Shore Capital , one of Britain's smaller investment banks, said it could make a loss for 2011 due to the tough market conditions and a writedown on its holding in Puma Hotels which has been embroiled in a dispute with a Spanish group.

Both bulge-bracket and smaller, boutique investment banks have been hit by the market slump caused by Europe's sovereign debt crisis, with U.S. brokerage Jefferies having to slash its exposure to European sovereign debt.

Shore Capital said on Friday while profit from operating activities had been in line with its expectations, writedowns on other holdings would hit its overall result.

In particular, there is uncertainty as to the mark to market that might need to be applied to our holdings in Puma Hotels, for which the aggregate carrying value on our balance sheet at December 31, 2010 was 5.2 million pounds.

Therefore ... depending on the outcome of the Puma Hotels mark to market adjustment at the year end, the overall result for the group for 2011 may be pushed into a loss, it said.

Puma Hotels has been in dispute with Spanish hotel operator Barcelo Corporacion Empresarial over certain terms in their business partnership.

Shore Capital shares closed at 17.63 pence on Thursday, giving the company a market capitalisation of around 40 million pounds.

(Reporting by Sudip Kar-Gupta; Editing by Dan Lalor)