UPDATE 3-European shares clock worst day in a year, Credit Suisse hits new record low

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Banks log worst day in over a year

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ECB seen raising key rate by 25 bps Thursday

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Inditex and H&M slide following results

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Bollore tops STOXX 600 on simplified cash tender offer

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UK budget: Hunt pledges reforms to spur slow economy

(Updates prices to close; adds comments, details)

By Shreyashi Sanyal and Ankika Biswas

March 15 (Reuters) - European shares on Wednesday had their worst day in over a year as a selloff in bank stocks resumed on renewed investor concerns about stresses within the sector, with Credit Suisse plunging to a fresh record low.

The pan-European STOXX 600 index closed the day 3% lower, a day after recording its best day this year.

The banks sector index plunged 7.1% to log its steepest one-day drop in over a year.

Spain and Italy's lender-heavy indexes lost over 4% each.

Efforts by regulators and financial executives to assuage contagion fears following tech-focused lender Silicon Valley Bank's sudden collapse have failed to calm investors' nerves.

Credit Suisse's shares tumbled 24.2% and fell below 2 Swiss francs ($2.18) after the lender's biggest shareholder said it could not raise its stake beyond 10%, citing regulatory issues.

"It always feels like they're (Credit Suisse) just teetering on the precipice ... why European banks are utterly clobbered this afternoon," said Chris Beauchamp, chief market analyst at IG Group.

Due to the Credit Suisse stock rout deepening worries over the European banking sector's health, traders now increasingly see the European Central Bank increasing interest rates by 25 basis points on Thursday, down from the 50 bps hike expected prior to the SVB collapse.

"It's too early for them to stop entirely, but it would be probably a bit foolhardy to go for 50 basis points tomorrow," Beauchamp added.

Energy firms were also among the major drags on the market, with Shell and BP losing over 8% each, as oil prices hit their lowest in more than a year.

Retailers shed 4.4% after the world's biggest fashion retailer Zara-owner Inditex slumped 4.6% after flagging higher investment spending.

H&M, the world's second-biggest fashion retailer, slid 8.5% after a smaller-than-expected increase in sales in the latest sign of its struggle to compete with Inditex.

Prudential tumbled 12.4% even after the Asia-focused insurer flagged minimal exposure to SVB and expects little impact on its "conservative" balance sheet.

TotalEnergies fell 5.6% after some 42% of operators at its French refineries and depots continued their strike for an eighth day over the government's planned changes to its pension system.

Lanxess lost 11.3% as the German speciality chemicals maker expects a slower first quarter than last year as high energy costs weigh.

Meanwhile, Bollore jumped 8.3%, topping the STOXX 600 index, following the entertainment production firm's simplified cash tender offer.

Elsewhere, Britain's finance minister Jeremy Hunt announced a plan that he hopes will speed up the world's sixth-biggest economy, that has been stagnating, and avoid a recession this year - even if it is still set to contract.

However, London's FTSE 100 closed 3.8% lower. (Reporting by Shreyashi Sanyal, Amruta Khandekar and Ankika Biswas in Bengaluru; Editing by Eileen Soreng, Savio D'Souza and Emelia Sithole-Matarise)