The Yorkshire and Clydesdale banks will slash 1,700 jobs as part of a massive restructuring announced by their owner, National Australia Bank (NAB).
Australia's biggest bank estimates the cuts - nearly 17 per cent of its staff in Britain - will save A$285m (£117m) a year. The move, which includes changes to the branch network, will cost A$266m. Yorkshire Bank in northern England and Clydesdale Bank in Scotland have been hit by rising costs and declining profit margins.
Lynne Peacock, the head of NAB's UK operations, said the company was working hard to make its UK businesses, which have 2.7 million customers, more nimble and customer focused. The bulk of the job losses, which will come in the next 12 to 18 months, affect back-office roles. About 20 per cent of the cuts are to customer-facing staff as the company strips out what it terms "antiquated admin processes" from its branches, Ms Peacock said.
However, some analysts questioned the wisdom of the cuts which will also affect distribution and products. Brett Le Mesurier, at the broker Wilson HTM said: "What they need to do is sell more products and sell better products, so you would think they would not be reducing the number of people."
NAB is slashing the number of processing centres from 24 to two, and the number of products from 320 to 140. It is also converting 40 Yorkshire and Clydesdale branches in the North to "financial solutions centres," targeting small to medium-sized businesses and wealthy private customers.
Ms Peacock said: "The strategy is to run the existing businesses a lot more efficiently and to grow revenue, and to expand in the South of the UK."
NAB had been looking for an acquisition - it looked at Abbey National, which was bought by Santander last year - to boost its relatively small British operations four years ago. It lacks a major presence in the South-east, but has recently opened 15 centres there and plans to open another 15 by the end of the year.
Yesterday's announcement sought to put an end to speculation that NAB would sell the Clydesdale and Yorkshire banks. The group, which is recovering from two profits warnings and a foreign exchange trading scandal, sold its two struggling Irish banks to Danske Bank last year.
Ms Peacock said: "We are committed to a strong presence in the UK, but to do so we must change the way we do business." The British operations generated £188m of net profits last year, accounting for 14.5 per cent of group profits.