The STOXX Europe 600 Banks index <.SX7P> was up 1.6 percent after climbing to its highest level since January. Credit Suisse (>> Credit Suisse Group AG) rose 4 percent after announcing more than 1 billion Swiss francs (782.04 million pounds) in extra cost cuts.

Italian banks <.FTIT8300> rose 2.2 percent, with Reuters exclusively reporting Italy was preparing to take a 2 billion euros controlling stake in Monte dei Paschi di Siena (>> Banca Monte dei Paschi di Siena SpA) as the bank's hopes of a private funding rescue faded following Prime Minister Matteo Renzi's decision to quit.

Italian banks are now up nearly 12 percent since Monday's close.

Shares in Monte dei Paschi di Siena were up 8.9 percent, a day after Italian banks climbed 9 percent on short covering before a European Central Bank meeting this week and after Italian Prime Minister Matteo Renzi said he would step down following the referendum's defeat.

Miners tracked stronger metals prices, with the European sector index <.SXPP> rising 2.1 percent. The STOXX 600 <.STOXX> was up 0.6 percent in early trades.

(Reporting by Atul Prakash, Editing by Vikram Subhedar)