FTSE gains as Citi results buoy banks

* FTSE up 1.7 pct, first weekly gain in nine weeks

* Citigroup results help banks' rally

* Miners sag, Tesco succumbs to retail sell-off

By Amanda Cooper

LONDON, July 18 (Reuters) - British blue-chip stocks rose on Friday as banks rebounded after better-than-expected results from U.S. bank Citigroup (C.N: Quote, Profile, Research, Stock Buzz) in the choppiest session in nearly six months, while a fall in miners curbed gains.

The FTSE 100 .FTSE ended up 90.1 points, or 1.7 percent, at 5,376.4 points, bringing the rise for the week to 1.9 percent, making this the first weekly increase in nine weeks and the end of the longest losing stretch since late May 2002.

In this latest slide, the index has lost over 15 percent.

The FTSE swung between a loss of 1.3 percent and a gain of 1.4 percent in its most volatile day of trade since Feb. 2.

Financial stocks have ranked among the top performing sectors this week in Europe, fuelled by burgeoning optimism that the impact of the credit crunch on bank balance sheets may not get much worse as a string of earnings from high-profile U.S. banks beat expectations.

Citigroup, the largest U.S. bank, was the latest Wall Street institution to beat expectations with its earnings, posting a smaller-than-expected loss that helped push up major indexes in Europe.

Banks topped the FTSE list of gainers, with HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) up 3.7 percent, Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) up almost 10 percent and Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) up 9.7 percent.

"The market was conditioned to expect something really bad and in fact it's not quite as bad as everybody expected, there is a bit of relief," said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin.

"Looking at dividends, on the banks we're back at levels seen in the previous recession. A lot of bad news has been discounted to some extent and finally we did have this technically oversold condition and markets have been waiting for a catalyst to help facilitate a rebound."

The FTSE 350 banking sector .FTUB8300 has rallied by nearly 11 percent this week, making it one of the best- performing sectors on the UK market.

"These securities have been very badly beaten up," said Edward Menashy, an economist at Charles Stanley. "(But) We know one thing -- no central bank will allow a major bank to fall."  Continued...