European equities slipped for a seventh straight session on Thursday as banking stocks struggled to find a floor following mounting sector losses, while energy shares retreated tracking a sharp decline in crude prices.

The FTSEurofirst 300 index of top European shares ended 1.0 percent lower at 796.32 points after hitting a six-week low at 788.81. It fell 4.3 percent in Wednesday's previous session and had lost 45 percent last year.

Banks were the biggest sectoral losers, with Lloyds TSB slipping 11.7 percent, Commerzbank dropping 10.8 percent, BNP Paribas shedding 6.6 percent, HSBC down 7 percent and Barclays down 8.2 percent.

Shares in Deutsche Postbank plunged 19 percent amid a rash of downbeat broker notes a day after new terms for the company's takeover by Deutsche Bank were agreed.

"There is a degree of scepticism about the actions that the governments have taken. Markets will probably return to their lows and we will continue to see elevated levels of volatility," said Darren Winder, head of macro and strategy research at Cazenove.

It was an early stage of a downturn in economic activity and the recession was to get deeper and broader before people began to anticipate a recovery, he said.

Misery in the banking sector continued. U.S. bank JPMorgan Chase said its quarterly profit fell 76 percent as it wrote down bad loans and set aside more money to cover credit losses at its investment bank.

Citigroup plans to report quarterly results on Friday and analysts are looking for a fifth straight multi-billion dollar loss. It is also expected to provide details of a reorganisation of the company designed to ensure its survival.

A profit warning from Germany's Deutsche Bank on Wednesday and a prediction HSBC may need fresh capital also shook confidence in two major European banks previously credited with dodging the worst of the fallout.

"We know the banks are in trouble. We were expecting bad figures from Deutsche Bank, but they were worse." Giuseppe-Guido Amato, strategist at Lang & Schwarz in Germany, said.

"There's no great urge to buy. Not yet."

ECB RATE CUT FAILS TO CHEER

The European Central Bank cut rates by 50 basis points to 2 percent in response to a global crisis which is casting fresh doubt on the ability of banks to survive intact.

But the size of the decline disappointed some players, who had been hoping for a bigger cut.

News of a plea by Bank of America for more government aid also hurt sentiment. Its shares fell another 21 percent on Thursday after tumbling in the previous session, while Citigroup plunged 17 percent.

Fresh economic data painted a bleak picture. The number of U.S. workers filing new claims for unemployment benefits rebounded last week after a brief holiday-induced slowdown, suggesting that the year-long recession was deepening.

Energy shares came under pressure as crude prices fell nearly 9 percent on concerns about falling global energy demand. BP, Royal Dutch Shell, BG Group and Tullow Oil shed between 0.8 percent and 2.4 percent.

Miners were mixed, with Eurasian Natural Resources falling 4.5 percent, BHP Billiton down 1.6 percent and Anglo American falling 1.4 percent. But Antofagasta rose 4.1 percent and Xstrata rose 1.7 percent.

Miner Rio Tinto said it suffered a sharp fall in iron ore output as eroding demand for autos and appliances hit both ends of the steel chain. Rio shares, however, ended up 1.5 percent.

Among other gainers, Elcoteq jumped 10 percent after the electronics manufacturer said it planned to cut around a quarter of its workforce and shut plants globally to cope with weaker demand.

Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 were down between 1.4 and 1.9 percent.