The downgrade, announced late Thursday, came as the bank's supervisory board approved plans announced last week to cut thousands of staff and close a fifth of branches following a failed merger with bigger rival Deutsche Bank.

Commerzbank, part owned by the German government after a bailout, has been struggling for years with a legacy of bad debts, high costs and fines, and tough trading conditions have hampered its recovery efforts.

"Negative interest rates, increasing regulation, a weaker economy and tough competition ... The challenges facing banks are enormous," Zielke said.

Outgoing finance chief Stephan Engels added the latest loosening of policy by the European Central Bank "will not make our lives easier", and that a program designed to cushion the blow for banks would not fully compensate.

Commerzbank shares were up 1.4% at 0915 GMT, reversing earlier declines.

Some investors said the bank's overhaul didn't go far enough.

"The plans for Commerzbank sound a bit like, 'Wash me but don't get me wet'," said Klaus Nieding, vice president of shareholder lobby group DSW. "It all seems a bit helpless."

Commerzbank, which was ejected from Germany's blue-chip DAX index last year, has already been reducing staff and trying to cut back-office work to restore profitability. It embarked on merger talks with Deutsche Bank earlier this year, hoping to make more savings, but the discussions fell apart.

Zielke said the overhaul would allow Commerzbank to stand on its own, but left the door open to future deals, saying the lender should be an "active player" in banking consolidation.

DETERIORATING MARKET

"Over the course of 2019, the market environment has continued to deteriorate further. This has been particularly evident in the corporate clients business," the bank said, explaining the downgrade in its revenue expectations.

The tough market backdrop comes amid management change at the bank. It said on Thursday that board member Bettina Orlopp would succeed Engels as chief financial officer, while Sabine Schmittroth would become board member for human resources.

The supervisory board also approved plans to sell a stake in the bank's Polish subsidiary mBank and absorb its Comdirect online brokerage unit.

The lender flagged the strategic overhaul last week.

The measures were approved by the board during a two-day meeting.

Among the plans, the bank will cut 4,300 jobs in some places but add 2,000 jobs in "strategic areas", so the group headcount will fall in total by about 2,300 full-time positions, equivalent to about 5.7% of its workforce.

The mBank sale will further reduce staff levels. Headcount will fall to 29,300, a spokesman said. The company now employs about 40,700 people.

Commerzbank said the strategy would involve investment of 1.6 billion euros ($1.8 billion), with 750 million euros going into new technology and the rest earmarked for restructuring.

The restructuring plan is negative for the German lender's credit rating, ratings agency Moody's has said.

The agency said plans to sell mBank would "further limit the bank's growth potential given that mBank meaningfully contributed to the group's revenue and profits, and its growth".

(Reporting by Tom Sims and Hans Seidenstuecker; additional reporting by Patricia Uhlig; editing by Kirsten Donovan and Mark Potter)

By Tom Sims and Hans Seidenstuecker