European stocks drop in early trade; UBS falls

PARIS, Nov 3 (Reuters) - European stocks fell 1.2 percent in early trade on Tuesday, losing ground for the sixth time in nine sessions, as poor results from UBS (UBSN.VX: Quote, Profile, Research) and a shake-up of Lloyds and Royal Bank of Scotland (RBS.L: Quote, Profile, Research) rattled investors.

At 0812 GMT, the FTSEurofirst 300 index of top European shares was down 1.2 percent at 968.39 points. The index has lost 6 percent over the past two weeks, but is still up 16 percent in 2009.

UBS shed 4 percent after the Swiss lender posted a higher-than-expected accounting charge and withdrawals at all its key divisions pushed it into another quarterly loss, and said it did not expect an immediate recovery of client inflows.

Shares of Lloyds Banking Group (LLOY.L: Quote, Profile, Research) gained 1.8 percent after it launched a record 13.5 billion pound ($22 billion) rights issue and along with rival RBS agreed to sell off some businesses to limit their reliance on government support.

"The timing for such a huge rights issue is quite bad. UBS just posted ugly results that bode ill for European banks results, and CIT CIT.N just filed for bankruptcy. This raises the question: isn't it too early to pay back government money?," said David Thebault, head of quantitative sales trading, at Global Equities, in Paris.

Shares of RBS dropped 2.7 percent. The DJ STOXX European bank index was down 1.7 percent. (Reporting by Blaise Robinson)