LONDON, Oct 8 (Reuters) - European shares pared losses in late morning trade on Wednesday as British banks HBOS HBOS.L and Royal Bank of Scotland (RBS.L: Quote, Profile, Research) surged.

At 1038 GMT, the pan-European FTSEurofirst 300 benchmark was still down 3.7 percent at 966.44 points after trading nearly 8 percent lower early in the day.

HBOS HBOS.L surged 55 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research) jumped 32 percent after heavy recent losses.

The stocks were helped by a UK government plan to inject as much as 50 billion pounds into the sector, and HBOS was additionally boosted by hopes that its deal to be taken over by Lloyds TSB (LLOY.L: Quote, Profile, Research) would proceed as planned.

(Reporting by Sitaraman Shankar)