Vodafone, banks drag FTSE lower; commodities gain

* FTSE 100 falls 1.4 pct to snap 3-day winning streak

* Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) slumps after trading update

* Banks slip; oil, mining shares track firmer commodity prices

By Atul Prakash

LONDON, July 22 (Reuters) - Britain's blue-chip FTSE index fell 1.4 percent on Monday, as a sharp drop in Vodafone (VOD.L: Quote, Profile, Research, Stock Buzz) shares and weaker banking stocks outweighed commodity sector gains.

By 0806 GMT, the commodity-heavy FTSE 100 .FTSE was down 72.7 points at 5,331.6, after closing 0.5 percent higher on Monday. The index, which had risen for the past three sessions, has fallen more than 17 percent this year.

Vodafone, world No. 1 mobile phone company by revenue, topped the FTSE 100 losers list by slipping 12 percent after it said full-year revenue was expected to be around the bottom of its previously stated range due to economic weakness.

"It's not a good day for European mobile," one London-based analyst said.

"European mobile is saturated, it's harder to show top line progression. Top line is now under pressure, and Vodafone is obviously the benchmark for European mobile," the analyst said.

Banking shares also slipped on concerns about a tough economic outlook and tight credit market conditions.

Macroeconomic research consultancy Capital Economics said UK banks may be forced to rein in lending by as much as 180 billion pounds, the equivalent of 13 percent of economic output, to shore up their balance sheets, the Daily Mail reported.

"We had some reasonably reassuring comments from some of the U.S. banks in recent days, but it's difficult to say that all of the difficulties in relation to the credit market are behind us," said Keith Bowman, analyst at Hargreaves Lansdown.

"I am sure we are going to be results-driven in the next few days," he added.

HBOS, the latest European bank to raise capital to repair its balance sheet, fell 1 percent, while Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) fell between 2 and 4.2 percent.