Britain's FTSE climbs as banks, oil companies rise, M&S slumps

* Progress on Greek debt relief buoys European markets

* FTSE at 1-month high, up 0.7 pct at close

* M&S slumps after warning of short-term profit hit (Updates prices at close)

By Kit Rees and Sudip Kar-Gupta

LONDON, May 25 (Reuters) - Britain's top share index climbed on Wednesday to touch its highest level in a month, lifted by gains at major banks and oil companies, while retailer Marks & Spencer slumped after a disappointing trading update.

The blue-chip FTSE 100 index was up 0.7 percent at 6,262.85 points at the close.

Banks rose across Europe after euro zone finance ministers unblocked 10.3 billion euros of new funds for Greece and gave the country its firmest offer yet of debt relief.

"There is some good news for investors as it looks like they may not have to face another summer of high volatility with respect to Greece," said Naeem Aslam, chief market analyst at TF Global Markets UK Limited.

Royal Bank of Scotland (LSE: RBS.L - news) led the gainers, rising 4.4 percent, and peer HSBC Holdings (HKSE: 0005.HK - news) was up 2.8 percent.

Oil companies rose as the price of oil edged towards $50 a barrel.

M&S slumped more than 10 percent, the worst FTSE 100 performer in percentage terms, after warning of a short-term hit to profit as it pushes through a plan to turn around its underperforming clothing and homeware business.

"We still have concerns that the company will not be able to reverse the declines in general merchandise (GM (NYSE: GM - news) ) like-for-like sales," Cantor Fitzgerald analysts wrote in a note, keeping a "sell" rating on M&S shares.

Product testing firm Intertek was down 5.6 percent, hitting a one-month low after reporting softer organic growth.

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Mike Dolan, Markets Editor EMEA. (Editing by Toby Chopra and John Stonestreet)