* Banks weak ahead of G20 summit
* BoE's King urges caution on recovery
* LSE big blue-chip faller after update
By Tricia Wright
LONDON, Sept 24 (Reuters) - Britain's top share index fell 0.3 percent by midday on Thursday, led lower by banking stocks with investors cautious ahead of the outcome from the latest Group of 20 leaders' meeting.
At 1126 GMT, the FTSE 100 was down 14.11 points or 0.3 percent at 5,125.65, having closed 0.1 percent down on Wednesday.
"The FTSE is struggling to break above the 5,200 level and over the last week or so we've simply been range trading," said Joshua Raymond, market strategist at City Index.
Banks took the most points off the index, with heavyweight HSBC down 1 percent, while Standard Chartered lost 1.6 percent and Royal Bank of Scotland fell 0.2 percent.
"I would imagine that ... investors in the banking institutions that have had to take and still hold money from the central government, or the central bank as such, then in that case one would probably need to be very cautious," said Stephen Pope, chief global market strategist at Cantor Fitzgerald.
Bank of England Governor Mervyn King urged caution as Britain's economy enters the recovery stage.
He asked for people not to get too carried away, warning any improvement is likely to be small compared to the sharp drop in output caused by the global financial crisis, in an interview published on Thursday.
London Stock Exchange was a top blue-chip faller, down 3.4 percent as the bourse operator issued a trading update indicating the firm is losing market share.
Private equity firm 3i fell 3.5 percent after it doused hopes that the stock market rally would quickly feed through into the value of its assets.
British Airways fell 2.9 percent as Citigroup cut its recommendation on the airline to "hold" from "buy".
A note by UBS on the European airline sector also weighed on BA, with the broker saying the negative trends in the industry will reverse only in 2010.
OILS LIMIT LOSSES
Energy stocks were higher, helping to limit the FTSE 100's losses, with gains seen in the sector after Wednesday's sharp falls, with crude prices over $68 a barrel.
Royal Dutch Shell climbed 1 percent, while BP rose 0.4 percent.
Strength was also seen among some miners after a retreat the previous session, as gold ticked higher supported by recent dollar weakness.
Randgold Resources climbed 1.3 percent, while Fresnillo, Rio Tinto, Xstrata and Lonmin added 0.4 to 1.3 percent.
Positive broker comment boosted Autonomy, up 1.5 percent, with Banc of America-Merrill Lynch lifting its target price for the software firm to 1,900 pence from 1,660, saying the company's cyclical exposure is underestimated.
The stock was also lifted by renewed market talk that Microsoft may bid for the company, with a price of 2,800 pence a share mentioned.
Imperial Tobacco, up 1.2 percent, was buoyed as Evolution Securities lifted its target price for the cigarette group to 2,100 pence from 1,950, while repeating its "buy" recommendation on the stock.
The Fed on Wednesday upgraded its assessment of the U.S. economy, saying growth had returned after a deep recession, while reiterating its promise to hold interest rates very low for a long time.
Investors will be keeping a close eye on U.S. weekly jobless claims at 1230 GMT and U.S. existing home sales figures for August at 1400 GMT. (Editing by Jon Loades-Carter)