By Andrew MacAskill and Lawrence White

LONDON (Reuters) - 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, an analysis by Reuters shows.

HSBC <HSBA.L>, Royal Bank of Scotland <RBS.L>, Barclays <BARC.L> and Lloyds Banking Group <LLOY.L> are among banks that have cut 600 branches from April 2015 to April 2016.

More than 90 percent of the closures were in areas where the median household income is below the British average of 27,600 pounds ($39,042), according to an analysis of Office for National Statistics data on average incomes in the locations where branches were closed. By comparison, five out of the eight branches opened by these banks over the same period were in some of the wealthiest neighborhoods in Britain -- Chelsea, Canary Wharf, St Paul's, Marylebone and Clapham, all in the capital, London.

The banks say in an era of falling revenues, they must look for ways to cut costs, which includes reducing staff as well as closing branches, an obvious measure as more and more people do their banking online.

They say they choose which branches to close on the basis of where they have the fewest customers and deny they specifically target poorer areas.

But campaigners say banks are cutting too fast in places where people are less able to fall back on digital banking services because of a lack of access, finances or ability to use the internet. "We are witnessing the creation of a dual financial system: one for the middle class and wealthy and another for the poor," said Fionn Travers Smith of Move Your Money, which campaigns for ethical banking.

The situation is similar in the United States, where 1,600 branches closed in 2015, according to SNL financial. The result, according to a 2014 study by MIT economist Hoai-Luu Nguyen, is a decline in lending, especially in low-income areas.

High Street bank branches are important to communities who use them for basic functions such as withdrawing money and cashing checks, politicians and business people told Reuters.

The village of Cross Hands with a population of 4,500 in southwest Wales is a classic example. It is set to lose its last branch when the local Lloyds closes at the end of July.

Local businesspeople say the closure will mean they are forced to travel to nearby Tumble, a 90-minute round trip by infrequent buses for many residents without cars.

"It's going to have a big financial impact as I will have to close the shop during that time," said Jo Payne, who is set to open a café in Cross Hands next month and will need to deposit cash takings, which cannot be done online.

Payne said the loss of ATMs in the village from branch closures has also hurt business, as few shops take credit cards.

About a third of cash machines now charge customers to withdraw money, and studies such as one by Nottingham University say when branches close, less-regulated financial institutions, including payday loan providers and cash-checking centers, fill the void at a higher cost to customers.

"If we want businesses to thrive in areas with scattered populations and lower incomes, they must keep at least the last bank in every community open," said Nia Griffith, Labour member of parliament for Llanelli and Shadow Secretary of State for Wales.

With a population of 3 million, Wales has been plagued by high unemployment and poverty since the closure of coal mines in the 1980s. Western Wales and the Valleys has the highest level of poverty in northern Europe, with the average income at 67 percent of the European Union average, according to 2013 EU statistics.

The large banks were three times more likely to shut a branch in Wales than in the southeast or London, the wealthiest areas of Britain, when closures were averaged out for the size of their populations, the Reuters analysis showed.

"The fact that poorer areas are being hit the worst by branch closures, means you're going to see a perfect storm making it harder for them to regenerate," said Jonathan Edwards, an MP for Carmarthen East and Dinefwr in southwest Wales.HSBC, Barclays, RBS and Lloyds say they have signed up to protocols aimed at minimizing the impact of branch closures, including partnering with the post office to offer services and carrying out impact studies before closures. Banks say they have not canceled any planned closures as a result of the studies, but have delayed some. 'HEART OF THE VILLAGE'Taxpayer-owned RBS has closed the most branches overall in the last year and is responsible for more than one in every three branch closures among the top four banks. Lenders are expected to accelerate the closure of branches because of new technology and cost-cutting; a study by investment bank UBS published in January predicted half of Britain's branches may disappear in the next five years.

A senior executive at a top four British lender said banks are stripping out unprofitable parts of the network to focus on more affluent urban areas, where customers are likely to buy products such as savings and insurance to boost profit."The majority of branch closures will be this year and next," the executive said. "Customer behavior (toward online banking) has evolved faster than we thought and it's about cutting back to the minimum scale that's needed."

Yet government data shows about 8.6 million adults among Britain's 64 million population -- mainly the poor and the elderly -- do not have access to the internet because they are deterred by the costs or lack the expertise.

A report on financial inclusion produced by the Financial Conduct Authority last month even predicted poorer people could be shut out from in-person banking.

"It is possible that, in the future, only the wealthy or those willing to pay for a personal service will be able to talk to bank staff in person," the report said.Laura Evans of Cross Hands estate agents Peters and Co said she typically visits the village's soon-to-be-closed branch twice a day to pay in hundreds of pounds worth of cash and cheques. Evans said she will now have to drive to Tumble, and fears what will happen if that bank closes too.

Older residents of the village she has spoken to have little interest in going online to do their banking, Evans said, and will feel the loss of the branch even more keenly.

"For older people it's a social occasion going in to the branch," she said. "It takes the heart out of the village to close it."

(Editing by Rachel Armstrong, Sinead Cruise and Sonya Hepinstall)