Hopes of a turnaround in the battered banking sector sent bank stocks soaring yesterday after better-than-expected profits from US giant Goldman Sachs.

UK banks led the blue chip gainers after Goldman Sachs posted a much higher than expected first-quarter profit and said it planned a $5bn share sale to help repay government funds.

Goldman reported a surprise £1.1 billion in first-quarter profits and announced plans to raise cash to pay back US government bailout funds, fuelling hopes the banking crisis may finally be easing. Barclays, up 10.1 per cent, was particularly helped by the implications of the Goldman news.

Cazenove analysts said Goldman’s results were boosted by strong fixed income, currency and commodities revenues, areas where Barclays is also active. Insurers Legal & General, Aviva and Prudential up between 3.7 and 11.7 per cent.