FTSE down as banks dip, oils track falling crude

* FTSE 100 falls 1.2 pct

* Oil firms lower as crude at $108 a barrel

* Banks down as sterling hits 12-year low

By Michael Taylor

LONDON, Sept 3 (Reuters) - Britain's leading share index fell over 1 percent early on Wednesday as beaten down banks drifted lower, while falls in energy prices dented the performance of oil companies.

At 0755 GMT the FTSE 100 .FTSE was down 67.8 points, or 1.2 percent, at 5,552.9 after rising 0.3 percent in the previous session. The blue-chip index is now down nearly 14 percent so far this year.

Across the Atlantic overnight, Wall Street fell as the steep decline in the price of oil and other commodities hit energy and materials companies, while tech shares fell amid jitters a global economic slowdown would crimp technology spending.

Oil slipped to about $108, deepening this week's sharp falls as traders looked past Hurricane Gustav to focus on a wobbly global economy and the gloomy outlook for energy demand.

BG Group (BG.L) lost 3 percent, and Cairn Energy (CNE.L) shed 1.3 percent.

A positive sector note from Goldman Sachs helped support Royal Dutch Shell (RDSa.L) and BP (BP.L), however, which were little changed.

UK banks edged lower, dragged down by worries about the health of the global economy and further writedowns.

HBOS HBOS.L, Lloyds TSB (LLOY.L) and Standard Chartered (STAN.L) dipped 1.5-4.8 percent, while Barclays (BARC.L) lost 2.5 percent after Royal Bank of Scotland cut its rating on the stock to "sell" from "hold".

HSBC (HSBA.L) shed 1.1 percent. South Korea's Choson Ilbo newspaper said both HSBC and an unidentified Chinese bank were among potential buyers of Lehman Brothers LEH.N, citing a financial industry source. [ID:nSEO149857]

"As oil comes off in price, the penny has finally dropped that there is very little reprieve on global growth," said Manus Cranny at MF Global Spreads. "The only saving grace with that fall in oil price is that the central banks may be able to reconsider their position in the next two to three months in terms of what they do with rates."

"Fundamentally, it compounds the view that flat growth will perpetuate in the UK."

Adding to the overall negative sentiment on the British economy, sterling's =GBP slide continued as it hit a 12-year low against a basket of currencies.

In other financials, Schroders (SDR.L) slipped 4.4 percent after Morgan Stanley cut its rating on the stock to "underweight" from "equal weight", and reduced its price target to 970 pence from 975 pence.

Heavyweight mobile phone giant Vodafone (VOD.L) shed 2 percent after Credit Suisse cut its rating to "neutral" from "outperform" and its price target to 160 pence from 180 pence.

Further on the downside, Wolseley (WOS.L) dipped 3.5 percent after Deutsche Bank cut its rating on the stock to "hold" from "buy".

British telecoms company Cable & Wireless (CW.L), however, rose 2.2 percent after it entered into a 1 billion pound bulk annuity agreement with insurer Prudential (PRU.L), a move Nomura said was a step along the way to splitting up the company.

Among midcaps, Britain's biggest pub company Punch Taverns (PUB.L) lost 13.2 percent after it reported a decline in sales for its latest financial year and said it would not be paying a final dividend.

Enterprise Inns (ETI.L), Marston's (MARS.L), JD Wetherspoon (JDW.L) and Mitchells & Butlers (MAB.L) fell 3.1-10.8 percent.

DSG International (DSGI.L) lost 4.7 percent after the European electrical goods retailer said it remained "very cautious" about the outlook for the European consumer as it posted a drop in first-quarter underlying sales and pledged to cut more costs.

"The DSG and Punch numbers ... are not the biggest stocks in the FTSE, but they are symptomatic of what is going on in the high street and how people are actually curtailing their discretionary spending," added MF Global Spreads' Cranny.

BHP Billiton (BLT.L), Rio Tinto (RIO.L), Legal & General (LGEN.L), John Wood Group (WG.L), TUI Travel (TT.L) and Ferrexpo FXPO fell after going ex-dividend. (Additional reporting by Dominic Lau, editing by Will Waterman)