Commerzbank will accelerate a pullback from euro zone nations and cut risky assets to avoid another state bailout after a 798 million euros ($1.10 billion) impairment on Greek assets pushed it to a third-quarter operating loss.

Germany's second-largest lender, which is 25 percent owned by the State, was forced to abandon its profit target for next year, as it struggles to meet more stringent capital requirements to help withstand euro zone market jitters.

We continue to be committed to our original operating profit target of 4 billion euros for the group but, on account of the market environment, we will be unable to reach this target next year, Chief Executive Martin Blessing said on Friday.

Commerzbank said it had a core tier one ratio of 9.4 percent at the end of September and needs to raise 2.9 billion euros to meet capital requirements set out by the European bank regulators.

We can meet the required capital ratio by, for example, reducing risk assets in non-core areas, selling non-strategic assets or by means of retained earnings and we do not intend to tap new state funds, Commerzbank said.

Its shares were down 3.5 percent to 1.69 euros shortly after the open at 0811 GMT (4:11 a.m. EDT), while the STOXX Europe 600 Bank index <.SX7P> gained 1.5 percent.

Its property financing unit Eurohypo will stop taking new business and the group as a whole will stop making loans not related to Poland or Germany, the bank said.

Commerzbank will keep its Eastern European BRE Bank unit and its online arm comdirect but will review the possibility of selling financial investments in the hope of cutting risky assets by 30 billion euros, the bank said.

Last month, CEO Blessing had already made clear he would rather pare back businesses than resort to German state rescue fund SoFFin a second time.

Having cut exposure to indebted euro zone countries by more than 20 percent to 13 billion euros, including a 52 percent haircut on Greek debt, the Frankfurt-based lender said it would continue reducing its public sector debt in Portugal, Italy, Spain, Ireland and Greece.

The third-quarter operating loss of 855 million euros compared with a year-earlier profit of 116 million was worse than the 683 million euros loss estimated in a Reuters poll.

Earnings from Commerzbank's core businesses of lending to midsized German companies remained robust. The Mittelstandsbank, which specializes in financing Germany's medium-sized companies, generated an operating profit of 344 million euros.

For 2012, Commerzbank said it expects a good operating result for its core businesses.

($1=0.728 Euros)

(Editing by Hans-Juergen Peters and Mike Nesbit)

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