THE owner of Clydesdale Bank has refused to rule out further branch closures as the institution defied economic uncertainty to record a rise in mortgage lending, boosting shares by three per cent.

Glasgow-based CYBG axed a further five branches in Scotland last week in a move which will effectively see it withdraw from four towns – Arbroath, Brora, Largs and St Andrews – completely. The fifth to be shut is in Shettleston, Glasgow, with the latest closures leaving the bank with 62 branches in Scotland.

Speaking after CYBG said its £1.7 billion merger with Virgin Money helped it make a statutory profit of £42m for the six months to March 31, following a £95m loss at the same stage last year, chief financial officer Ian Smith said the bank will continue to monitor the performance of its branch network. And he flagged closures could come as a result of its merger with Virgin Money, which may leave it with branch overlap in certain towns.

The bank currently has five Virgin Money stores in Scotland.

Mr Smith said CYBG would “absolutely consider” closing branches which are “less well used”, adding: “The other thing you will see over the next couple of years is that there are instances where we have a Clydesdale or a Yorkshire branch very close to a Virgin Money branch. And clearly, we only need one. So, there is going to be an element of de-duplication over the next couple of years in the branch footprint.

“And I think that many people get that now. You have to do this in a very customer-sensitive way, [and] make sure they have continued access to banking. But I think people understand that now.”

Mr Smith said there was no change to the initial projection of 1,500 jobs being cut due to the combination of CYBG and Virgin Money by the time the integration is complete. CYBG has previously said the Clydesdale name will ultimately be phased out as a result of the deal, with the enlarged bank going on to trade under the Virgin Money name.

Asked if there had been any backlash to the decision, Mr Smith said “most customers” understand the rationale, adding that the bank “can’t be restricted to a particular geography” as it looks to grow.

Mr Smith said: “People get that and understand there are significant changes taking place in the high street in Scotland.”

He added that the rebranding will take place over 2020 and 2021, and pledged an update on the timeline at the bank’s capital markets day in June.

CYBG made a “small top-up” provision of £30m for payment protection insurance (PPI) claims, which Mr Smith said reflected dealing with “speculative claims”. He noted that bank was “close to the end” of having to deal with PPI, and stated: “We’re incurring the processing cost of investigating the claims, but not actually paying anything out.”

So far, the bank has made a total provisions of £2.67bn for dealing with PPI claims.

CYBG reported growth in mortgage balances of 2.5% to £60.5bn, in spite of tough competition in the mortgage market and the uncertain economic backdrop. Chief executive David Duffy said the uncertainty would be extended as a result of delays to a Brexit deal being ratified.

CYBG noted pricing in the mortgage market has “stabilised”. Mr Smith said: “It’s a sensible outcome. I’m not yet ready to say we have a turned a corner.”

On Brexit, he lamented the “narrow self-interest” of the major parties which is undermining his hopes a compromise will be reached. The uncertainty, he added, was causing business customers to continue “keeping their hands in their pockets”,

Overall customer lending increased by 2.4% to £72.7bn, which in addition to mortgage growth was driven by a 1.1% rise in lending to small and medium-sized enterprises) to £7.6bn. The bank said business drawdowns of £1.1bn were offset by high redemptions.

Shares in CYBG close up 6.3p, or 3.29%, at 197.55p.