The Co-operative Bank has announced plans to cut around 400 jobs ahead of a potential merger.

On Tuesday, the company said that it had started a consultation to eliminate 12 per cent of its workforce as part of plans to simplify its business and cut costs.

In a statement, the bank said: "The decision has not been made lightly, and the bank will continue to work closely with our trade union and to support impacted colleagues."

It added that the job cuts are “essential” for the bank to deliver its multi-year strategic plan which has overhauled the bank and included a £100 million IT investment.

The Co-operative Bank entered into exclusive talks with Coventry Building Society late last year, with a spokesperson confirming to Reuters that talks are still ongoing.

Were it to go ahead, the merger would be the latest in a busy period of consolidation within the UK financial sector with Nationwide and Virgin Money UK last week agreeing a £2.9 billion deal to create the country’s second largest mortgage and savings provider.

Elsewhere earlier this month, Moody's upgraded the Co-operative Bank’s long-term deposit rating to Baa3, moving the Bank to investment grade. Moody's said the upgrade of the bank’s long-term deposit ratings and the upgrade of its BCA reflect its improved profitability supported by the higher interest rate environment and further progress towards a sustainable capital generative business mode.

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