The London Stock Exchange comfortably beat quarterly revenue forecasts with a 17 percent rise, boosted by higher charges on short-term funding to Italian banks caught up in the euro zone debt crisis.

The British exchange's Italian clearing house CC&G, like other clearing providers, makes short-term deposits with clients, typically overnight.

This unit has benefited from increased demand for funding from Italian banks, whose borrowing costs in general have increased because lenders see them as more risky.

The LSE has been able to charge higher margins on these short-term deposits because of the risk that a bank could default.

Post-trade income was up 50 percent driven by higher margins deposits in the Italian clearing house and wide credit default swap spreads on Italian banks, said Richard Perrott, an analyst at Berenberg Bank.

The British exchange Friday reported income of 196 million pounds in the three months to December, its financial third quarter, compared with a forecast for 181 million.

Treasury income from its Italian clearing house of 33.5 million beat a forecast for 26.6 million.

We have seen a big increase in the volume of transactions we clear and we are looking to optimise the returns we take on margin collateral, chief financial officer Doug Webb said.

The LSE's main capital markets business earned 68.9 million pounds, compared with a forecast of 69.8 million, while its data services group made 52.8 million, versus 44 million from a consensus of analysts.

The LSE's chief executive Xavier Rolet said Friday the exchange group's growing diversity gives our portfolio a good element of natural hedge. The exchange operator said its fourth quarter had started with subdued secondary market trading.

Rolet also said the LSE had completed the acquisition of index firm FTSE and was continuing takeover talks with clearing house LCH.Clearnet.

(Editing by Erica Billingham and Dan Lalor)