(Updates to close)
Oct 3 - Australian shares trimmed losses from the previous session to close higher on Monday, buoyed by financials on reports that Deutsche Bank was nearing a settlement with U.S. authorities over the sale of toxic mortgage bonds.
The S&P/ASX 200 index perked up 0.8 percent or 42.57 points to 5,478.5 at the close of trade.
Deutsche Bank shares, which hit a record low on Friday, extended their recovery after AFP's report that the bank was near a settlement of $5.4 billion.
Gains in Australia's "Big Four" banks lifted the financials index, which rebounded from previous session losses, to settle 1.5 percent up.
Cattle and beef producer Australian Agricultural Company Ltd was the biggest percentage gainer on the index, up 9.8 percent to its highest in around five months.
New Zealand's benchmark S&P/NZX 50 index regained ground, to close 0.2 percent or 11.4 points up at 7,372.49, led by utilities.
Electricity generator and distributor Meridian Energy Ltd rose 3.1 percent, posting its biggest percentage gain in around two weeks.
Air New Zealand was the biggest loser on the index, down 2.15 percent after oil prices edged up on Friday.
Reporting by Aparajita Saxena in Bengaluru; Editing by Eric Meijer