(Adds closing levels, details)
* FTSEurofirst 300 up 0.3 pct, Italy's MIB up 1.9 pct
* Allianz tumbles 6.2 pct as Gross leaves Pimco
* Strong demand seen for bank option calls
By Blaise Robinson
PARIS, Sept 26 (Reuters) - European shares rose on Friday, led by banks on expectations they will be the big winners in the ECB's drive to stave off deflation, while Allianz sank on news fund manager Bill Gross was leaving the group's asset-management unit Pimco.
Gross, one of the bond market's most renowned investors, will be joining Pimco rival Janus Capital Group, Janus said on Friday.
Traders worried that his departure could mean more redemptions from Gross's flagship Pimco Total Return Fund , the world's largest bond fund with more than $220 billion in assets. It has suffered nearly $70 billion of investor withdrawals over the past 16 months.
Allianz shares tumbled 6.2 percent on Friday in their biggest one-day slide in nearly three years, representing a wipeout in the group's market value of about 3.8 billion euros ($4.82 billion).
"The news is having ripple effects on many asset classes, even on European bond yields. People think Pimco might start offloading assets," said Alexandre Baradez, chief market analyst at IG France.
"The timing of Gross's departure from the world's biggest bond fund, just as the Fed is poised to start raising interest rates in the next few quarters, is also spooking investors."
Following the news of Gross's exit from Pimco, which has large investments in euro zone peripheral bonds, Italian 10-year bond yields rose 4 basis points on the day to 2.40 percent and equivalent Spanish yields advanced 5 bps to 2.20 percent.
The FTSEurofirst 300 index of top European shares ended 0.3 percent higher at 1,377.00 points.
Euro zone banking stocks featured among the top gainers, boosted by expectations they will be the big winners in the European Central Bank's drive to stave off deflation.
Credit Agricole gained 1.2 percent and UniCredit rose 2.2 percent. The STOXX euro zone banking index gained 1 percent, among the top sectors across Europe.
Investors increasingly expect euro zone banking stocks to rally in coming months as the ECB steps up efforts to support the region's economy. The central bank announced more stimulus measures this month, including purchases of asset-backed debt, in addition to cheap loans to banks announced earlier.
Societe Generale equity analysts recommend buying European banks set to benefit from the ECB's latest measures. They also say the ECB's asset-quality review - results of which are due next month - should give banks more visibility.
"It's a theme that many clients want to play, but not necessarily directly with long positions on the cash market. There's been a big rise in the open interest in calls on banking stocks in the past few months," said Vincent Cassot, head of equity derivatives strategy at Societe Generale.
Demand was lower than expected last week for the ECB's four-year loans to banks. But several investors say banks will wait for the asset-quality review to end before taking part in the ECB scheme. Another round of loans is due in early December.
Gains in Europe on Friday were led by Milan's FTSE MIB , up 1.9 percent, Paris's CAC 40, up 0.9 percent and Madrid's IBEX, 0.6 percent higher.
The FTSEurofirst 300 has gained 4.6 percent this year, with Italy's MIB up 9.6 percent and Spain's IBEX gaining 9.4 percent. Both the UK's FTSE 100 and Germany's DAX have underperformed, down 1.5 percent and 0.6 percent respectively in 2014.
According to a Reuters poll published on Thursday, European shares are poised to add another 2 percent to this year's gains, supported by the ECB's ultra-loose monetary policy and a falling euro, which should boost company earnings.
Italy's MIB is likely to benefit the most, gaining an extra 6 percent before year-end.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Editing by Mark Heinrich)