Sinking banks knock European stocks lower again

PARIS, July 4 (Reuters) - European stocks ended 1.2 percent lower on Friday, reversing the previous session's tentative recovery as banks resumed their decline, hit by a negative note from Goldman Sachs on the sector. The FTSEurofirst 300 index of top European shares unofficially ended 1.2 percent lower at 1,164.14 points. The index, which has lost 2.4 percent on the week, is down 23 percent year-to-date.

Banco Santander (SAN.MC: Quote, Profile, Research) shed 4.3 percent, Royal Bank of Scotland (RBS.L: Quote, Profile, Research) lost 3.2 percent, and BNP Paribas (BNPP.PA: Quote, Profile, Research) fell 2.8 percent.

Bradford & Bingley (BB.L: Quote, Profile, Research) plunged 18 percent. The UK lender said it will increase its rights issue to 400 million pounds ($794 million) after U.S. investor TPG Capital pulled out of buying a stake as concern deepened about the lender's business plan.

"It has become almost 'politically incorrect' to have banking stocks in a portfolio," said Alain Bokobza, head of strategy at Societe Generale, in Paris.

Banking shares have been hammered by fears over the impact of the crisis in the credit markets that have forced banks to unveil multi-billion dollar asset writedowns and emergency capital increases. The DJ Stoxx bank index , down 35 percent so far in 2008, shed 3 percent on Friday.

(Reporting by Blaise Robinson)