Co-operative Financial Services (CFS) has announced that it will lay off 1,000 employees this year in order to cut costs to fund a £250 million growth programme.
The programme aims to expand the company's operations in retail, corporate banking and general insurance.
CFS which consists of the Co-operative Bank and internet bank Smile, hopes to reduce its operating costs by £100 million by June 2008 and says the proposed redundancies are an important part of its cost reduction strategy
The company has not disclosed which departments will be affected by the redundancies but said that customer-facing roles will not be targeted for change.
The company's chief executive David Anderson said: "Decisions taken which lead to a reduction in colleague numbers are not taken lightly and consultation is underway with all the relevant trades unions.
"Full support will be offered to all colleagues affected by these changes. CFS will aim to achieve some of these changes through voluntary means however the scale of the reorganisation will mean that compulsory redundancies are inevitable."
He added that the proposed £250 million investment will help expand the company's customer and membership base. The CFS head said it was essential to remove "business processes which do not add value for our customers and members".
"This will enable CFS to provide a comprehensive range of high quality products, delivered through a number of UK based service channels to an increasing number of co-operative customers and members," he added.