FTSE posts lowest close in three weeks, though HSBC leads banks

* FTSE 100 down 0.2 pct at close

* HSBC leads banking index higher

* Next (Frankfurt: 779551 - news) shares gain after update (Adds detail, updates prices at close)

By Kit Rees and Atul Prakash

LONDON, Aug 3 (Reuters) - Britain's top share index dipped to close at its lowest level in three weeks on Wednesday, with weaker commodities and property-related stocks offsetting an HSBC-led rally in banking stocks.

The blue-chip FTSE 100 index was down 0.2 percent at 6634.40 points, its lowest close in three weeks. The index's 5 percent rally since Britain voted to leave the European Union is losing steam, and the market faced some selling pressure in the past days.

Banks were the top performers, with HSBC helping the UK banking index to gain more than 3 percent.

HSBC shares rose 4.5 percent after Europe's biggest bank cheered investors by announcing plans to buy back up to $2.5 billion of its shares, despite reporting a 29 percent slump in its first-half profits.

"This reflects the decision by management to return half of the capital gain generated from the disposal of the group's Brazilian operations ... (but it) has dropped its progressive dividend policy," Shore Capital analyst Gary Greenwood said.

"So while giving with one hand, (the) management is at the same time taking away with the other."

Other banks also gained, with both Royal Bank of Scotland (LSE: RBS.L - news) rising 2.6 percent and Standard Chartered (HKSE: 2888.HK - news) jumping 4.2 percent after reporting a return to profit in its own results.

However, commodities-related stocks lost ground again. The UK mining index fell 0.2 percent, tracking losses in major industrial metals.

Shares (Berlin: DI6.BE - news) in Rio Tinto (LSE: RIO.L - news) were down 0.8 percent, also after the global miner reported a 47 percent slump in first-half profit to its weakest in 12 years. However, losses were limited as it surprised the market with a higher-than-expected dividend.

Property-related stocks also fell on lingering concerns about the pace of economic growth in Britain after the country voted in late June to leave the European Union.

A closely watched business survey said on Wednesday that Britain's economy was shrinking at its fastest rate since the 2008-09 financial crisis, making a Bank of England rate cut on Thursday "a foregone conclusion".

Shares in Persimmon (Frankfurt: 882058 - news) , Berkeley Group, Taylor Wimpey and Intu Properties (Other OTC: CCRGF - news) fell between 1.8 percent to 2.7 percent.

Among other movers, Next rose 4.1 percent after reporting a pick up in sales in its fiscal second quarter from the first. (Reporting by Atul Prakash; Editing by Janet Lawrence)