* Banks bolster S&P 500
* Qualcomm up on talks to buy NXP
* Cognizant plunges on internal probe
* Indexes up: Dow 1.01 pct, S&P 0.86 pct, Nasdaq 0.79 pct (Adds details, comments, updates prices)
By Yashaswini Swamynathan
Sept 30 (Reuters) - Wall Street extended gains on Friday as a bounce in Deutsche Bank's shares helped lift financial stocks amid broad gains across sectors.
The S&P 500 financial index rose 1.21 percent, outpacing gains in other major sectors. The index had lost nearly 1.5 percent on Thursday, sparked by declines in Deutsche Bank and Wells Fargo.
Deutsche Bank's U.S-listed stock surged 12.3 percent after French news agency AFP reported that the bank was nearing a settlement with the U.S. Department of Justice regarding mortgage bonds.
The German lender's Frankfurt-listed stock recovered smartly from record lows to trade up 5.6 percent.
The stock was hammered on Thursday on news that a number of hedge funds had pulled out collateral as the bank faces a $14 billion demand from U.S. authorities for misselling mortgage-backed securities.
Shares of JPMorgan, Bank of America and Citigroup rose between 1.2 percent and 2 percent on Friday.
"Deutsche Bank's problem is probably not as big of a magnitude as people might think," said Randy Fredrick, managing director of trading and derivatives at Charles Schwab.
At 11:25 a.m. ET the Dow Jones industrial average was up 184.12 points, or 1.01 percent, at 18,327.57.
The S&P 500 was up 18.52 points, or 0.86 percent, at 2,169.65.
The Nasdaq Composite was up 41.67 points, or 0.79 percent, at 5,310.82.
Ten of the 11 major S&P 500 sectors were higher, while utilities was the only sector in the red.
Qualcomm shares rose 3.5 percent after sources said the company was in talks to buy NXP Semiconductors in a deal valued at more than $30 billion. NXP was up 6 percent.
Cognizant's shares plunged 14.6 percent, making it the biggest loser among S&P companies, after the IT services provider said it was conducting an internal investigation into possible violations of U.S. anti-corrupt practices laws related to payments in India.
Advancing issues outnumbered decliners on the NYSE by 2,217 to 653. On the Nasdaq, 1,974 issues rose and 676 fell.
The S&P 500 index showed 17 new 52-week highs and three new lows, while the Nasdaq recorded 46 new highs and 25 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Anil D'Silva)