* FTSEurofirst 300 up 0.6 pct
* Barclays rises 8.6 pct, drives peers as it pledges
* Gloomy outlook statements weigh on auto sector
By Francesco Canepa
LONDON, Feb 12 UK banks led European shares
higher on Tuesday after Britain's third biggest lender, Barclays
, unveiled swingeing cost cuts and a strategic overhaul
that fuelled expectations its peers would follow suit.
Shares in Barclays rose 8.6 percent to a two year-high as
the bank's new management said it would cut jobs and prune its
investment bank to save 1.7 billion pounds ($2.66 billion) in
Trading volume on the shares was more than three times its
90-day average, Thomson Reuters data showed.
Fellow domestic UK banks Royal Bank of Scotland and
Lloyds Banking Group gained 4.1 percent and 5.1
percent, respectively, on speculation they may follow in
They were among top gainers on the pan-European FTSEurofirst
300 index, which closed 0.6 percent higher at 1,161.46
"On the back of Barclay's report we've seen a lot of playing
both Lloyds and RBS," Will Hedden, a senior trader at IG, said.
"With the focus on the investment banking changes, there are
a few people who are expecting RBS to be quite aggressive with
its investment bank and push through job cuts."
Starmine data showed RBS, Barclays and Lloyds traded at
between 0.4 times and 0.8 times their tangible book value, a
steep discount to a 1.2-1.4 multiple for peers HSBC and
Standard Chartered, which benefit from their exposure
to faster growing economies.
Traders said the strategic overhaul could mark a turning
point for domestic UK lenders and their return to higher levels
of profitability and trading multiples in the coming months.
The broader earnings picture in Europe remained mixed, with
disappointing results and outlook statements knocking the auto
sector, down 1.1 percent on Tuesday.
Michelin, the world's second-largest tyremaker,
saw its shares fall 4.3 percent as it reported estimate-missing
results and forecast a challenging year ahead in Europe due to a
prolonged fall in car sales.
U.S. peer Goodyear Tire & Rubber Co and TomTom
, Europe's largest maker of navigation devices, both
blamed slumping auto sales in Europe as they cut their profit
estimates for 2013, sending TomTom shares down 5.3 percent in
Analysts have cut their 2013 estimates for the auto sector
by around 4.5 percent in the past 30 days, a steeper rate of
downgrades than for a broader basket of consumer discretionary
stocks at 1 percent and the STOXX Europe 600 index at
2.3 percent, Starmine data showed.
Estimate downgrades are still outweighing upgrades in
Europe, albeit only just, and the proportion of downgrades has
shrunk from nearly 60 percent of all estimate changes in
mid-2012, Datastream data showed.
John Bilton, European investment strategist at Bank of
America Merrill Lynch, said investors needed to see earnings
start to improve and companies resume investing if they were to
add to their equity positioning after a 24 percent rally on the
FTSEurofirst 300 between June and January.
"Investors want to see proof of earnings coming through and
they want to see proof that firms are beginning to consider
redeploying their cash," Bilton said.