European shares hit lowest level since February as Greece saps sentiment

* FTSEurofirst 300 down 0.7 pct

* Greek debt crisis hits banking sector

* Henkel (Other OTC: HELKF - news) misses out on hair-care acquisition

By Liisa Tuhkanen

LONDON, June 16 (Reuters) - European stocks fell for a third straight day on Tuesday as investors grew increasingly worried about lack of progress in negotiations between Greece and its creditors.

The pan-European FTSEurofirst 300 was down 0.7 percent at 1,509.17 points by 0802 GMT, following a 1.6 percent fall on Monday, its biggest loss since late May.

Earlier in the session, the index fell to 1,503.89, its lowest since February. It is still up more than 10 percent for the year.

Greece and its creditors hardened their stances on Monday after talks aimed at preventing a default and possible euro exit faltered. That prompted Germany's EU commissioner to say the time had come to prepare for a "state of emergency".

"In fact relations are now so bad it is hard to see how any agreement can possibly be reached at this late stage ... unless one or the other side changes its tune we're heading for a default, the only question is when," Michael Hewson, chief market analyst at CMC Markets, said in a note.

Concern over the deadlocked talks weighed on euro zone banks , which fell 1.1. percent as peripheral bond yields rose.

Greece's Athex share index was down only 0.6 percent, a mild move by the volatile standards of the index, although one which took its drop since Friday to more than 10 percent. Greek banks were still some of the biggest decliners on the market.

Henkel dropped 3.4 percent after a report that it had lost its bid to buy a Procter & Gamble Co hair-care business, which includes the Wella and Clairol brands.

U.S. cosmetics group Coty (NYSE: COTY - news) won auctions to acquire three businesses from P&G for as much as $12 billion, a source familiar with the matter told Reuters. They include P&G's hair-care operations. [ID: nL1N0Z2005]

Other notable movers included Airbus, which shed 2.5 percent. American Airlines (Xetra: A1G.DE - news) said it will push back delivery of 35 Airbus family jetliners by several years, although JetBlue Airways is eyeing a long-range plane from Airbus.

Europe bourses in 2015: http://link.reuters.com/pap87v

Asset performance in 2015: http://link.reuters.com/gap87v

Today's European research round-up

(Additional reporting by Alistair Smout; Editing by Larry King)