European stocks eked out a small gain by midday on Monday, as drugmakers rose, but Royal Bank of Scotland slumped more than 40 percent after posting the biggest loss in British corporate history. At 1206 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 805.20 points.
The index also rose on Friday, but fell for seven sessions before that. It fell 45 percent in 2008, with banks hit worst.
Defensive pharmaceutical stocks gained, with GlaxoSmithKline , Roche and AstraZeneca rising 2.6 percent to 3.7 percent.
But banks fell sharply as Britain launched a second bank rescue plan.
The plan includes boosting its stake in RBS to 70 percent from 58 percent. RBS shares fell 44 percent to a 24-year low, adding to losses of more than 90 percent in 2008.
"There is a Europe-wide banking problem to solve — it's not just in the UK," said Franz Wenzel, strategist at AXA Investment Managers in Paris.
Deutsche Bank fell 6 percent, hitting an all-time low, following results last week.
LBBW analyst Alexander Groschke estimated in a research note that Deutsche Bank was sitting on more than 80 billion euros worth of assets for which no market prices are available and which could trigger further writedowns.
BNP Paribas, Credit Suisse and Societe Generale fell between 4.2 percent and 6.6 percent.
Lloyds Banking Group, now enlarged by the acquisition of HBOS, was down 10 percent.
Investors trained their sights on possible moves from the incoming U.S. administration, which has said it will make its bailout funds work harder to get credit flowing again to cash-starved consumers and companies.
In Washington, a senior adviser to Barack Obama, who will be sworn in as president on Tuesday, said the new team would soon change the way the second half of the $700 billion bank rescue scheme was run to make it more effective.
AXA's Wenzel said: "Markets are being helped by the Obama bonus. He's made it clear he will act."
But Wenzel warned: "We don't see a major pick-up in the next few weeks. The reporting season is just beginning, and there will be downwards earnings revisions."
Barclays shares turned negative by midday after an initial jump when the stock recovered most of the 25 percent it lost on Friday. Barclays issued a statement after the market closed on Friday, saying it knew of no reason for the slump.
OILS RISE
After drugmakers, the oil companies added most to the index, though futures for March had slipped nearly 2 percent and were trading below $42 a barrel.
Total, ENI, BP and Royal Dutch Shell were up between 1.6 percent and 3.2 percent.
Around Europe, UK's FTSE 100 index, Germany's DAX index and France's CAC 40 were up between 1.4 percent and 1.9 percent.
Spain's IBEX was up 1.1 percent despite Spain's sovereign ratings being cut by S&P
Swedish Match rose 2 percent after Dresdner Kleinwort upgraded it to "buy" from "add", saying earnings will be boosted by lower tax and favourable foreign exchange movements.
Shares in German chemicals group BASF fell 4.3 percent after the company said the decline in its business was greater than expected in November and will impact earnings negatively.
UK supermarket group Morrison was 3 percent higher ahead of a trading statement on Thursday, with press reports suggesting it will have outperformed most of its rivals over the Christmas period. U.S. markets will remain closed on Monday for a national holiday.
