Banks curb European shares on litigation worries

* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 up 0.3 pct

* Deutsche Bank (LSE: 0H7D.L - news) , UBS hit, raise buffers for legal costs

* BP (LSE: BP.L - news) keeps market afloat after strong earnings, div hike

By Francesco Canepa

LONDON, Oct (KOSDAQ: 039200.KQ - news) 29 (Reuters) - European shares edged higher early on Tuesday to keep within their recent, tight range as the banking sector slid after provisions for legal costs marred results at Deutsche Bank and UBS.

Shares in UBS and Deutsche Bank fell 6 percent and 2.6 percent after both banks, hit by allegations over a scam to manipulate inter-bank lending rates, said they were holding more capital to deal with legal costs.

"They (regulators) are looking for a pound of flesh ... and I think that's the way it's going to be from now on," said Nick Xanders, head of strategy at BTIG. "The sector has started to roll over and I think it will continue."

The STOXX Europe 600 Banking index has fallen 2 percent in the past week, hit by mixed earnings and concerns about a review of euro zone's bank balance sheets that may result in some lenders having to raise capital.

The broader FTSEurofirst 300 index was up 0.1 percent at 1,284.48 points at 0837 GMT while the Euro STOXX 50 was up 0.3 percent at 3,030.10 points.

The FTSEurofirst has struggled to make much headway since hitting a five-year high a week ago, hit by concerns about banks, mixed earnings reports as well as uncertainty about the Federal Reserve's future monetary policy.

Propping up equity markets was BP, which added nearly one index point to the FTSEurofirst after unveiling forecast-beating results, a dividend hike, and a promise to sell more assets and return the proceeds to shareholders.

Around 53 percent of companies on the pan-European STOXX 600 index that have reported so far have beaten or met market forecasts with their results, while 47 percent have missed market forecasts.

That pattern continued on Tuesday, with German industrial gases maker Linde (LSE: 0H3X.L - news) curbing its 2013 profit outlook while French tyre company Michelin (Paris: FR0000121261 - news) also cut its full-year operating profit target.

"Across the board, results have been a mixed bag. It doesn't look too great," said Terry Torrison, managing director at Monaco-based McLaren Securities.

Traders said many investors would also avoid taking on big new equity positions before a U.S. Federal Reserve meeting which begins on Tuesday. The Fed is not expected to make any shift in monetary policy this week as it waits for more evidence of how badly Washington's budget battle hurt the U.S. economy.