* FTSEurofirst 300 index gains 1.3 pct
* Greek deal lifts banks
* Energy shares mirror higher crude oil
* M&S slumps after short-term profit warning (ADVISORY - Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)
By Alistair Smout and Atul Prakash
LONDON, May 25 (Reuters) - European equities jumped to a four-week high on Wednesday with banks buoyed by progress on talks towards securing a debt relief deal for Greece, and energy shares rose on the back of a rally in oil.
The FTSEurofirst 300 and the STOXX Europe 600 index both touched their highest levels since late April, climbing 1.3 percent to add to the previous session's jump of more than 2 percent.
Banks rose after euro zone finance ministers agreed with Greece and the International Monetary Fund on a deal that will address Athens' requests for debt relief.
"This deal is welcome, and it allows the current arrangement to progress. In a way it puts a lid back on the can of worms, but the worms are still in there," Jasper Lawler, market analyst at CMC Markets, said.
The euro zone banking index was up 3.6 percent, led by lenders in the periphery. Shares in Caixabank, Banco Popular and Santander surged between 5.8 percent and 7.3 percent.
Deutsche Bank gained 3.4 percent, with some traders citing positive broker comments from JP Morgan.
The top Greek index rallied in early deals as sovereign yields fell on the deal. It had been set to post its highest close since December 2015, until a late pullback saw it end flat.
Energy shares were in demand after oil prices pushed closer to $50 a barrel, with U.S. crude hitting its highest in more than seven months after industry data suggested a larger-than-expected drawdown in U.S. crude inventories last week.
The STOXX Europe 600 Oil and Gas index rose 2.5 percent, helped by gains of 2.3 percent for BP and Royal Dutch Shell respectively.
Among fallers, British retailer Marks & Spencer slumped after it said its turnaround plan would cut into profits in the short term.
M&S was down 10.2 percent, the top decliner in the FTSEurofirst 300 index, after the company told investors to expect a short-term hit to profit as it pushes through a plan to turn around its underperforming clothing and homeware business.
"Clothing and general merchandise performance remains unsatisfactory as difficult trading conditions persist, which leaves everything on the shoulders of a stronger performing but much lower-margin food segment," Accendo Markets head of research, Mike van Dulken, said.
"A troubled retail division has become a major issue as the core customer base ages and it likely struggles to entice a younger demographic more likely to buy online."
Today's European research round-up
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Mike Dolan, Markets Editor EMEA. (Editing by Mark Heinrich)