Commerzbank (CRZBY)   posted stronger-than-expected fourth-quarter earnings on Thursday and showed a modest improvement on its balance sheet, even as low interest rates continue to hold down profitability.

Net profit at Germany's second-biggest bank came in at €183 million ($196 million) for the three months ending in December, the company said, firmly ahead of the €154 million anticipated by analysts. Full-year operating profit was pegged at €1.4 billion, and €337 million for the quarter, the company said, on full-year revenue of €9.4 billion.

The bank's CET1 ratio, a key measure of financial strength, improved by 30 basis points to 12.3% at the end of 2016, the company said.

"In 2016 we achieved a solid profit and further improved our capital ratio. However, we cannot yet be satisfied with the quality of our earnings, and that's why we will put every effort into the implementation of our strategy," said CEO Martin Zielke. "We have now given ourselves the room for maneuver needed for this and can proceed with the transformation as planned. We want to make Commerzbank the most competitive bank in Germany by 2020. We will now work to achieve, step by step, the targets we have set ourselves."

The bank did not provide earnings guidance for 2017, however, but noted it plans to keep its cost base under control and increase the amount of provisions for bad loans as it balance sheet repair program continues. Loan loss provisions were €900 million, the bank said, with €290 million coming in the final three months of the year.

Commerzbank shares closed at €7.90 each in Frankfurt on Wednesday, up 1.78% on the session, to extend the three-month gain past 21%, outpacing the 15% return of the Stoxx Europe 600 Banks Index.