Commerzbank, Germany's third-biggest listed bank, has underlined concerns about the weakness of the country's financial sector, reporting a record loss of €372 million ($733 million) for 2002.
The dire result increases the risk that Europe's largest economy will slide into its second recession in two years asconsumers curb spending.
Commerzbank, recording its first full-year loss, suffered from a fall-off in its corporate lending and retail banking divisions.
The bank lends to 40 per cent of Germany's small and medium-sized firms, which have suffered from the stagnation of the economy.
Commerzbank avoided reporting an even worse result by booking proceeds of €386 million ($760 million) from the sale of a stake in Credit Lyonnais, the French bank, which has yet to be completed.
Economists have estimated that a record 42,000 German businesses are expected to fail in 2003, up from 37,700 last year.
This will compound the trend of rising unemployment.
Many of Germany's major companies have laid off thousands of staff in an attempt to cope with the prolonged economic downturn.
Commerzbank said last year that it would shed 4300 jobs, or 11 per cent of the workforce.
There was speculation that thousands more jobs could go after Commerzbank's chief executive, Klaus-Peter Mueller, said he wanted to curb more costs to push the bank back into profit this year.
Commerzbank wants to reduce operating expenses by at least 3 per cent and accelerate the disposal of non-strategic stakes it holds in a number of companies.
Mueller said: "It is no exaggeration to call 2003 one of the most important years in the history of our bank, which stretches back more than 130 years."
Analysts said they doubted Commerzbank would return to profit next year. One said: "They think they will get growth from restructuring their retail, investment banking and asset management divisions but the real problem is revenue. It is hard to see how that will increase without an upturn in the German economy."
