Banks outperform weaker European shares on rate hike talk

* STOXX inch lower, set for weekly gain

* Euro zone bank index hits 15-month high

* Autos, utilities lead sectoral fallers

* Tullow oil (LSE: TLW.L - news) plunges on rights issue news (Adds details, updates prices)

By Danilo Masoni

MILAN, March 17 (Reuters) - European shares inched lower on Friday, led down by export-oriented carmakers and utility stocks, but banks outperformed after an ECB policymaker rekindled talk of a possible rate hike.

ECB policymaker Ewald Nowotny said the central bank will decide at a later time whether to raise interest rates before or after ending its bond purchase programme, pushing euro zone government bond yields higher.

The pan-European STOXX 600 index fell 0.1 percent, erasing parts of the gains made in the previous session but remaining on track to end a week with a gain.

But banks, whose margins benefits from higher rates, bucked the weaker trend on Friday. The Austrian central bank governor said the ECB could hike its below-zero remuneration of bank deposits before the main rates at which it lends to banks.

Rabobank said Nowotny's comments had been over-interpreted, even though they could not rule out the possibility of the central bank tightening policy before ending its asset-buying.

"In our view, hiking rates before asset purchases have ended still looks quite unlikely," analysts at the Dutch bank said in a note to investors.

The euro zone bank index rose to its highest level in more than 15 months, up more than 1 percent, with Germany's Commerzbank (Xetra: CBK100 - news) leading the surge, while Europe's broader bank index added 0.4 percent, with gains capped by Nordea Bank (LSE: 0JNL.L - news) going ex dividend.

Meanwhile, euro zone money markets showed around an 80 percent chance that the ECB could lift its deposit rate at its December meeting, up from 60 percent a week ago.

Utilities, which tend to underperform when rates and yields rise because that makes the dividend paying sector less attractive, fell 0.7 percent, the second biggest sectoral decliner in Europe after autos, which fell 0.8 percent.

Biggest drag on utilities was Italy's Enel (LSE: 0NRE.L - news) , whose shares fell 1.8 percent in spite of a proposed increase in its annual dividend.

Top fallers in the auto sector were German carmakers Volkswagen (IOB: 0P6N.IL - news) , Porsche and BMW (EUREX: BMWE.EX - news) , down between 1.2 and 1.6 percent.

Elsewhere, Tullow Oil plunged 15 percent, the top faller on the STOXX 600 index, after the British oil services company announced a 607 million pound share sale to reduce its debt.

But London-focused housebuilder Berkeley Group rose 5.9 percent to their highest level since Britain voted to leave the European Union, as investors cheered to full-year forecasts at the top end of market estimates.

German airport operator Fraport (IOB: 0O1R.IL - news) rose 2.5 percent, also boosted by a well-received 2017 guidance.

(Reporting by Danilo Masoni, editing by Pritha Sarkar)