More than 1,000 jobs set to go at the Co-operative Bank. Picture: (Reuters)
More than 1,000 jobs set to go at the Co-operative Bank

The Co-operative Group is set to axe more than 1,000 jobs at its troubled banking arm in a final bid to overhaul its business and finances.

It is understood the job cuts, details of which could emerge on Monday, will comprise over 10% of the Co-operative Bank's workforce.

The redundancies come as the bank seeks to plug a £1.5bn capital black hole in its balance sheet by converting junior bondholders into shareholders.

Earlier this year the Co-operative Bank reported a dismal £709.4m pre-tax loss for the first six months of 2013. This was largely due to a £496m impairment charge against the value of the bank's loans, as well as a £165.5m writedown of IT assets, and another £61m in compensation payments to customers, which included PPI mis-selling.

The deal over job cuts, which will have the approval of the Bank of England, will involve Britain's biggest mutually owned organisation relinquishing ownership of the Co-op Bank, and has sparked fury among many customers.

Insiders told Sky News a decision had yet to be taken about whether the scale of the jobs cull would be made public on Monday by Euan Sutherland, the Co-op Group chief executive.

One source said: "It's unlikely he'll want to go public with it at this stage."

The final number was still being decided this weekend but it is believed that well over 1,000 of the roughly 9,000 people who work for the banking arm could lose their jobs.

The cuts will affect the Co-op Bank's corporate lending business, which will have a revised strategy focused on retail and small business customers.

According to Sky News retail bondholders are likely to receive a better deal than one presented as a fait accompli by Sutherland until last week.

People close to the deal said that ordinary investors would most likely be handed a combination of bonds and a new tool guaranteeing income.

The biggest institutional bondholders - two US hedge funds - fought to overturn the original deal and will emerge as big shareholders when the bank's shares are listed on the stock exchange next year.