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RBS axes further 259 British branches as expands e-banking

LONDON, Dec 1 (Reuters) - British state-owned Royal Bank of Scotland (RBS) said on Friday it will close 259 branches and cut 680 jobs as it reduces costs and encourages customers to use online and mobile services.

The latest round of closures at 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.

British banks are set to close a record 762 branches this year, Reuters reported in August, drawing criticism for depriving customers of access to in-person services, particularly in poorer parts of the country.

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 its 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."

The latest closures will affect the bank's RBS and Natwest brands in England, Wales and Scotland, leaving it with around 744 branches.

Low interest rates and increasing competition from startup banks have eaten into profits for many of Britain's banks, prompting them to cut costs and RBS Chief Executive Ross McEwan has slashed thousands of jobs.

The bank reported a better-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 profit since 2007 in 2018, but that depends on when it reaches a multi-billion pound settlement with the United States Department of Justice over the mis-selling of toxic mortgage backed securities in the U.S.

It finalized 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 of shares in RBS next year. (Editing by Lawrence White and Alexander Smith)