Germany's second largest lender Commerzbank said on Thursday it plans to cut 9,600 jobs, or one-fifth of its workforce, by 2020 and withhold dividends to pay for a 1.1-billion-euro restructuring.

The Frankfurt-based firm added that the $1.23-billion plan, still to be agreed at a supervisory board meeting on Friday, would see it report a loss in the third quarter as it writes down the value of goodwill and other intangible assets.

But it forecasts a "slightly positive" bottom line for the whole of 2016.

Like other German banks, Commerzbank is fighting headwinds from low interest rates in the eurozone, tough regulation, intense competition, and the arrival of new digital actors on the market.

Board members aim to achieve "sustainable profitability" by focusing on private and business banking customers while shrinking investment banking activities, it said in a statement.

"Profit volatility and risks from regulatory changes will be reduced and capital freed up for the core business" with the retreat from investment banking, the statement continued.

To cover the costs of the restructuring, the bank said it would "cease dividend payments for the time being".

Commerzbank reported a profit of 1.06 billion euros in 2015, and paid its first dividend since the 2008 financial crisis at 20 cents per share.

Shares in the bank lost 0.77 percent to trade at 5.95 euros by 0945 GMT in Frankfurt, while the DAX 30 index of leading firms gained 0.69 percent.

Commerzbank's employee roster would shrink by roughly 9,600 -- around a fifth of its current level of 51,300 -- if the plan is put into action.

Managers predict that the restructuring will create savings of 6.5 billion euros per year and allow them to create 2,300 new jobs in "growth areas" at the bank.

The German state remains a shareholder in Commerzbank to the tune of 15 percent after coming to the lender's rescue in 2008.

Chief executive Martin Zielke in August batted away rumours that he was considering a tie-up with Deutsche Bank, Germany's biggest lender and Commerzbank's historic Frankfurt rival.

Deutsche is itself going through a painful restructuring that will see it slash almost 9,000 jobs worldwide and 200 branches in home market Germany.

The once-proud institution is labouring under a burden of around 8,000 legal cases worldwide including a $14-billion demand from the US Department of Justice over its activities leading up to the subprime mortgage crisis.

On Wednesday the German government strongly denied rumours that it was preparing a rescue plan for Deutsche in the event it faces a US fine that its legal provisions of $5.5 billion are too small to cover.