Shares in British banks were mixed in morning trading on the FTSE 100 after sharp drops caused by uncertainty about the state of the global recovery.

Investors have appeared reluctant to buy into banks in recent days due to weak confidence. Earlier this week the governor of the Bank of England, Mervyn King warned that inflation was likely stay above the two per cent target until late next year. He added that the BoE may look at raising interest rates or ending quantitative easing in order to prevent the "destructive" effects of inflation.

Pessimism about the economy helped drag banking shares early this morning with RBS and Barclays seeing the largest falls of 0.9 per cent.

However later in the morning the Office for National Statistics released figures showing much stronger than expected retail sales. According to the ONS retail sales volumes rose by 1.1 per cent in July, well above the 0.4 per cent expected.

The news appeared to encourage investors and strengthen banking shares into positive territory.

By 10:05 shares in Lloyds Banking Group were up 0.69 per cent to 71.12 pence per share and RBS shares increased 0.08 per cent to 46.98 pence per share.

Barclays shares however were down 0.32 per cent to 323.70 pence per share while HSBC shares declined 0.46 per cent to 649.80 pence per share.

Overall the FTSE 100 was down 0.31 per cent to 5,286.60.

Barclays HSBC FTSE Bank of England