Commerzbank has today posted a smaller-than-expected net loss for the third quarter, hit by restructuring costs and the impact of low interest rates coupled with weak loan demand from German companies. 

The €288m net loss from Germany's second-largest lender after Deutsche Bank was ahead of analysts' expectations of a €509m loss. 

Commerzbank reiterated it expects to turn a small net profit for the full-year 2016, down from €1.1 billion last year. 

The bank announced in September it would cut more than a fifth of its workforce and suspend its dividend as it tackles the challenges of weak profits and a shift to online banking.

It warned that the revamp would cause a €700m hit to third-quarter earnings.

Squeezed by the European Central Bank's money-printing policy, German lenders have been seeking ways to boost revenue by passing on costs to corporate customers and increasing fees for retail depositors.

But profit margins remain thin in one of Europe's most competitive banking markets. 

Operating earnings at Commerzbank's cash cow Mittelstandsbank unit, which caters to Germany's prized small and medium-sized companies, was flat quarter-on-quarter.

Its small investment banking activities saw operating income rise, in line with peers which benefited from a rebound in bond trading. 

Commerzbank has said it plans to merge its business dealing with medium-sized German companies with its corporate and markets segment.

It also plans to cut back trading activities in investment banking to help reduce earnings volatility and free up capital for use elsewhere. 

The retail bank saw operating profit decline due to pressure on its deposits business, where negative interest rates bit, despite cost cuts and higher customer demand for mortgages. 

Commerzbank posted a capital ratio at the end of the second quarter of 11.8% and its chief financial officer Stephan Engels said it is expected to post around 12% by the end of the year.