UK banking shares underperform as Scottish referendum, Article 50 trigger weigh

LONDON (Reuters) - Shares of Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L) were the worst performers on the UK bluechip index in afternoon trading, with the former hitting its lowest levels in a month.

Analysts said that the prospect of a new Scottish independence referendum could be weighing on shares of Scotland's two biggest banks, RBS and Lloyds, which fell more than 3 percent and 2.2 percent respectively.

Previously both Lloyds and RBS have said that they would relocate to England if Scots voted for independence back in 2014.

Gary Greenwood, analyst at Shore Capital, said that the move in Lloyds and RBS could be attributed to nervousness around the Scottish referendum.

"Royal Bank (of Scotland) and Lloyds both have sizeable Scottish operations, so it depends what ... ultimately happens there and whether (Scotland) actually exits the UK and stays part of Europe," Shore Capital's Greenwood said.

The banking sector is often seen as a barometer of concerns over Brexit and with gloom over a prolonged bout of exit talks sent the sterling to an eight-week low.

Barclays shares were down 1.6 percent. Among midcaps, Metro Bank (MTRO.L) was off 3.9 percent.

(Reporting by Vikram Subhedar and Kit Rees; Editing by Robin Pomeroy)