* FTSEurofirst 300 up 0.6 pct
* Barclays rises 8.6 pct, drives peers as it pledges overhaul
* Gloomy outlook statements weigh on auto sector
By Francesco Canepa
LONDON, Feb 12 (Reuters) - UK banks led European shares higher on Tuesday after Britain's third biggest lender, Barclays , unveiled swingeing cost cuts and a strategic overhaul that fuelled expectations its peers would follow suit.
Shares in Barclays rose 8.6 percent to a two year-high as the bank's new management said it would cut jobs and prune its investment bank to save 1.7 billion pounds ($2.66 billion) in annual costs.
Trading volume on the shares was more than three times its 90-day average, Thomson Reuters data showed.
Fellow domestic UK banks Royal Bank of Scotland and Lloyds Banking Group gained 4.1 percent and 5.1 percent, respectively, on speculation they may follow in Barclays' footsteps.
They were among top gainers on the pan-European FTSEurofirst 300 index, which closed 0.6 percent higher at 1,161.46 points.
"On the back of Barclay's report we've seen a lot of playing both Lloyds and RBS," Will Hedden, a senior trader at IG, said.
"With the focus on the investment banking changes, there are a few people who are expecting RBS to be quite aggressive with its investment bank and push through job cuts."
Starmine data showed RBS, Barclays and Lloyds traded at between 0.4 times and 0.8 times their tangible book value, a steep discount to a 1.2-1.4 multiple for peers HSBC and Standard Chartered, which benefit from their exposure to faster growing economies.
Traders said the strategic overhaul could mark a turning point for domestic UK lenders and their return to higher levels of profitability and trading multiples in the coming months.
The broader earnings picture in Europe remained mixed, with disappointing results and outlook statements knocking the auto sector, down 1.1 percent on Tuesday.
Michelin, the world's second-largest tyremaker, saw its shares fall 4.3 percent as it reported estimate-missing results and forecast a challenging year ahead in Europe due to a prolonged fall in car sales.
U.S. peer Goodyear Tire & Rubber Co and TomTom , Europe's largest maker of navigation devices, both blamed slumping auto sales in Europe as they cut their profit estimates for 2013, sending TomTom shares down 5.3 percent in Amsterdam
Analysts have cut their 2013 estimates for the auto sector by around 4.5 percent in the past 30 days, a steeper rate of downgrades than for a broader basket of consumer discretionary stocks at 1 percent and the STOXX Europe 600 index at 2.3 percent, Starmine data showed.
Estimate downgrades are still outweighing upgrades in Europe, albeit only just, and the proportion of downgrades has shrunk from nearly 60 percent of all estimate changes in mid-2012, Datastream data showed.
John Bilton, European investment strategist at Bank of America Merrill Lynch, said investors needed to see earnings start to improve and companies resume investing if they were to add to their equity positioning after a 24 percent rally on the FTSEurofirst 300 between June and January.
"Investors want to see proof of earnings coming through and they want to see proof that firms are beginning to consider redeploying their cash," Bilton said.