ROYAL Bank of Scotland is preparing to cut thousands more jobs as it looks to reduce an estimated £1 billion of costs after suffering crippling losses.

Staff at the Edinburgh-based bank are bracing themselves for the news. Around 40,000 workers have already lost their jobs since RBS was bailed out with £45bn of taxpayers' money in 2008.

The latest round of cuts is expected to take place next month. Colleagues of chief executive Ross McEwan say the job losses will be "very substantial".

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Mr McEwan wants to slash the bank's current cost-to-income ratio from 65% to mid-50%.

Operating costs currently stand at £10.06bn, and the reduction would see a cut of as much as £1.25bn. More than half of the bank's costs are made up of staff salaries.

The new cost-cutting measures are expected to be finalised when RBS's annual results are revealed in six weeks' time, and come two months after the bank posted a third-quarter pre-tax loss of £720 million.

Camley's Cartoon: on RBS plan to cut jobs after suffering crippling losses

Mr McEwan has previously been responsible for substantial cuts at Commonwealth Bank of Australia, where he ran its retail ­operations for five years until August 2012.

It is believed the chief executive wants to shrink RBS's international operations and introduce greater ­automation to high street banking services.

In November last year, RBS avoided demands for a full carve-up of the bank when a government report called for soured loans and toxic assets to be placed in an internal "bad bank", ­arguing that it will improve lending to businesses.

RBS confirmed plans to hive off £38bn of troublesome loans - including £9bn from Ulster Bank - into a new non-core division to be known as the capital resolution division, which the bank aims to wind down in three years.

The bank is also expected to write off up to £4.5bn of problem loans - driving the bank to a "substantial loss" for the full year. However, it is estimated that some £11bn of capital should be released as a result.

Mr McEwan has been embarking on a review of all the bank's operations, including its troubled Ulster Bank and investment banking arm, which has already been scaled back. He is also expected to accelerate the sale of the US-based financial group, Citizens.

Unions have been expecting a new wave of job cuts on top of the 40,000 already axed.

In RBS's third-quarter results ­statement, the bank said that Mr McEwan was launching a review of its operations in an effort "to capture the full potential of its customer businesses".

The statement added: "The review will aim to improve the bank's performance and effectiveness in serving its customers, shareholders and wider stakeholders."

Mr McEwan has endured a difficult first three months. Last month, RBS and group member NatWest's high street banking systems went down for several hours leaving customers unable to use their cards.

Mr McEwan described the failure as "unacceptable" and said the bank had suffered from decades of under­investment in its IT systems.

It followed a similar problem in June 2012, when a failed software upgrade meant wages were not paid into customers' accounts and payments were not made or they could not withdraw money.

Also last month, Nathan Bostock resigned as the group finance director to join Santander after only 10 weeks in the job, and RBS was fined £324m by the European Commission for attempting to manipulate European and Japanese interest rates.

Allegations that RBS deliberately forced companies into default to seize their properties have also been referred to the regulators.

RBS would not comment on the potential cuts last night.