Barclays, Britain's fourth-largest, yesterday secured backing from the board of Woolwich for a £5.3 billion takeover of the mortgage bank that will see 100 branches shut and 1,000 jobs lost.

Mr John Stewart, chief executive of Woolwich, will become deputy chief executive of Barclays and take over as head of retail financial services. Most of the Woolwich executive team will also join Barclays.

The Woolwich brand will be retained and used for mortgages sold through Barclays branches.

Mr Matt Barrett, Barclays chief executive, said it had learnt from its decision earlier this year to close 171 branches on the same day, which led to attacks from consumers and politicians.

"Barclays has something of a reputation when it comes to branches," he admitted. "Let me emphasise that these branch combinations closures will be done paying the utmost attention to ensuring that customers will not be inconvenienced."

The bank will try to avoid any compulsory redundancies. Barclays will also drop all Woolwich cash machine charges after the deal is completed.

But the deal was attacked by Mr Don Cruickshank, who wrote a scathing report on banking competition. He told Radio 4 that Woolwich was one of the few `real competitors' to Barclays, and `it is a real issue that the market for current accounts is going to be more concentrated'.

However, there is little likelihood of a reference to the Competition Commission after the Treasury last week rejected automatic referral of bank mergers.

Some in London's City financial centre wondered whether Barclay's purchase of Woolwich was smart when the home loan industry as a whole looks like a dog.

The takeover will double Barclays' current 4 per cent share of a market which is facing falling profit margins and unprecedented competition from new players like Standard Life Bank and Internet bank Egg.

"Some in the City appear to be a wee bit spooked about what we regard as a good business," Mr Barrett admitted after formally unveiling details of the merger.

Woolwich's Mr Stewart, defended his company's honour, saying it was the "prettiest girl in town". As Barclays rightly points out, it was the only area where there was a glaring hole in the bank's strategy. It had almost a fifth of all current bank accounts but just 4 per cent of the home loan market.

Rival Lloyds TSB watched its profits grow smartly when it bought mortgage bank Cheltenham and Gloucester five years ago.

That was then, however. Mortgage banks are currently rated significantly lower than their retail counterparts. Top mortgage banks trade at eight to 11 times their earnings versus about 12 to 17 for retail banks.

During its presentation, last week, of six-month profits, Barclays said it nearly doubled earnings in part because it was not heavily exposed to mortgages. Shares of Barclays have fallen about six per cent since it announced it was in talks to buy Woolwich earlier this week. The decline comes from worries it is overpaying by awarding Woolwich a premium compared to its peers.

Brokers Donaldson, Lufkin and Jenrette said yesterday that they would have preferred if Barclays had simply tried to grow on its own in the mortgage market rather than buying Woolwich.

Others say things in the mortgage industry are far from bleak. Efficient lenders like Northern Rock are still making good money. It recently reported a 10 per cent increase in first-half profits and its margins held up.