Multiphase shear flows often show banded structures that affect the global behavior of complex fluids e.g. in microdevices. Here we investigate numerically the banding of emulsions, i.e. the formation of regions of high and low volume fraction, alternated in the vorticity direction and aligned with the flow (shear bands). These bands are associated with a decrease of the effective viscosity of the system. To understand the mechanism of banding observed in the experiments by Caserta and Guido (Langmuir, 2008, 100), we simulate the multiphase flow using a one-fluid formulation, solving the incompressible Navier-Stokes equations coupled with a Volume of Fluid technique. The experiments were perfomed starting with a random distribution of droplets which, under the applied shear, evolves in time resulting in a phase separation. To numerically repoduce this process, the banded structures are initialized in a narrow channel confined by two walls moving in opposite direction. We find that the initial banded distribution is stable when droplets are free to merge and unstable when coalescence is prevented. In this case, additionally, the effective viscosity of the system increases, resembling the rheological behavior of suspensions of deformable particles. Droplets coalescence, on the other hand, allows emulsions to reduce the total surface of the system and hence the en-ergy dissipation associated to the deformation, which in turn reduces the effective viscosity. arXiv:1902.05448v1 [physics.flu-dyn]