Britain`s FTSE Ends 2.2 Pct Lower, Weighed By Bank

Banks were the heaviest losers, retreating from sharp gains the previous session as uncertainty about their futures again bubbled.

Britain's top stock index closed down 2.2 percent on Friday as Lloyds Banking Group tumbled, dragging embattled banks lower, while softer oil and metal prices hit commodity shares.

The FTSE 100 ended down 85.55 points at 3,830.09 after gaining 1.7 percent on Thursday. Britain's benchmark index lost 7.7 percent in February, compared to a 0.1 percent gain in the same month last year.

The index has lost 13.6 percent so far in 2009 after tumbling 31 percent last year.

Banks were the heaviest losers, retreating from sharp gains the previous session as uncertainty about their futures again bubbled to the surface again.

Lloyds Banking Group tumbled 22 percent after it said it had not yet finalised details of its plan to put billions of pounds of assets into a British government-backed insurance scheme as it unveiled a 10 billion pound loss for 2008.

A move by the U.S. government to take a large common equity stake in lender Citigroup added to anxiety in the financial sector, sending U.S. stocks to a 12-year low.

"The downtrend in equity markets is picking up speed, and the Citi news isn't helping," said Jim Wood-Smith, head of research at Williams de Broe.

Royal Bank of Scotland fell 20 percent and Barclays slid 17 percent, while HSBC fell 6.8 percent. Insurers, whose fortunes tend to mirror those of the banks, also slid with Legal & General, Aviva and Old Mutual down 9.7 to 11.7 percent.

Further darkening the mood among investors was data that showed the U.S. economy shrank at its fastest rate since early 1982 in the fourth quarter, while consumer confidence ebbed to a three-month low in February.

"The market is finally getting its head round the fact the banking crisis is over in all but name and now we're moving to an economic crisis," Wood Smith said.

Also, global development banks launched a coordinated two-year plan to lend up to 25 billion euros ($32 billion) to shore up banks and business in crisis-hit eastern and central Europe.

In Britain, a survey showed consumer morale was less negative than expected this month but remained in the doldrums as people fretted about the economic climate.

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House prices in England and Wales fell 15.1 percent on the year in January, the Land Registry said, underlining gloom in the UK property market.

The global economic picture also looked grim. Production at Japanese factories fell by a record 10 percent last month and jobs proved increasingly hard to find, showing that Japan's worst recession since World War Two is deepening.

Drugmakers followed U.S. peers lower on worries that President Barack Obama's budget proposals targeting high drug prices in the United States will strangle their profits.

AstraZeneca sagged 4.8 percent, GlaxoSmithKline lost 1 percent and Shire slipped 6.3 percent.

However, other stocks seen as resilient to poor economic conditions performed well, with Imperial Tobacco and British American Tobacco up 1.8 percent.

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Heavyweight oil and gas producers tracked a 3.5 percent fall in crude to below $44 a barrel.

BP, Royal Dutch Shell and BG Group fell 0.6-2.6 percent.

Miners tracked softer metal prices, with BHP Billiton, Rio Tinto, Vedanta Resources, Kazakhmys and Antofagasta down between 3.1 and 6 percent.

However Xstrata bucked the trend, gaining 6.2 percent after Exane BNP Paribas upgraded the miner to "outperform" from "neutral".