The Co-operative Bank has unveiled plans to cut 400 jobs, or 12% of its workforce, as it continues takeover talks with Coventry Building Society.

The lender, which has been owned by hedge funds since 2017, says it is talking to unions about the layoffs.

It says the next phase of its “strategic plan” will be “expected to result in a net reduction of approximately 400 roles across the bank. 

“The decision has not been made lightly, and the bank will continue to work closely with our trade union and to support impacted colleagues.”

Co-operative Bank has been in exclusive takeover talks with Coventry Building Society since December, although this period is due to close at the end of this month, unless both parties agree to an extension.

The Co-operative Bank received “non-binding proposals” from the mutual and planned to use the exclusive talks to “better value the merits of a combination,” it said late last year.

The bank insists that the latest stage of its restructuring is not connected to its merger talks. 

A merger between the mutual and the bank would create a high street financial services brand with almost five million customers and £90bn in assets.

Co-operative Bank’s hedge fund owners spent £700m to pull the bank out of a financial black hole seven years ago..

Banking analysts say the business could be worth around £800m after returning to profit in 2021.