UK banks led European shares higher on Tuesday after Britain's third biggest lender, Barclays, unveiled cost cuts and a strategic overhaul that fueled expectations its peer group would follow suit.
Shares in Barclays rose 8.6 percent to a two year-high as the bank's new management said it would in 2013 and prune its investment bank to save 1.7 billion pounds ($2.66 billion) in annual costs.
UK peers RBS and Lloyds gained 4 percent and 4.9 percent, respectively, on speculation they may follow in Barclays' footsteps.
They were among top gainers on the pan-European FTSEurofirst 300 Index, which provisionally closed 0.5 percent higher at 1,160.43 points.
"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."
The autos sector closed over 1 percent lower on Tuesday after poor January sales data diminished hopes of a European upturn in car sales. Downward pressure also came from Michelin after it posted results.
"The markets weren't very strong at all last year," Michelin CEO Jean-Dominique Senard told France's BFM radio station.