April 27, 2017 / 2:38 PM / 3 months ago

European shares fall as ECB stands pat, banks drop

4 Min Read

* Pan-European index down 0.2 pct

* Deutsche Bank leads banks lower after sales drop

* Well-received earnings help SKF, Nokia, Subsea 7

* Zodiac drops on doubts over Safran takeover (Adds details after ECB meeting, updates prices)

By Danilo Masoni and Helen Reid

MILAN, April 27 (Reuters) - European shares fell from 20-month highs on Thursday as weaker banks weighed, with the broader market little moved by a widely expected European Central Bank decision to stand pat on policy.

The pan-European STOXX 600 index fell 0.2 percent, after hitting a 20-month high in the previous session. France's CAC 40 also fell 0.2 percent, off Wednesday's nine-year high.

The ECB kept its ultra-easy policy stance in place as inflation continues to undershoot its target but explicitly acknowledged the vigour of the euro zone economy, now on its best run since the global financial crisis.

The news conference by Mario Draghi saw equity indexes see-sawing but remarks from the central bank governor failed to provide a clear direction for markets.

"This was a pretty confusing and conflicting performance from Mr Draghi. He’s had to acknowledge that the growth outlook has improved and the risks to the outlook are more balanced without following that through into the inflation outlook," said Aberdeen Asset Management investment manager James Athey.

"At this stage, it’s better to just look beyond today. There’s enough from today to suggest that we might see a material change in policy in June," he added in a note.

Besides the ECB, earnings were a key focus for equity traders in Europe. First-quarter earnings for STOXX 600 companies are expected to rise 5.5 percent and revenues are seen up 5.7 percent, according to Thomson Reuters I/B/E/S data.

Deutsche Bank shares fell 2.9 percent as a fall in first-quarter revenues disappointed, even though net profit more than doubled due to a rebound in bond trading.

"We are positive on costs and capital but the key uncertainty remains revenues," said UBS analysts.

Deutsche Bank's share price has nearly doubled from its September 2016 lows.

A 5.3 percent drop in Banco Popular shares added to underperformance in European banks, down 0.6 percent.

However, results from Lloyds boosted the British bank by 1.9 percent after its first-quarter profit bucked expectations of a post-Brexit dip.

First-quarter earnings hit by weak margins in its renewable and retail business dampened appetite for shares in Finnish energy company Neste which fell 4 percent, dragging on the broader European energy index.

Shares in debt-laden aeronautical firm Zodiac Aerospace fell 5.9 percent after a French media report raised doubts on a planned takeover by Safran.

"Zodiac being acquired by Safran would actually be the best thing to happen for Zodiac shareholders," said Alphavalue analysts in a note, adding that its "dangerously" high level of debt would require a capital increase of 0.7 billion euros.

Among risers, Mediclinic jumped 16 percent after Abu Dhabi cancelled a requirement for citizens to make a 20 percent co-payment for treatment at private facilities, in a boon to private healthcare providers.

Elsewhere, upbeat results from the likes of SKF , Nokia and Subsea 7 were cheered as more investors piled into the European economic recovery story.

Of the 20 percent of STOXX companies having reported so far, 70 percent had beaten estimates while 19 percent had missed, Thomson Reuters data showed. (Reporting by Danilo Masoni; Editing by Mark Trevelyan)

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