Weak banks, miners drag down FTSE 1%; defensives up

* Banks weak on fundraising uncertainties

* Oils, miners reverse with commodity prices

* Defensives in demand; International Power results please

By Jon Hopkins

LONDON, Aug 11 (Reuters) - Britain's top share index shed 1.1 percent on Tuesday knocked by weakness in heavyweight banks, miners, and oils, with defensive issues back in favour headed by International Power (IPR.L) after pleasing first-half results.

The FTSE 100 .FTSE index was 50.86 points lower at 4,671.34 by the close of the session, weakening for a second day after hitting a 10-month closing high of 4,731.56 on Friday.

"Banks and miners suffered the most as investors expressed some caution ahead of the BoE (Bank of England) inflation report and Fed rate decision, both due tomorrow, by booking some profits," said Mic Mills, senior trader at spread betters ETX Capital.

U.S. blue chips .DJI were also 1.1 percent lower by London's close with the latest rating-setting FOMC meeting kicking off on Tuesday, and a decision by the Fed due on Wednesday.

Banks were the main drag in London, with Lloyds Banking Group (LLOY.L) the biggest faller, down 7.1 percent on recent reports it is considering a multi-billion pound rights issue.

Royal Bank of Scotland (RBS.L), Barclays (BARC.L), Standard Chartered (STAN.L) and HSBC (HSBA.L) fell 0.6 to 5.5 percent.

The British government is close to hammering out an agreement about how to insure loans granted to Royal Bank of Scotland and Lloyds Banking Group under its 580 billion pound asset protection scheme, the Guardian newspaper reported.

Life insurers shed some of Monday's gains as profit takers moved in, with Aviva (AV.L), Old Mutual (OML.L), Legal & General (LGEN.L), and Prudential (PRU.L) losing 4.1 to 6.0 percent.

Friends Provident (FP.L) followed the sector trend, dropping 2.7 percent as it agreed a 1.86 billion pound takeover from Resolution (RSL.L) that valued the life insurer at a 6 percent premium to Monday's closing price. [ID:nLB614001]

Resolution shares shed 7.6 percent on the deal.

Real estate issues fell as the sector got cold-shouldered, with British Land (BLND.L), Land Securities (LAND.L), Hammerson (HMSO.L), and Liberty International (LII.L) losing 3.6 to 5.9 percent. Arbuthnot cut its rating for Land Securities to "neutral".