* FTSEurofirst 300 up 0.4 percent
* Banks recover after initial falls
* U.S. new housing starts jump
By Joanne Frearson
LONDON, July 17 (Reuters) - European shares were higher in early afternoon trade on Friday with banks recovering after initial falls following Citigroup results, while new U.S. housing starts jumped mored than expected.
By 1306 GMT, the pan-European FTSEurofirst 300 index of top shares was up 0.4 percent at 870.56 points, having fallen earlier to 865.82 points.
The index is up 6.9 percent this week, and on track for its best weekly gain since November.
The banking sector was mixed. HSBC, BNP Paribas and Barclays were up 1.3-1.8 percent, while Credit Suisse, Bank of Ireland and Lloyds Banking were down 0.5-4.8 percent.
"Banks have been sold off a little bit on the back of Citigroup results which has slightly knocked Europe off its high," said Mark Priest, head of equity sales at ETX Capital.
"But, we are still seeing a bullish trend at the moment, figures have to be really awful to be completely sold off."
Citigroup reported a $4.3 billion second-quarter profit thanks to gains on its Smith Barney deal.
But stripping out the one-off gain from the brokerage venture, Citigroup had a loss of 26 cents a share, narrower than analysts' consensus forecast of a 31 cent loss.
Meanwhile, Bank of America Corp's quarterly profit topped Wall Street forecasts, but the largest U.S. bank warned of a fresh surge in troubled loans from credit card, mortgage and business customers due to the weak economy.
General Electric Co said profit fell by almost half, on a deeper drop in revenue than Wall Street expected, as the slump that has gripped its finance and media businesses took hold of its heavy industrial units.
Commodity stocks were the top performers on the pan-European index. BG Group, BP, Royal Dutch Shell and Total were up 0.3-1.6 percent.
Among miners, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata were 0.5-5.5 percent higher.
Looking at macroeconomic data, new U.S. housing starts and permits jumped more than expected in June, propelled by a rise in single-family homes, a government report showed. (Editing by Dan Lalor)