STOCKS NEWS EUROPE-Lloyds falls as PPI hit sparks profit-taking

Shares in Lloyds Banking Group (LSE: LLOY.L - news) shed 2.4 percent To 77.71 pence, top fallers on Britain's FTSE 100, after the bank takes another big bill to compensate customers for mis-sold insurance products, prompting investors to lock in profits after a stellar rally.

Lloyds took a 750 million pound ($1.2 billion) charge for the mis-selling of payment protection insurance (PPI) in the third quarter, meaning it has now set aside more than 8 billion pounds for the scandal, far more than any other bank.

"There's quite a large sum of money set aside for PPI which is a bit of a shock," says JN Financial trader Rick Jones.

The FTSE 350 banking sector, off 0.2 percent, is the biggest drag on a 0.5 percent firmer FTSE 100 index as numbers from Standard Chartered (Other OTC: SCBFF - news) , UBS and Deutsche Bank (LSE: 0H7D.L - news) , which analysts call disappointing, also take their toll on sentiment.

Lloyds shares have leapt some 60 percent in 2013, outperforming the FTSE 350 banking sector, up 10 percent, and a 14.5 percent rise on the FTSE 100.

"I suspect there's a bit of profit taking in there", says Richard Hunter, head of equities at Hargreaves Lansdown (LSE: HL.L - news) .

"I have to say overall, we know it's a work in progress, but it looks like for its part Lloyds has done what it's been asked to do; it's returning to profitability and stability... the final thing which (it has) to sort out... is a return to dividend payment."

Numis Securities, meanwhile, cuts its rating on Lloyds to "hold" from "add".

Trading volume in Lloyds is robust, at 70 percent of the 90-day daily average, against the FTSE 100 on 27 percent.

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($1 = 0.6199 British pounds)

Reuters messaging rm://tricia.wright1.thomsonreuters.com@reuters.net

sudip.kargupta.thomsonreuters.com@reuters.net