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UPDATE 1-Royal Bank of Scotland to cut 880 IT jobs by 2020 - union

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LONDON, Aug 15 (Reuters) - Britain's Royal Bank of Scotland will cut almost 900 technology jobs at its London office by 2020, in its latest plan to reduce costs, the Unite union said on Tuesday.

Taxpayer-backed RBS plans to cut 40 percent of permanent IT staff, or 650 jobs, and 65 percent of contractors which equate to 230 roles, Unite said in a statement, adding there would be 950 full-time IT staff by 2020, compared with 2,200 in 2016.

"RBS's fixation with cutting employee numbers, restructuring and offshoring work that could reasonably be done by displaced staff within the RBS IT community is unacceptable," Rob MacGregor, Unite national officer, said.

"Unite is angry that the massive scale of IT job losses will sap morale, productivity and faith in the company."

RBS, which was not immediately available for comment, is more than 70 percent state-owned and is in the midst of a major restructuring aimed at returning the bank to profit after almost a decade of losses.

Earlier this month, the Edinburgh-based lender, rescued in a 45.5 billion pound ($59.8 billion) bailout at the height of the financial crisis, beat first-half profit forecasts, showing signs a long-promised recovery is finally gathering momentum.

The British bank has announced several rounds of job cuts earlier this year, with plans in June to cut 443 jobs dealing with business loans, many of them moving to India.

In May, the bank said it was eliminating 154 contractor roles and making an additional net 92 job cuts in an overhaul of its back office operations.

(Additional reporting by Sanjeeban Sarkar in Bengaluru; editing by Greg Mahlich and Alexander Smith)