Merger talk boosts banks but European shares end lower

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* Pan-European index ends down 0.4 pct

* Bank index makes biggest monthly gain since Feb 2015

* Deutsche Bank (LSE: 0H7D.L - news) boss calls for mergers

* Weaker commodity prices hit miners, oil stocks

By Danilo Masoni

MILAN, Aug 31 (Reuters) - European shares edged lower on Wednesday, weighed down by losses among miners and energy stocks, but banks extended recent gains amid talk of possible tie-ups in the battered sector.

Deutsche Bank chief John Cryan made a rare public call for more cross-border sector consolidation in Europe on Wednesday following a report that the German bank had considered a merger with rival Commerzbank (Xetra: CBK100 - news) .

Europe's STOXX bank index has been the worst sectoral performer so far this year due to concerns over margin pressure and possible capital shortfalls in a low-growth low-rate environment.

The index rose 1.7 percent on the day, ending August up more than 8 percent in its biggest monthly gain since Feb. 2015.

"Technology and regulation costs are rising and margins are being squeezed by persistently low and negative interest rates. Trading revenues are also on the decline," ETX Capital markets analyst Neil Wilson said.

"In any industry this would be a sign that deals are imminent... The key is how and when."

Shares (Berlin: DI6.BE - news) in Deutsche Bank and Commerzbank rose 2.5 and 3.4 percent respectively, while Spain's Banco Popular and Italy's Intesa Sanpaolo (Amsterdam: IO6.AS - news) rose more than 4 percent.

Investors said gains among banks and financial stocks have been supported this month by growing expectations that interest rates in the United States could rise by the end of the year.

The pan-European STOXX 600 index ended down 0.4 percent, hit by weaker mining stocks and with a late fall in crude oil prices adding pressure in the last stretch of the trading session.

Iliad (LSE: 0MGY.L - news) rose 4.1 percent after the French telecoms operator said core operating profit rose 11.5 percent and it continued to win customers.

Bouygues (LSE: 0HAN.L - news) gained 1 percent after naming two new deputy CEOs and reiterating its pledge to improve profitability this year following a first-half earnings boost from an improved performance at its telecom arm.

Grafton fell 9.9 percent to be the worst performer in the STOXX 600 after the distributor of building materials said UK demand was flat since June's Brexit vote. (Additional reporting by Atul Prakash in London; editing by John Stonestreet)