additional reporting by Peter Starck in Frankfurt; Editing by Andrew Macdonald)
