Britain's FTSE-100 closed up slightly on Monday, recovering from an earlier dip as HBSC led the banking sector higher, helping to counter losses for other financials and airline British Airways.
United Utilities was another feature, down 1.7 percent as jitters emerged ahead of the release of an industry price review from regulator Ofwat on Thursday. Dealers said there was concern that United Utilities might cut its dividend if proposed price increases do not meet its expectations.
The FTSE-100 index ended up 2.6 points at 4,415.7 - rising from a dip to 4,390.9 earlier in the session. The move came as Wall Street also recovered from an initial fall. But sentiment remained fragile in the face of the latest US security alert, which outlined threats to financial institutions.
Oil prices near $44 a barrel and the Bank of England's interest rate decision due on Thursday were also hitting investor enthusiasm, analysts said.
"The market is a little bit worried about whether growth will continue as good as it's been in the first half and at the same time it's seeing the cost of money going up," said Andrew Bell, European strategist at Carr Sheppards Crosthwaite.
The Bank of England is widely expected to hike rates by a quarter point on Thursday. Some dealers speculated a half-point increase could be on the cards after figures showed British manufacturing rose at its fastest pace in a decade in July.
Buoyant banking stocks were the main force keeping the market in positive territory, led by a 3.2 percent rise for HBSC after interim profits at the global bank rose by more than half, beating market forecasts.
"One of the worries was the Household acquisition, this huge new beast within HSBC, and what would happen when the US rate cycle turned. Was that going to produce lots of bad debts in that credit business? So far it hasn't and that's a relief," said fund manager Andrew Hobson of Exeter Asset Management.
Abbey National also stepped into the spotlight with a 2.6 percent gain after rival HBOS said it might challenge Spanish bank Santander Central Hispano's agreed offer. Standard Chartered and Barclays rose 1.3 percent and 0.8 percent ahead of their results later this week.
But other financials lagged behind. Fund manager Man Group ended down 4.4 percent and hit its worst level since September 2003. Man has struggled recently amid concerns about the outlook for the hedge fund industry and the performance of its main fund AHL, which lost 4 percent last week.
British Airways also fell to end down 2.8 percent on concern about the effect higher oil prices might have on profits at Europe's second-biggest airline.
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