* Bank shares all firmer after financial sector review
* Qantas best performing stock on profit cheer
* NZ stocks slightly firmer, smaller caps support (Adds analysis, quotes, stocks on the move)
By Gyles Beckford and Ian Chua
SYDNEY/WELLINGTON, Dec 8 (Reuters) - Australian shares rebounded on Monday with Qantas soaring to its highest in over three years after the airline said it expected to post its best first-half profit since 2010.
Qantas Airways topped the leader board with an impressive 13 percent rally to A$2.38 as investors cheered its faster-than-anticipated turnaround from last year's record loss.
Further supporting the overall market, the banking sector made a comeback as a government-backed review calling for stronger capital levels contained no nasty surprises.
The S&P/ASX 200 index climbed 1.0 percent to 5,389.4 by 0110 GMT, reversing all of Friday's 0.6 percent decline.
The big four major banks were all firmer led by a 2.0 percent rise in National Australia Bank.
"The banks are maybe seeing some relief buying today on the premise that perhaps these banks are going to be more secure in the future," said Chris Weston, chief market strategist at IG in Melbourne.
"The investment case for the banks is still solid. If you look at what's been driving them for the past 24 months, it has been yield and that yield play is still very much in focus."
Investors also warmed to companies that benefit from a drop in the local dollar, which slid below 83 U.S. cents for the first time in over four years.
CSL, the world's largest blood products company, advanced 2.4 percent, while Brambles, the world's largest supplier of pallets, climbed more than 2 percent to A$10.43, reaching its highest in nearly seven years.
Mining names, however, stayed under pressure with investors remaining wary amid falling commodity prices and worries about global demand. Gold miner Beadell Resources slid 5.7 percent to $0.208.
New Zealand's benchmark NZX50 index was a touch higher at 5,526.5, still within sight of a record high set two weeks ago.
The market's biggest company Fletcher Building edged up 0.2 percent to NZ$8.52.
The strongest positive note, however, came from smaller-cap stocks, with Solution Dynamics up 14.6 percent at NZ$0.63 on positive earnings guidance.
Refinery operator NZ Refining gained 1.8 percent to NZ$2.21.
Shares in stock exchange operator NZX eased 0.8 percent to NZ$1.21. The company said it would pay up to NZ$35 million to buy fund manager SuperLife to expand its offering of financial products. (Editing by Simon Cameron-Moore)