CORRECTED-Banks lead European shares lower on euro zone worries

Last Updated: Tue, Dec 11, 2012 08:50 hrs

(Corrects first paragraph to clarify KBC is a Belgian company, not Dutch)

LONDON, Dec 11 (Reuters) - Banks led European shares lower for a second day on Tuesday on the back of political turmoil in Italy, with Belgian lender KBC Groep the top faller after it sold a fresh batch of shares.

By 0814 GMT, the FTSEurofirst 300 was down 2.12 points, or 0.2 percent, at 1,132.41.

Banks were again the worst performers on the index, although losses were more subdued in than the previous session, as investors took stock of the potential for political instability in the euro zone after Italian Prime Minister Mario Monti announced he would step down after the 2013 budget was agreed.

Ian Williams, equity strategist at Peel Hunt noted that while yields rose on Italian bonds after Monti's announcement, moves were not as steep as had been feared and contagion had failed to spread to other peripheral bond markets.

"If that is a sign that asset markets are growing less vulnerable to euro zone political machinations moving into 2013, it would be welcomed by the majority of investors," he said.

Belgian bank and insurance group KBC led fallers, down 6.7 percent after it said late on Monday it had raised roughly 1.25 billion euros ($1.6 billion) to shore up its balance sheet at the same time as paying back state aid to Belgium. (Reporting by David Brett; editing by Simon Jessop and Nigel Stephenson)

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