Banks surged by as much as 10% as eurozone debt worries eased and two major US lenders reported strong results.

London’s leading shares index hit a five-month high after encouraging bond auctions in France and Spain boosted hopes that cheap credit recently made available by the European Central Bank had helped shore up the financial system.

The FTSE 100 Index rose 38.8 points to 5741.2, with lenders leading the way after being buoyed by improved results from Bank of America and a better than expected performance from Morgan Stanley in the US.

Barclays was the biggest riser up 10%, or 20.3p at 221.4p. Lloyds was ahead 9%, or 2.7p at 32.3p and Royal Bank of Scotland was up 2.2p at 27.1p.

The strong performance of banks allowed London’s leading shares index to build on recent gains after breaking through the 5700 barrier for the first time in three months yesterday.

Worries about the eurozone debt crisis linger, but optimism has been boosted after the International Monetary Fund yesterday said it plans to raise an additional £325.6bn to help struggling economies.

And investors were still hopeful ongoing talks will see Greece reach an agreement with creditors to write off a large chunk of its debts and avoid a default.

The pound was down against the euro at 1.20 after the single currency benefited from the optimism. But sterling was up against the dollar at 1.55.

The biggest Footsie risers were Barclays up 20.3p at 221.4p, Lloyds ahead 2.7p at 32.3p, Royal Bank of Scotland up 2.2p at 27.1p, and International Consolidated Airlines ahead 10.1p at 165.5p.

The biggest Footsie fallers were Essar Energy down 16.2p at 120p, British Sky Broadcasting off 23p at 666.5p, Polymetal International down 38p at 1102p, and British American Tobacco off 65p at 2897.5p.