By Dominic Lau

LONDON (Reuters) - Top shares fell 0.8 percent on Monday, clinging onto the psychological 6,000 mark, as Bradford & Bingley's profit warning and discounted rights issue weighed on banks and market sentiment.

The FTSE 100 closed down 45.9 points at 6,007.6, but well off its day's low of 5,978.4. The benchmark index lost 0.7 percent in May and is down 7 percent for the year.

Bradford & Bingley plunged 24 percent after the lender issued a stark warning on the state of the mortgage market and slashed the price of its emergency fundraising to secure a private equity lifeline.

It said U.S. private equity firm TPG Capital agreed to take a 23 percent stake in the bank in its first major UK bank investment.

"What they are telling you is that the fundamentals of business have changed, same as Royal Bank of Scotland when they first did their rights issue," said Mark Sartori, head of European equities at Fox-Pitt, Kelton. "Market conditions continue to deteriorate significantly, so it's in the process of re-pricing this in."

"Financials are set for a period of underperformance until we see the sign of recovery. I don't think you will get that until the next quarter or the quarter after that."

The B&B announcement triggered heavy losses in other banks, with HBOS down 10 percent, Alliance & Leicester dropping 5.2 percent, Lloyds TSB shedding 1.8 percent and Barclays falling 2.5 percent.

European credit spreads also took a hit and sterling fell 1 percent versus the dollar, while British gilt futures gained.