By Atul Prakash

LONDON (Reuters) - The top share index ended 0.8 percent lower on Monday as financial stocks fell on persistent concerns about the fallout of the credit crunch, outweighing the impact of commodity stocks that tracked crude and metals higher.

The commodity-heavy FTSE 100 ended 40 points lower at 5,312.6 after losing 0.4 percent last week. The benchmark index is down nearly 18 percent so far this year.

Banks were the top sectoral loser on the FTSE as concerns about the struggling U.S. financial sector kept investors on the sidelines. Citigroup lowered its stance on the European banking landscape to "underweight" from "neutral".

Standard & Poor's said it might cut some ratings on U.S. companies Fannie Mae and Freddie Mac, while Merrill Lynch said Lehman Brothers Holdings may post a loss in the third quarter and take an additional $2.5 billion writedown on home loans for the period.

"It's probably a period of consolidation following a modest rally from some lows, which came at the end of a sustained two-month sell-off," said Tim Hughes, head of sales trading at IG Index.

"Fundamentally, you have got that enormous question mark over the health of the economy generally and if that backdrop deteriorates, then the general market is going to have some difficult times."

HBOS shares fell 7.3 percent as traders said the bank was expected to report on Thursday that its half-year profits halved. Profits across the sector are expected to be hit by more big writedowns and slowing revenue growth, and the prospect of rising bad debts could keep outlooks cautious.

Other banks also fell, with Royal Bank of Scotland, Barclays , HSBC, Lloyds TSB and Standard Chartered falling between 1 and 5 percent.