THE Federation of Small Businesses (FSB) has urged the owner of Bank of Scotland to halt its controversial branch closure programme, after the institution unveiled a 23 per cent hike in profits to £1.6 billion for the first quarter of the year.

Lloyds Banking Group sparked an angry response from trade union Unite when it swung the axe on a further 49 branches earlier this month, slashing its workforce by more than 1,200 roles. The latest cuts mean the bank, which received a £20.5bn bailout by the UK Government at the height of the financial crisis in 2009, will have cut more than 350 branches in the past four years.

The FSB declared last week that the closure of hundreds of branches by the UK’s biggest banks in the past five years has had damaging effect on Scotland’s productivity, saddling small business owners with significant costs by limiting access to essential banking services. It calculates that five branches are closing every two weeks in Scotland, with 260 having been cut by the major banks in the past two years.

Royal Bank of Scotland handed a stay execution to 10 of the branches affected its plans to cut 62 branches from its network, which it announced in December.

Now, following the latest profits rise unveiled by Lloyds yesterday, it is calling on the UK’s biggest lender to reconsider its closure plans.

Mike Cherry, national chairman of the FSB, said: “With profits like these, is another 70 branch closures [across the UK] really necessary? When a town loses a bank branch it hurts vulnerable consumers, high-street footfall and small business revenues.

“We’ve seen challenger banks who are expanding their branch networks also report strong results, so we know it’s an approach that works from a commercial perspective.

“If a small firm can’t deposit and withdraw cash easily it has to store more on site, making it a target for theft. Equally, many small business owners have working relationships with branch staff that go back years. That’s not something that can be replaced by an app.”

Lloyds said no Bank of Scotland branches would be affected by its latest closure plans.

Chief financial officer George Culmer said in a media call: “We remain very much committed to the branch network and are making significant investments in terms of expanding our mobile branches to give us additional coverage across the UK.”

He added: “What I can say, in whatever shape that eventually turns out, branches are going to remain a core part of that proposition.”

While Lloyds’ first quarter profits came in just shy of City expectations, its start to the year was broadly held by analysts to be encouraging. Laith Khalaf at Hargreaves Lansdown said the institution had benefited from November’s rise in the base rate to 0.5 per cent from 0.25 per cent, as well as the acquisition of the MBNA credit card business, as net interest income climbed by eight per cent to £3.2 billion. Its net interest margin rose by 2.93%.

The bank booked a £90m charge for PPI (payment protection insurance) costs for the period, which it said reflected its requirement to contact customers who previously had their complaints defended. Its provision for PPI was £350 million in the first quarter of last year.

Mr Khalaf said: “PPI costs are much lower than last year, and this is a theme we can expect to continue for the UK banks. As the largest source of compensation, Lloyds also stands to be the biggest beneficiary of PPI disappearing in the rear-view mirror.”

The bank said it had increased profits against a backdrop of a “resilient UK economy”, which is benefiting from low unemployment.

Chief executive Antonio Horta-Osorio said: “In the first three months of 2018 we have again delivered strong financial performance with increased profits and returns, a significantly reduced gap between underlying and statutory profit and a strong increase in capital.

“These results continue to demonstrate the strength of our business model.”

Lloyds confirmed it was now in the second round of bidding for its Scottish Widows £109 billion asset management mandate. The mandate was withdrawn from Standard Life Aberdeen in February, with Lloyds saying the merger of Standard Life and Aberdeen Asset Management had to led its assets “being managed by a material competitor”. Aberdeen had been running the mandate since acquiring the Scottish Widows Investment Partnership from Lloyds in 2013. Lloyds’ shares closed down 1.12p at 65p.