Commerzbank, Germany's second-largest lender, said fourth-quarter profit rose as provisions for risky loans fell. Net income increased to €77 million from €64 million a year earlier, the Frankfurt-based company said in a statement Thursday.

Commerzbank is expanding lending to German consumers and companies while cutting thousands of staff to increase profitability.

It’s also winding down soured shipping and real- estate assets as part of a bailout by the German government in 2009, which still owns 17 per cent of the company.

"In a challenging environment we have posted further growth, have awarded more loans and increased market share," chief executive officer Martin Blessing said in the statement, referring to performance for the year.

Commerzbank shares fell 0.2 per cent to close at €11.28 in Frankfurt trading Wednesday, paring the year’s gains to 2.7 per cent.

That compares to a 0.9 per cent gain in the STOXX Europe 600 Banks Index this year.

Loan-loss provisions, or capital set aside to cover potential losses from defaults, fell to €308 million from €451 million in the fourth quarter of 2013.

The bank’s common equity Tier 1 ratio, a measure of financial strength, under the full application of Basel III rules was 9.5 per cent, down from 9.6 per cent at the end of the third quarter.

Bloomberg