Italian bank Monte dei Paschi di Siena, which is being bailed out by the government, booked a net loss of €3.38 billion for 2016 after setting aside more money to cover for bad loans.
The bank had ranked the worst in Europe in stress tests last summer.
It said in a statement today it had recorded €2.6 billion in loan loss charges due to "an updated methodology and evaluation" of its problematic loans.
It also booked one-off charges for €411m.
The bank said CET 1 ratio, a key measure of financial strength, stood at a lowly 8% at the end of December after it failed to raise money from private investors to plug a capital shortfall.
The bank's capital ratio had stood at 11.5% at the end of September.
Highlighting the funding challenges it faces, the bank said direct funding had fallen by €14.7 billion at the end of December from a year earlier to 4105 billion.
This was due to the loss of commercial deposits for €28 billion "resulting from the outflows recorded in the course of the year, largely as an effect of tensions ensuing the negative results of the stress test and of the unsuccessful recapitalisation transaction".
The drop was partly offset by repurchase agreements with other banks.
"Preliminary data for the month of January sets funding at the same level as the end of 2016, indicating a halt in these outflows," the Tuscan lender said.
The Rome government is set to take a 70% stake in the bank, pumping €6.6 billion to fill the bulk of an €8.8 billion capital deficit.
The rest of the money will come from the forced conversion of subordinated bonds into shares.
But the state aid scheme still needs to be approved by the European Commission, which must also give its green-light to the bank's yet-to-be-presented restructuring plan. Sources say the process is likely to take until May.
Meanwhile, Monte dei Paschi's shares, owned by around 150,000 people, have been suspended from trading until more clarity emerges over the state rescue plan.
