FRANKFURT (REUTERS) - Commerzbank, Germany's second-biggest lender, plans to cut up to 12 per cent of its staff by 2016 in a bid to slash costs and revamp its ailing retail business.

The bank said it would cut 4,000 to 6,000 full-time positions, with the exact figure to be negotiated with labour representatives in talks starting next month.

Commerzbank currently employs 56,000 staff at group level, with 49,000 full-time positions.

Like other European banks, Commerzbank is grappling with low interest rates, rising costs from implementing tougher bank rules, and clients who have become risk averse during the euro zone debt crisis.

"The cuts are dramatic - more severe than during the integration of Dresdner Bank into Commerzbank," a labour representative said, referring to the merger of the two German banks in 2009. However, some analysts said they should go further.

"The cuts are not very ambitious. I would have expected them to be carried out faster - until 2016, that is long way off," said analyst Guido Hoymann from Metzler Securities.

Commerzbank shares were down 2.5 per cent at 1.59 euros in early trading, underperforming a 0.6 per cent weaker banking sector.

On Wednesday, sources close to Unicredit said the Italian bank planned to cut about 1,000 jobs at its German unit by the end of next year, while Lloyds Banking Group announced it was axing 940 jobs.

To adjust to the new business environment in retail banking, Commerzbank will introduce longer business hours at its branches, requiring staff to work shifts and in changing locations, a person familiar with the matter said.

Some staff will see their salary cut, while certain services will be outsourced to low-cost suppliers, the person added In November, Commerzbank announced it was planning to cut jobs while investing 1 billion euros (S$1.6 billion) in an overhaul of its retail banking.