* FTSE 100 down 0.3 pct
* Drop in Lloyds impacts financial stocks
By Sudip Kar-Gupta
LONDON, July 31 (Reuters) - Britain's top equity index fell on Thursday as a drop at UK bank Lloyds hit financial stocks, while concerns about the impact on Europe from tensions between Russia and Ukraine also kept traders on the back foot.
The blue-chip FTSE 100 index was down by 0.3 percent, or 16.79 points, at 6,756.65 points.
Shares in Lloyds, which had risen for the last seven sessions, fell 2.6 percent and weighed on other financial stocks, with the FTSE 350 Banking Index falling 1.2 percent.
Traders and analysts said that while Lloyds' overall interim results were good, with the part-nationalised bank reporting a 32 percent in first-half profits, some of the gloss had been taken off by a rise in bad debts.
"Lloyds' numbers were good but the bad debt charges are the only negative I can see in them," said Securequity sales trader Jawaid Afsar.
The FTSE 100 hit a 2014 peak of 6,894.88 points in mid-May which marked its highest level since December 1999.
However, the index has failed to breach the 6,900 point mark so far this year.
Many traders expect the FTSE to hit a record high of 7,000 points later this year, but say the FTSE has to first breach the 6,900 point hurdle and its failure to do so has led some traders to book profits above the 6,800 point level.
"I wouldn't buy the FTSE here," said Afsar.
Afsar added that concerns about the situation in Ukraine, where Western powers have stepped up sanctions against Russia, were also pegging back stock markets.
New sanctions against Russia were imposed after 298 people were killed when a Malaysian passenger plane was shot down on July 17 over eastern Ukraine, where Kiev forces are fighting pro-Russian separatists.
Atif Latif, director of trading at Guardian Stockbrokers, was more optimistic that better corporate profits would enable the FTSE to recover and rise from any pull-backs.
"We are pleased that the earnings will allow the market to push back higher from this level," he said. (Additional reporting by Alistair Smout; Editing by Toby Chopra)