FTSE ticks up as gains in banks eclipse weaker oils

* FTSE 100 edges up 0.2 pct * Energy stocks slip on production fears, profit-taking * Banks rise as sentiment improves

By Dominic Lau

LONDON, Aug 28 (Reuters) - Britain's leading share index edged up by midday on Thursday as gains in banks offset weaker energy stocks, which fell on concerns over a tropical storm hitting production.

By 1028 GMT, the FTSE 100 .FTSE was up 11.7 points, or 0.2 percent, at 5,539.8, after gaining 1.1 percent on Wednesday.

UK banks gained after U.S. stocks rose overnight as investors grew more confident that Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) will not require a government bailout that would wipe out their equity.

HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz), Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) put on 0.4 to 4.5 percent.

"Some people are getting out of the commodity sector and back into banking," said Mark Foulds, head of equity sales at TradIndex.

"That's not to say the credit crunch is over, but I think peoples' memories die very quickly. And when there is a bit of confidence out there, the market seems to be holding at this level," he said, adding it would take only a little bad news to push markets back down again.

France's Credit Agricole (CAGR.PA: Quote, Profile, Research, Stock Buzz) rebounded after early losses to jump 5.8 percent despite posting a 94 percent fall in net profit. Traders and fund managers said the bank had got the bulk of the writedowns out of the way and results in the third and fourth quarter would be better.

But British subprime lender Cattles (CTT.L: Quote, Profile, Research, Stock Buzz) fell 1.5 percent after the mid-cap company reported a 16.8 percent increase in its half-year profit but said more customers were experiencing repayment difficulties in the face of weakening economic growth.

The Nationwide building society said British house prices fell almost 2 percent on the month in August to post their biggest annual drop since monthly records began in 1991. [ID:nLS439960]

Property shares, however, were in demand after the Financial Times said Australian shopping centre owner Westfield WDC.AX had almost filled its new White City shopping mall in west London in spite of the deteriorating economic environment for retailers.

Hammerson (HMSO.L: Quote, Profile, Research, Stock Buzz), British Land (BLND.L: Quote, Profile, Research, Stock Buzz) and Land Securities (LAND.L: Quote, Profile, Research, Stock Buzz) climbed between 2.5 and 2.9 percent.

WEAKER OILS