Britain's FTSE knocked back by RBS, Ukraine

* FTSE 100 falls 0.8 pct

* RBS leads financials lower

* Russia jet report spooks markets

* Capita among companies to report good results

* WPP hit on margin concerns

By Joshua Franklin

LONDON, Feb 27 (Reuters) - Britain's top share index was ontrack for its biggest daily drop in a month on Thursday, ledlower by a sharp sell-off in Royal Bank of Scotland andincreasing tension over Ukraine that has spooked global markets.

The FTSE 100 fell 56.54 points, or 0.8 percent to6,742.61 points at 1131 GMT, having been steady earlier in thesession.

Royal Bank of Scotland led the fallers, down 9.4percent after its new chief executive outlined plans for alarge-scale overhaul after the mostly state-owned lenderreported an 8.2 billion pound ($13.64 billion) loss.

"As the RBS story has unfolded we've seen continued sellingin that and I think that's just dragging a few of theheavyweights down," said Will Hedden, sales trader at IG.

Peers Barclays and Lloyds Bank were alsoboth lower with the financial sector the day's biggest weight onthe blue chip index.

Also unnerving investors and weighing on world stocks was areport from Interfax news agency that Russian aircraft had beenput on high-alert on the Ukrainian border.

"The involvement of Russia would be the bigger worry, thatit's going to lead to frosty ties with the EU and for the U.S.with Russia," said IG's Hedden.

EARNINGS SEASON

Troubled British insurer RSA was also down as itsought to move forward with a restructuring programme, withex-RBS CEO Stephen Hester at the helm.

It dropped 3.2 percent after Hester launched a plan to boostcapital by up to 1.6 billion pounds, half of which will betapped from shareholders and the rest from disposals and moneysaved from a dividend cut.

But some firms managed more encouraging earnings reports onThursday, with a 5.2 percent surge in Capita leading gainers.

The British outsourcing group posted a 14 percent rise inannual profits on Thursday and said it was confident on 2014after winning 588 million pounds ($978.3 million) worth of newcontracts so far this year.

In the earnings season thus far, 69 percent of FTSE 100companies that have reported results have come in ahead of or inline with expectations, Thomson Reuters StarMine data shows.

"As a whole, we haven't had too many bad shocks with regardsto results," Toby Morris, senior sales trader at CMC Markets,said. "However, it's a little bit concerning how many firms arecoming out and being a little bit tentative about 2014 ... itputs a bit of a dampener on things."

One such firm was the world's largest advertiser WPP, down 5.4 percent despite reporting strong trading, withLiberum and Numis both raising concern over a hit to margins andlower margin guidance moving forward.

"Full-year results were below our expectations due to amargin miss ... However, the main reason for the downgrade isthat WPP has taken down its longer-term margin improvementtargets," Liberum said in a note, cutting the stock to "hold"from "buy".

"While January has started well and the share buybackprogramme has increased, this does not offset the disappointingmessage on margin improvement."