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According to Reuters, the pan-European index was 0.5 per cent higher at 08:17 GMT, taking it to 1,075.44 points.
Lloyds shares jumped 8.7 per cent following the announcement, while stocks in other banks were also given a boost by the news, as Barclays, Societe Generale, Deutsche Bank, HSBC and BNP Paribas were up by between 0.4 per cent and 2.2 per cent.
David Buik of BGC Partners said the Lloyds news was unexpected and "terrifically encouraging".
"There are no particular dangers out there that are going to spoil the party," he added.
Gains across the banking sector also helped the FTSE 100 to rise this morning.
By 09:10 GMT, the index was up 0.34 per cent to 5,661.69 points, led by Barclays, Royal Bank of Scotland and Lloyds, with the latter jumping by over eight per cent.
Posted by Greg Secker
