Buoyant Banks Help European Stocks Snap Losing Run

RBS shares jumped 22 percent after the lender said it would place 325 billion pounds in assets in the UK insurance scheme.

European shares were up 2.2 percent around midday on Thursday, snapping a four-day losing run as banks rallied from recent sharp losses, led by Royal Bank of Scotland (RBS) and UBS.

RBS shares jumped 22 percent after the lender said it would place 325 billion pounds in assets in the UK insurance scheme as it posted a loss of 24.1 billion pounds ($34.3 billion) for 2008 -- the biggest in British corporate history.

"People are not focusing on the results, which are far from good, but rather on the UK plan. They have found a way to keep RBS listed, which is good news for minority shareholders, but still, it's a creeping nationalisation," Marie-Pierre Peillon, head of equity and credit research at Groupama Asset Management, said in Paris.

"It's a step in the right direction. We're not going to get out of this crisis as long as balance sheets remain rotten. But every time we get some sort of relief, it is quickly followed by more worrisome news. Dresdner's loss is not reassuring and it raises red flags for hybrid debt holders."

Allianz on Thursday posted a worse-than-expected loss in 2008, saying it had been hit by losses at Dresdner Bank hit by turmoil at Dresdner Bank, which Allianz sold to Commerzbank in a deal completed last month.

Allianz rose 10 percent as investors were relieved its problem child has now found a new home, while Commerzbank fell 0.5 percent. UBS surged 13 percent after it named Oswald Gruebel, who masterminded a turnaround at arch rival Credit Suisse, as its new chief executive. Marcel Rohner resigned after barely 18 months as CEO, during which time UBS shares fell some 85 percent.

At 1250 GMT, the FTSEurofirst 300 index of top European shares was up 2.2 percent at 731.92 points, rising only the third time in 13 sessions.

EYES ON OBAMA BUDGET

Helping the mood, two senior U.S. administration officials said President Barack Obama's budget pencils in the possibility that he may request an additional $250 billion to help fix the trouble U.S. financial system.

Obama, who will unveil his first budget on Thursday, has left room to ask Congress for more money to ease the crisis in the banking system, which has fuelled the economic downturn.

Banking and insurance shares were by far the biggest gainers on Thursday, with Lloyds up 25 percent, Swiss Re up 14 percent and ING up 13 percent.

Despite the rally, the DJ Stoxx bank index is still down 22 percent year-to-date, and the DJ Stoxx insurance index down 29 percent.

Pharmaceutical stocks, which have outperformed the market recently, were on the downside, with Sanofi-Aventis down 1.2 percent and AstraZeneca down 0.5 percent.

Telefonica rose 5.3 percent after the telecoms operator said it was maintaining its 2010 growth targets and forecast a 1 percent to 3 percent rise in operating income before depreciation and amortization (OIBDA) in 2009.

On the downside, seamless-tube maker Vallourec fell 10 percent after saying sales would drop by as much as 5 percent in the first quarter, hit by the global industrial slowdown.

Around Europe, UK's FTSE 100 index was up 1.3 percent, Germany's DAX index up 1.6 percent, and France's CAC 40 up 1.3 percent.