European shares end strong week on sour note

* FTSEurofirst down 1.3 percent

* Set for best week since October 2015

* Volkswagen (Other OTC: VLKPY - news) leads auto shares lower

* Allianz (Hanover: ALVN.HA - news) down after earnings, dividend miss (Adds quote, detail)

By Danilo Masoni and Alistair Smout

MILAN/LONDON, Feb 19 (Reuters) - European shares turned lower on Friday, hit by a drop in bank, oil and auto shares, as investors locked in gains following a strong week that has helped to stabilise markets after a tumultuous start to the year.

The pan-European FTSEurofirst 300 was down 1.3 percent at 1,276.78 points by mid-afternoon but still up 3.6 percent since Monday, and set for its best week since October 2015.

The index has been buoyed by gains in bank and energy stocks after a tough start to the year, and the sectors saw profit-taking on Friday.

"We were due a recovery, as the markets were oversold... but the underlying story hasn't really changed, and people don't want to take risks heading into the weekend," said Mike McCudden, head of retail derivatives at Interactive Investor.

"There is still a stand-off between oil-producing parties, and the concerns over the banks have not gone away."

The biggest sectoral faller was banks, down 2.4 percent. They are still up 7.5 percent from last week's lows but down over 20 percent for the year on concern over how they can protect profits in a low-interest-rate, low-growth environment.

Oil prices also resumed their slide as a record build-up in U.S (Other OTC: UBGXF - news) . crude stockpiles stoked worries about global oversupply. Oil and gas shares were down 1.4 percent.

"At this stage ... it is still unclear if the current up-move has run its course or if this is merely a 'normal' and much-needed consolidation before the next leg higher," said Markus Huber, a trader at City of London Markets.

Auto shares fell 1.7 percent, with scandal-hit Volkswagen under pressure again. The stock fell 3.9 percent after a media report that VW does not expect to reach an agreement with the United States over its rigging of emissions tests before the end of March .

Allianz fell 2 percent after the German insurer missed profit and dividend expectations and gave a 2016 operating profit target in line with analysts' predictions.

Baader Bank Helvea analyst Daniel Bischof reiterated his "hold" rating on the stock, noting net income missed forecasts because of a goodwill impairment on its life business in Asia.

Valeo (Paris: FR0000130338 - news) led gains on the FTSEurofirst, up 4.2 percent, after the French car-parts maker posted a 30 percent rise in full-year net profit and proposed raising its dividend by 36 percent.

Italian broadcaster Mediaset (Amsterdam: MA8.AS - news) rose 3.5 percent after local media reported that French media group Vivendi (Swiss: VIV.SW - news) had been discussing an acquisition of its pay-TV business. Mediaset said it was not in talks with Vivendi over a sale.

Today's European research round-up ($1 = 0.6984 pounds) (Editing by Mark Trevelyan)