Banks help FTSE close higher

By Atul Prakash

LONDON (Reuters) - The top share index closed 0.5 percent higher on Monday, as better-than-expected results from Bank of America helped banking stocks, while firm commodity prices gave a lift to oils and miners.

The commodity-heavy FTSE 100 ended up 27.9 points at 5,404.3, after rising 0.5 percent last week, its first weekly advance in more than two months. But the benchmark index is down 16 percent so far this year.

Banks extended earlier gains after Bank of America figures showed profit fell less than expected, as improved investment banking and trading results offset a surge in bad loans.

Bank of America became the fourth of the nation's five largest banks to top earnings forecasts, joining Citigroup, JPMorgan Chase and Wells Fargo.

Improved sentiment supported banks, with Royal Bank of Scotland, Barclays, HSBC, Alliance & Leicester and Standard Chartered rising between 0.4 and 2.5 percent.

Traders and analysts said the results were positive for the market, but investors were not yet convinced that the financial sector crisis was easing, or that the economic outlook was improving.

"There is a bit of relief and a little bit of confidence, but still a huge amount of apprehension and concern over the long-term picture," said Angus Campbell, head of sales at Capital Spreads.

"Overall, the trend is still downward, and it's difficult to say whether the banking sector has got to a stage yet whereby its downward spiral is completely over."