FTSE up as battered banks, commodities rally

* FTSE 100 up 1.0 pct

* Battered banks and commodity stocks rebound

* Utilities weak on switching out of defensives

(For more the financial crisis, click on [nCRISIS])

By Jon Hopkins

LONDON, Oct 9 (Reuters) - Britain's top share index was up 1 percent at midday on Thursday, recovering some of the previous session's hefty losses as battered banks and commodity stocks rebounded but staying well below earlier highs.

At 1113 GMT the FTSE 100 .FTSE was up 43.9 points at 4,410.6, below the morning peak of 4,512.5 having tumbled 5.2 percent on Wednesday to its lowest close in over four years.

The UK benchmark is still down 31 percent this year.

"We are seeing a nice little relief rally," said David Buik of BGC Capital. "But there is no real conviction so please enjoy it while you can."

Banks rose, with the FTSE 350 banks index .FTNMX8350 up 1.3 percent. Citigroup said it had raised UK banks to "neutral" from "underweight" after their underperformance and the government's rescue plan as well as coordinated rate cuts from major central banks.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) were up between 8.9 and 29.7 percent.

"There is still a degree of cynicism for banks in spite of the rescue package and rate cut moves, with LIBOR remaining high and lending amongst each other still non-existent," said Buik.

"Getting the banks lending to each other is the key to the kingdom and the key to success," he added.

HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) was down 1.2 percent, and Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), off 4.2 percent, missed out on the rally.

Barclays is likely to boost its capital by offering existing investors the chance to take preference shares or other instruments before it taps government funds, people familiar with the matter said. [ID:nL9523002]  Continued...