Up to 650 jobs are being cut at Halifax Bank of Scotland as part of plans to merge two of its business banking divisions, it was announced today.

Britain's fifth largest bank said the roles would go across its UK offices over the next 18 months.

The Edinburgh-based firm is merging its 1,000-strong Business Banking arm, which sits in the group's retail division, with the group's Commercial Business in the corporate division to create one single unit focused on small and medium-sized businesses.

HBOS said that alongside the 650 expected job losses, another 350 staff within the enlarged division would be transferred to alternative roles in the group.

The group said it hoped to achieve the reduction in jobs through voluntary redundancies, normal staff turnover and, where possible, further redeployment.

Trade union Unite said it was disappointed at the decision to axe jobs and would be calling for no compulsory redundancies.

Ged Nichols, of HBOS's group union Accord, added: "We are always unhappy at any planned reduction in the roles and opportunities available within HBOS - even when we fully understand what the business believes to be the commercial need for the changes.

"We will work hard with HBOS and Unite and do our best to ensure that alternative roles can be found for those union members who want to stay in the company."

HBOS said the merger is designed to create "significant synergies", taking out duplication between the two functions.

"The new strategy will further enable HBOS to win selective market share from the 'big four' banks by acquiring more primary relationships from SMEs," it said.

"The single business will have a very clear focus on winning even more deposits from customers."

At present, the business banking arm handles firms with a turnover of less than £1 million, while the commercial business unit looks after those with turnover of more than £1 million.

The new division will handle all small and medium sized businesses, from sole trader to larger businesses, said HBOS.

HBOS is currently asking its investors for £4 billion in funds to boost its balance sheet after suffering write-downs in the credit crunch fall-out.

But the group, which employs 65,000 people in the UK, stressed that the job losses and merger were not part of a wider plan to trim the bank's operations.

There have been a swathe of job cuts across the banking sector, although the axe has so far largely fallen on investment banking divisions amid the financial market turmoil.