Barclays shares fell by 2.5 percent in early trade, reversing an early gain, after the firm refused to rule out a rights issue.

KBC shares lost nearly 6 percent.

By 0721 GMT the FTSEurofirst 300 index of top European shares was down 0.7 percent at 1,344.91 points. The ratio of falling stocks to advancers was four to one.

‘On the financial side, we've seen a certain amount of improvement, but the underlying newsflow still contains a lot of negative items which in sum, do still paint the picture that in the U.S., the consumer is under significant pressure and will contribute to a less favourable environment in the months to come and that of course has repercussions for equities,’ said Tammo Greetfeld, a European equity strategist at UniCredit in Munich.

Other major movers included mining stocks Rio Tinto and BHP Billiton, which retreated by 2.1 to 2.3 percent after hitting record highs this week.

On the upside, Zurich Financial was the largest positive weight in the broader market, rising 3.4 percent after beating expectations with its first-quarter results, while continuing to cut costs.