European bank stocks set for worst two-day loss ever in post-Brexit fallout

A Barclays bank office is seen at Canary Wharf in London, Britain May 19, 2015. REUTERS/Suzanne Plunkett/File Photo

LONDON (Reuters) - European bank stocks .SX7P extended post-Brexit losses on Monday putting the sector on track for its worst 2-day drop ever.

The economic impact of Britain’s decision to leave the European Union is seen compressing earnings further at a time that regional banks are already grappling with poor returns, higher regulatory costs and rising non-performing loans.

The regional banking index .SX7P fell more than 5 percent on Monday and neared levels last seen in the aftermath of 2011's eurozone debt crisis.

Other financials also suffered with the STOXX Europe 600 Insurance index .SXIP down 4 percent to its lowest level since December 2013.

Italian and UK banks took center stage. In Italy, UniCredit CRDI.MI fell 7.2 percent while Intesa fell 7.6 percent, as the Italian government said it was looking at various policy options to help its banks and prevent further falls in their share prices.

In the UK, shares of Royal Bank of Scotland RBS.L and Barclays BARC.L both fell more than 10 percent in particularly volatile trading which spurred intermittent automatic suspensions in trading.

Credit Suisse CSGN.S shares hit another record low.

European banks have lost more than a third of their value this year.

Reporting by Sudip Kar-Gupta; Editing by Vikram Subhedar