STOCKS NEWS EUROPE-Lloyds bounces on talk of H1 profits

Lloyds Banking Group (LLOY.L) tops the table among UK blue chips .FTSE, up 5.8 percent with analysts pointing to a report in the Sunday Times that the bank, 43 percent owned by the UK government, will turn a profit in the first half of 2009.

Without citing sources, the newspaper reports Lloyds will make a headline profit for the first half of 2009 despite around 13 billion pounds of bad debt provision "by announcing that accounting trickery has helped it scrape into the black."

"Last week the talk was that they were going to announce massive losses so it is quite remarkable that it might now announce a profit," one banking analyst says.

The Sunday Times says some of Lloyds' most toxic subprime investments have clawed back billions of pounds of value in recent months and that under fair-value accounting rules, the paper gains will flow straight through to the bottom line.

The UK banking sector .FTNMX8350 is up 1.4 percent with investors reassured on the sector as sources say that U.S. lender CIT Group CIT.N has reached a tentative deal with bondholders for $3 billion in rescue financing.

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