By Sudip Kar-Gupta
LONDON (Reuters) - A slide in financial stocks, including Aberdeen Asset Management (L:ADN), knocked back Britain's top equity index on Monday, to its lowest level in nearly a week.
The blue-chip FTSE 100 index <.FTSE> closed down by 0.1 percent, or 3.48 points, at 6,788.07 points.
Fund management group Aberdeen Asset Management was the worst-performing FTSE 100 stock in percentage terms, falling 5.3 percent after the company reported fund outflows in its third quarter.
Lloyds Banking Group (L:LLOY) closed flat, recovering from a slight dip after it agreed to pay fines totalling $370 million ( 217.82 milliom pounds) to U.S. and British authorities investigating its part in a global interest rate rigging scandal and manipulating fees for a British government lending scheme.
The fact that Lloyds would be fined had been widely flagged, but the ongoing regulatory pressure on Lloyds and other banks still dragged down the shares of its part-nationalised rival Royal Bank of Scotland (L:RBS).
RBS, which had surged 10.8 percent on Friday after posting surprise second-quarter profits, closed down 3.4 percent on Monday.
"The banks have taken a bit of a hit this afternoon. The Lloyds' fine was a bit bigger than I thought," said Berkeley Futures associate director Richard Griffiths.
Analysts at Investec said in a note that some investors were being complacent about Lloyds' regulatory fines. However, they also said that the latest fine was a relatively small "drop in the ocean" given that Lloyds had paid out around 10 billion pounds in total on mis-selling loan insurance.
JNF Capital investment manager Edward Smyth said UK banking stocks were a worthwhile buy at current levels.
"Lloyds should be able to absorb this fine. I am bullish on the UK banks around these levels," he said.
WORRIES OVER UKRAINE REMAIN
Another factor weighing on equity markets was ongoing tensions between Russia and Ukraine. A total of 298 people were killed on July 17 when a Malaysian passenger plane was shot down over rebel-held territory in eastern Ukraine, where Kiev's forces are fighting pro-Russian separatists.
A White House adviser said on Monday that U.S. President Barack Obama was scheduled to speak on Monday with four European leaders about the situation in Ukraine.
"There's the potential for further developments in Ukraine, which is keeping everyone on the back foot," said IG analyst Chris Beauchamp.
Uncertainty over Ukraine has contributed to push the FTSE 100 down by more than 1 percent from peaks reached in May and early July.
However, many investors still think the index will recover later in the year to hit a record high of 7,000 points, helped by a gradual recovery in corporate profits and the British economy.
(Additional reporting by Francesco Canepa; Editing by Gareth Jones and Susan Fenton)