* Medium-sized lending unit profitable
* Net loss of 746 mln euros vs avg forecast 592 million loss
* Operating loss 201 million eur vs avg forecast 351 million
* Share price drops back after early gains
(Adds CFO's comments)
By Edward Taylor
FRANKFURT, Aug 6 (Reuters) - Commerzbank reported further losses in the second quarter on Thursday and stopped short of saying it had turned a corner, although the operating result at Germany's second-biggest bank beat market forecasts.
The bank said the situation in 2009 remained "challenging", despite making progress on restructuring and seeing a good start to the third quarter, as well as a peak in 2008 to credit-related charges.
The Frankfurt-based lender said it sees its loan loss provisions at about 3.6 billion euros ($5.18 billion) for the full year, the same level as 2008.
Unlike rivals Deutsche Bank and Barclays which have seen their investment banking units become profit engines, Commerzbank's investment banking unit made a 231 million euro operating loss in the second quarter.
Overall, the bank posted an operating loss of 201 million euros in the three months, down from 591 million in the first quarter and less than the average forecast of 351 million euros given in a Reuters poll of analysts but up from the 131 million euros lost in the same period last year.
The result was also flattered by 328 million euros in one-off gains from the sale of stakes in Lufthansa, Linde and ThyssenKrupp and Commerzbank's net loss of 746 million euros was bigger than the 592 million euros analysts had expected due to tax charges and an impairment charge for its Eurohypo commercial real estate unit.
Net interest income in the quarter rose 9 percent on a year ago to 1.84 billion euros.
Matthias Duerr, an analyst at DZ bank, said the results weren't enough to help Commerzbank reach break even before 2011 "at the earliest" and he retained a "sell" rating on the stock.
Commerzbank's shares were down 0.4 percent at 5.885 euros by 1346 GMT when the DJ Stoxx European banking sector index was up 3.1 percent. Trading in the bank's shares was volatile with the price dropping from an early high of 6.225 euros to a low of 5.74 euros as analysts digested the figures.
Although writedowns on financial investments and trading book losses should have peaked in 2008, they would continue in 2009, the bank said.
Writedowns on its portfolio of asset-backed securities fell to 173 million euros in the second quarter, down from almost 1 billion euros in the first quarter.
Commerzbank said it aims to return state guarantees provided by the German government's rescue fund ahead of time. If market conditions improve, Commerzbank would start to repay 5 billion euros of its bailout by 2011, a year earlier than planned.
Chief Financial Officer Eric Strutz said the bank was reviewing Germany's bad bank scheme, designed to help stricken lenders offload problem loans.
The bank was looking at the scheme as a matter of prudence, rather than necessity, he said. "We don't need a bad bank," he told Reuters TV.
Commerzbank's core tier 1 capital ratio of 11.3 percent meant the bank has adequate capital, Strutz said.
The bank had to turn to Berlin for help in weathering the financial market crisis, taking an 18.2 billion euro capital injection and giving the government a stake of 25 percent plus one share in return.
Commerzbank said the costs of integrating Dresdner Bank, which it bought from insurer Allianz, would total around 2 billion euros in 2009.
But it continued to expect to hit its medium-term goal of a 12 percent post-tax return on equity in 2012. ($1=.6954 euros) (Editing by Greg Mahlich)