By Danilo Masoni

MILAN (Reuters) -Shares in Credit Suisse turned sharply higher in afternoon trade on Wednesday with traders citing an Inside Paradeplatz report saying that U.S-based State Street is planning a takeover bid for the troubled Swiss lender.

Credit Suisse shares earlier lost almost 8% getting closer to their lowest in over 20 years as investors dumped the stock after the company warned of a likely second-quarter loss as volatility hit its investment bank.

By 1426 GMT, the shares were up 3% after a sudden jump following the report in the Swiss financial blog. From the lows hit earlier in the day, the shares were up more than 13%. The broader European stock market was down 0.6%.

Shares in State Street were down more than 2%, underperforming the wider market.

Citing one unidentified source, Inside Paradeplatz said State Street would price its bid at 9 Swiss francs a share, a premium of more than 30% to Tuesday’s closing price. That would value Credit Suisse at 23 billion francs ($23.6 billion).

Credit Suisse declined to comment and State Street did not immediately respond to a request for comment.

A top U.S. brokerage questioned in a message to clients the rationale of any State Street interest for the Swiss bank, citing unclear synergies for the U.S. custodian, along with risk of capital costs, job cuts and litigation risks.

($1 = 0.9739 Swiss francs)

(Reporting by Danilo Masoni; Editing by Saikat Chatterjee, Kirsten Donovan)