FTSE rises 0.4 pct early as oils and banks gain

* FTSE 100 rises 0.4 pct * Financials rebound; Aon makes offer for Benfield * Energy stocks track higher crude, miners mixed

By Dominic Lau

LONDON, Aug 22 (Reuters) - Britain's leading share index edged up early on Friday as energy stocks tracked higher crude prices, while financials rebounded after recent losses and were boosted by merger and acquisition activity in the sector.

By 0751 GMT, the FTSE 100 .FTSE was up 21.3 points, or 0.4 percent at 5,391.5 after ticking down 1.6 points on Thursday. The UK benchmark is down more than 16 percent for the year. Banks rebounded after recent losses as Barclays , Royal Bank of Scotland , Lloyds TSB , HBOS , HSBC and Standard Chartered gained between 0.2 and 2.3 percent.

The sector was also helped by the announcement from Benfield and Aon Corp , one of the world's largest insurance brokers, that the U.S. firm had made a recommended cash offer for the UK-listed broker.

Mid-cap Benfield leapt nearly 30 percent.

Bradford & Bingley advanced nearly 2 percent after the mid-cap mortgage lender said underwriters and other banks had entered a lock-up agreement under which they have agreed not to dispose of the 426.7 million new shares for 20 days.

Investors are likely to keep an eye on the second reading of the UK GDP figures, due at 0830 GMT, for further clues on the state of the British economy, and on what the U.S. Federal Reserve's Ben Bernanke has to say about the credit market and the financial sector in a speech at 1400 GMT.

"At one point there were some hopes that there could be an easing on inflationary pressure as oil prices were going down. That's now slightly reversed," said Richard Hunter, head of UK equities at Hargreaves Lansdown. "Inflationary pressures remain and the underlying concern is still much the same."

"There is a little bit of a jump in the index. It's slightly exasperated by the fact that there is very thin trading volume at the moment ... It will be probably September when we see some volumes coming back."

Energy stocks were in demand as crude prices CLc1 traded above $121 a barrel. BP , Royal Dutch Shell , BG Group , Tullow Oil and Cairn Energy added 0.3 to 2.3 percent.

Russia-focused Imperial Energy rose 1.8 percent after the Financial Times said the mid-cap firm has made good progress in talks with India's Oil and Natural Gas Corp and is close to agreeing a takeover deal valuing Imperial at about $2.8 billion.

Miners were mixed, with BHP Billiton and Rio Tinto down. Eurasian Natural Resources , Anglo American , Antofagasta , Xstrata , Lonmin , Ferrexpo were up.

WPP slipped 0.3 percent despite the advertising group beating market expectations with its like-for-like sales growth for the first half and raising its interim dividend by 20 percent.

Among those reporting results, mid-cap Rentokil Initial shed 6.1 percent after the services group posted a 55.3 percent fall in first-half pretax profit and said the current rate of losses would continue for the remainder of the year.

Arriva soared 5.6 percent after the bus and train operator reported a 40 percent rise in pretax profit, reflecting rising demand for its bus operations and the first contribution from its UK CrossCountry rail franchise. (Editing by Paul Bolding)