Banks drive Europe shares down early after HBOS

LONDON, June 19 (Reuters) - European stocks fell early on Thursday as uncertain financial outlook continued to weigh on banks, after HBOS HBOS.L warned of a 1 billion pound ($2 billion) writedown in the first half of its financial year.

By 0718 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,244.30 points, close to its lowest since late March.

Banks were the biggest losers, with HBOS falling 4 percent and Royal Bank of Scotland (RBS.L) slipping nearly 3.5 percent, while continental European banks were not immune. UBS (UBSN.VX) lost 2 percent, Banco Santander (SAN.MC) lost 1 percent and Deutsche Bank (DBKGn.DE) fell 1.9 percent.

"They now seem to be continuously coming out with more bad news ... The market won't take it as 'phew the problems are out of the way,' in a weak market coming from a bad New York and a bad Japan (session), it will put a nasty malaise over the market," said Justin Urquhart Stewart, a director at Seven Investment Management.

Oil shares were among the top gainers as the price of crude CLc1 held above $136 a barrel. Total (TOTF.PA) was up 1.4 percent, Royal Dutch Shell (RDSa.L) was up 0.8 percent and BP (BP.L) gained 0.9 percent.

Other gainers included Vodafone (VOD.L), which edged up 0.2 percent after the Financial Times said the company had pulled out of the auction for Italy's Tiscali (TIS.MI). Tiscali was down by more than 7 percent.