In this work, we show how the presence of microstructural banding and segregation affects the work-hardening behaviour of a dual phase steel with improved formability. This steel contains chemical segregation inherited from the casting process. Our previously developed 3D cellular automaton model allowed us to design thermo-mechanical processes to either promote or suppress banding. The bands are properly described as in-plane sheets of martensite grains. Mechanical testing data revealed a significant reduction in tensile strength in banded structures for a similar level of ductility. The work-hardening behaviour in the pre-yield regime, including the yield strength itself, is not correlated to the incidence of segregation and/or microstructural banding. The reduction in ultimate tensile strength in banded structures stems from a reduced work-hardening capacity in the post-yield regime. This is due to increased austenite stability in the banded steels, coupled to the anisotropic strain localisation in the ferritic matrix between martensite bands.