* British banks set to close more than 1,000 branches this year
* RBS says customers are moving to mobile banking
* Politicians say closures must stop (Adds criticism from lawmakers and FSB)
By Emma Rumney
LONDON, Dec 1 (Reuters) - British state-owned Royal Bank of Scotland (RBS) said on Friday it will close around a quarter of its branches and cut 680 jobs as it cuts costs and encourages customers to use digital services, drawing criticism from lawmakers.
The latest round of 259 branch closures by the Edinburgh-based bank follow 180 announced in March, putting 1,000 jobs at risk, and a similar move by Lloyds Banking Group which said on Wednesday it would close 49 branches.
The RBS cuts mean British banks are set to close more than 1,000 branches this year, a record according to a Reuters analysis of previous announcements and academic studies.
Britain’s largest banks are disproportionately closing branches in the lowest-income areas while expanding in wealthier ones, taking bricks-and-mortar services away from communities where they are arguably needed most, Reuters reported in June last year.
British opposition lawmakers took to Twitter to rebuke RBS for the move, which they said would leave some areas without any branches.
“Bailed out by the taxpayer and they repay our communities by withdrawing from them,” tweeted Ian Blackford, a lawmaker from the Scottish National Party. “This has to be stopped.”
Jane Howard, RBS’s managing director of branch banking, told Reuters by telephone that customers are increasingly using mobile and online channels rather than bricks-and-mortar branches, and RBS had to react to that.
“There will be some customers that will be really disappointed we are closing branches ... and I understand why. But it’s important that we do respond.”
RBS is investing in its remaining branches and its digital offering, Howard said, adding: “Given what we know, we’ve got the right shape of network.”
Unite, a labour union that represents staff at RBS, said the bank was “decimating” its branch network.
“This announcement will forever change the face of banking in this country resulting in over a thousand staff losing their jobs and hundreds of high streets without any banking facilities,” Rob MacGregor, Unite national officer, said.
The latest closures will affect the bank’s RBS and Natwest brands in England, Wales and Scotland, leaving it with around 744 branches - down from 2,278 in 2007. It did not say how much it expects to save thanks to the latest closures.
The Federation of Small Businesses’ (FSB) National Chairman Mike Cherry said cash and face-to-face support is still critical for many local businesses, and owners need to be provided with sustainable alternatives.
“What we can’t have is banks shutting branches on a whim,” he said.
Low interest rates and increasing competition from start-up banks have eaten into profits at many of Britain’s banks, prompting them to cut costs and RBS Chief Executive Ross McEwan has cut thousands of jobs.
The bank reported a stronger-than-expected operating profit for the third quarter of this year after keeping expenses under control and avoiding any misconduct charges, which, along with restructuring costs, have dogged the bank’s return to profitability since the financial crisis.
RBS hopes to post its first annual profit since 2007 in 2018, but that depends on when it reaches a multi-billion pound settlement with the U.S. Department of Justice over the mis-selling of toxic mortgage backed securities in the United States.
It finalised the closure of its “bad bank”, set up to sell unwanted assets nearly a decade after it was rescued in a 45-billion pound bailout, on Thursday and this month the British government said it plans to start selling 15 billion pounds ($20 billion) of shares in RBS next year. ($1 = 0.7416 pounds) (additional reporting by Lawrence White, Editing by Alexander Smith and Adrian Croft)