Banks drag FTSE lower on euro zone debt worries

                                
 * FTSE 100 down 0.6 percent
                                
 * Banks fall back after initial gains on Ireland bailout
                                
 * ICAP knocked by broker downgrade
                                
 
                                
 By Tricia Wright
                                
 LONDON, Nov 22 (Reuters) - Britain's top share index was
lower by midday on Monday, as concerns over euro zone debt
weighed on the banking sector after Ireland's bailout, while
defensive stocks saw gains.
                                
 By 1220 GMT, the FTSE 100 <.FTSE> index was down 36.13
points, or 0.6 percent, at 5,696.70, retreating after hitting a
peak of 5,783.14 earlier in the session after Ireland agreed to
a bailout by EU partners and the International Monetary Fund.
                                
 The European Union and the IMF agreed on Sunday to help bail
out Ireland with loans expected to total 80-90 billion euros to
resolve its banking and budget crisis. [ID:nLDE6AL00M]
                                
 "While (the deal) probably solves (Ireland's) individual
short-term concerns, it certainly doesn't solve the overall
outlook in terms of risk of contagion and uncertainty for the
wider euro area," said Henk Potts, equity strategist at Barclays
Wealth.
                                
 Banks <.FTNMX8350>, which rose earlier in the session, went
into reverse as investor caution over the European debt
situation undermined sentiment.
                                
 Royal Bank of Scotland <RBS.L> dropped 3.3 percent, while
Lloyds Banking Group <LLOY.L> was 2.4 percent lower.
                                
 Defensive stocks came into favour as investors switched out
of sectors perceived as more risky.
                                
 Utility Scottish & Southern Energy <SSE.L> climbing 1.2
percent.
                                
 "It seems to me that what little money is going into
equities this morning is going towards utility stocks and
certainly out of the banking sector. I don't think the problems
with the EU area are quite over yet," said Manoj Ladwa, senior
trader at ETX Capital.
                                
 Integrated oil stocks, the top blue chip performers earlier
on Monday, fell back, led by BG Group <BG.L>, off 0.9 percent.
                                
 Mining stocks were also on the back foot, with Eurasian
Natural Resources <ENRC.L> and Rio Tinto <RIO.L> shedding 0.7
percent and 0.8 percent respectively.
                                
 Interdealer broker ICAP <IAP.L> dropped 1.9 percent as
broker Execution Noble cut its rating on the stock to a "hold"
from a "buy". [ID:nLDE6AL0F1]
                                
 Invensys <ISYS.L> was also hit by a broker downgrade, losing
0.8 percent, with traders saying Bank of America Merrill Lynch
had cut its stance to "neutral" from "buy".
                                
 U.S. stock index futures <SPc1> <DJc1> <NDc1> pointed to a
flat to higher opening on Wall Street on Monday, ahead of
October's Chicago Fed index, due at 1330 GMT. [ID:nLDE6AL0H0]
 (Editing by Jane Merriman)