Deutsche rises on U.S. mortgage fraud deal, buoying European shares

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* STOXX 600 up 0.1 percent

* Deutsche up after setting mortgage fraud claim

* Credit Suisse (IOB: 0QP5.IL - news) turns flat, Barclays (LSE: BARC.L - news) falls on lawsuit

* NN Group, JCDecaux (LSE: 0MGO.L - news) also gain on merger deals

By Alistair Smout

LONDON, Dec (Shanghai: 600875.SS - news) 23 (Reuters) - European shares edged up on Friday, buoyed by the banking sector after Deutsche Bank (IOB: 0H7D.IL - news) and Credit Suisse settled mortgage securities fraud suits with the United States, and as Italy's Monte dei Paschi (Milan: BMPS.MI - news) agreed to a bailout.

The STOXX Europe 600 was up 0.1 percent at 0950 GMT, flat for the week but still set for its best month since October 2015.

Deutsche Bank rose 4 percent, the biggest gainer on the index, after it agreed to a $7.2 billion settlement with the U.S. Justice Department (DoJ) over its sale and pooling of toxic mortgage securities in the run-up to the 2008 financial crisis.

U.S. authorities had been seeking nearly twice as much.

The bank's shares are up nearly 90 percent since touching record lows in September.

Credit Suisse turned flat after early gains, while RBS (LSE: RBS.L - news) , which is being investigated, rose 0.6 percent on hopes that its final settlement might be lower than expected.

However, Barclays underperformed after failing to reach a settlement. It was down 1.4 percent, as the DoJ launched a lawsuit against the bank over its sale of mortgage-backed securities. The bank said it rejected the complaint.

"(Gains for) Deutsche Bank shares suggests relief at a good result and the affair being closed. Credit Suisse shares flat implies an acceptable deal. Barclays' (fall) indicates some uncertainty about what it eventually ends up paying," Accendo Markets head of research Mike van Dulken said in a note.

Britain's FTSE 100 was last down 0.1 percent.

Italian lenders rose 1.1 percent after the Italian government agreed to bail out Monte dei Paschi, whose shares in the bank itself were suspended from trading.

Dutch insurer NN Group rose 3.7 percent after it reached an agreement to buy Delta Lloyd (Euronext: DL.NX - news) , after NN nudged up an unsolicited offer by 1.9 percent to 2.5 billion euros.

NN Group said the deal would cement its leading position in life insurance in the Netherlands, increase assets under management by 60 billion euros, and lead to "double-digit" dividend increases starting in 2018.

Advertising firm JCDecaux rose 2.9 percent on its merger of activities with Top Media, strengthening its presence in Panama, Guatemala, Costa Rica and El Salvador. (Editing by Louise Ireland)