* FTSE 100 off 0.8 pct; biggest percentage drop in 2 months
* Banks slip, pressured by UBS results
* Miners fall, retreating after Monday's advance
* Carnival up on read-across from Royal Caribbean Q3
By Tricia Wright
LONDON, Oct 26 (Reuters) - Weak banks helped drive Britain's top share index to a lower close on Tuesday, with sentiment hit by a loss at UBS's investment bank and as investors locked in profits after sharp gains over the last two months.
The FTSE 100 closed 44.68 points, or 0.8 percent, lower at 5,707.30, its biggest one-day percentage drop since Aug. 25. The index has risen more than 9 percent since the start of September.
Banks were out of favour after UBS's results and as uncertainty on the global economic outlook kept optimism on more cyclical equities in check. Barclays and Royal Bank of Scotland both fell 1.4 percent.
"(The FTSE) is pretty weak... the UBS figures have caused a lot of pressure, which has permeated (the wider market)," Joe Rundle, head of trading at ETX Capital, said.
Miners, which notched up good gains in the previous session, took the most points off the index. BHP Billiton, down 2.5 percent, was the biggest laggard in the sector.
Insurers fell, hurt by a note from BofA Merrill Lynch which downgraded the sector on valuation grounds after a strong run over the past few months. Prudential lost 1.7 percent.
"The market has had a good run since late August and it appears to be on an upward, sawtooth trend. It seems this is one of those days where investors are booking profits after gains," Peter Dixon, economist at Commerzbank, said.
CAIRN WEAK
Cairn Energy topped the blue-chip fallers' list, shedding 7.2 percent. The oil explorer said one of its wells in Greenland did not result in a commercial discovery, and another failed to reach the target depth before the end of the Arctic drilling season.
ARM Holdings was also on the back foot, down 5.9 percent, as strong results and a bullish tone from the British chip designer were drowned out by a warning of faltering consumer demand from key customer Texas Instruments.
Cruise company Carnival, meanwhile, grabbed the top spot on the FTSE 100 leader board, up 4.3 percent, with traders citing a positive read-across from peer Royal Caribbean Cruises' third-quarter earnings.
Reckitt Benckiser put on 0.5 percent after the British consumer goods firm won conditional EU regulatory approval late on Monday to purchase Durex condom and Scholl sandals maker SSL , boosting its presence in health and personal care.
Equities showed almost no reaction to data early in the session showing that Britain's economy grew twice as fast as expected in the third quarter.
However, the FTSE 100 index pared losses later after U.S. consumer confidence rose slightly in October. (Additional reporting by Simon Falush; Editing by Michael Shields)