* Index on track for second straight weekly loss
* NZ steady after scaling record high
* Banks worst performers on ASX200 index
* 38 shares up, 151 down and 11 unchanged (Adds analysis, quotes, stocks on the move)
By Swati Pandey
WELLINGTON, Nov 5 (Reuters) - Australian shares faltered on Thursday after Federal Reserve Chair Janet Yellen indicated at a rate hike in December in the United States, leading to heavy selling in banking stocks.
At home, comment by central bank governor Glenn Stevens that recent rises in mortgage rates by the big banks need not be offset with a cut in the official cash rate further soured sentiment.
The S&P/ASX 200 index .AXJO skidded 1.3 percent to 5,193.2 by 0237 GMT. The benchmark barely moved on Wednesday, ending at 5,242.3.
The index is on track for another weekly loss after slipping more than 2 percent the previous week.
All sectors were in red on Thursday with banks remaining on a shaky footing.
"There is some negativity in banks even after they posted record profits as investors do seem to be having second thoughts about owning them due to challenges ahead," said IG Markets analyst Angus Nicholson.
Australia's four major banks - CBA CBA.AX , NAB NAB.AX , ANZ Banking ANZ.AX and Westpac WBC.AX - posted their sixth straight year of record profits but are preparing for their slowest earnings growth since the global financial crisis as the economy cools and stricter capital regulations bite.
NAB, which was trading ex-dividend Thursday, stumbled 4.4 percent. Others were down between 0.6 percent and 1.6 percent.
Graincorp GNC.AX hit a 7-week low while real estate website operator REA Group fell over 2 percent after broker downgrades.
Echo Entertainment jumped 7.3 percent after Morgan Stanley (N:MS) said it remained upbeat about its outlook for Echo to win global VIP market share.
Major miners BHP Billiton (L:BLT) BHP.AX and Rio Tinto (L:RIO) RIO.AX each fell 0.9 percent.
New Zealand's benchmark NZX 50 index was steady after peeling back from record highs hit earlier in the day. It last traded 6.3 points lower at 6,064.87.
Unlike its peer, the NZX 50 is set to end the week more than 1 percent higher. It is already up about 8.5 percent so far this year, in contrast with a 2.6 percent drop in the Australian benchmark.
Xero Ltd was the top performer on the index after it posted a net loss that came in line with expectations. It was last up 2.3 percent.
Kathmandu continued its losing streak, down nearly 4 percent on the day. Telecommunications company Spark New Zealand was the most-traded stock and was last down 1.16 percent.