UPDATE 2-Commerzbank to cut up to 6,000 jobs

* Exact figure to be negotiated with labour representatives

* Commerzbank to revamp retail business

* Barclays, UniCredit, others also axing jobs

* Shares unchanged, underperforming sector

By Arno Schuetze and Alexander Hübner

FRANKFURT, Jan 24 (Reuters) - Commerzbank,Germany's second-biggest bank, plans to cut up 6,000 jobs by2016 to try to reduce costs as part of efforts to revive itsstruggling retail business.

The Frankfurt-based bank said on Thursday it would shed4,000-6,000 full-time positions, as much as 12 percent of itsworkforce. Talks with unions will start in February over theexact number of jobs affected, which are expected to be mostlyin Germany.

The bank, 25 percent state-owned since a bailout in thefinancial crisis, currently employs 56,000 staff at group level,with 49,000 full-time staff.

Labour representatives condemned the cuts at Commerzbank asunacceptable, while analysts said the bank should go further.

The cutbacks form part of a 2 billion euro ($2.66 billion)overhaul the bank announced in November, which includes a revampof its retail business in Germany.

Like other European banks, Commerzbank is battling risingcosts from tough new bank rules, while risk-averse customershave put a damper on fee income. In its retail business, marginsare under pressure from deposit wars in Germany's overcrowdedretail bank sector.

Jobs are being axed across Europe's banking industry becauseof the cost of new regulation and the weak business climate.Deutsche Bank, Switzerland's UBS andFrance's BNP Paribas have announced job cuts, whileBritain's Barclays is expected to announce cutbacksnext month.

Earlier this week, sources close to UniCredit saidthat the Italian bank planned to shed about 1,000 jobs at itsGerman arm.

"The cost side is really the only area that banks have leftto control," said Bridget Gandy, Managing Director for financialinstitutions at credit rating agency Fitch.

In its retail banking overhaul, Commerzbank will introducelonger business hours at branches, requiring staff to workshifts and be flexible about changing locations, a personfamiliar with the matter said.

Some staff will see their salary cut, while certain serviceswill be outsourced to low-cost suppliers, the person added.

"In our retail business, we clearly have overcapacities,"Ulrich Sieber, board member for human resources, said in astatement. "Current staff levels are tailored to demandestimates of 2008 and 2009 which unfortunately did notmaterialise."

UNION RESPONSE

Labour representative Beate Mensch from union Verdi saidthey would seek to extend a guarantee of no forced redundanciesuntil 2016.

"The cuts are dramatic - more severe than during theintegration of Dresdner Bank into Commerzbank," a labourrepresentative said, referring to the merger of the two Germanbanks in 2009, after which 9,000 jobs were shed in total.

Analysts said the plan was not radical enough.

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

Credit rating agency Moody's warned on Thursday that thebusiness environment for banks would remain challenging in 2013,citing a fragile global economic recovery and risks from theeuro zone crisis.

Commerzbank shares were up 0.4 percent at 1.63 euros at 1148GMT, while the banking sector was up 0.1 percent.

No jobs will go at Commerzbank's Polish BRE Bank or at its online subsidiary Comdirect.

The 1,000 job cuts already announced for Commerzbank'sinternal 'bad bank' - the group's so-called work-out unit fornon-core assets - are included in the 6,000 figure announced onThursday.

Separately, German insurer Allianz said onThursday that it was closing down its retail banking unitAllianz Bank - which amassed losses of 400 millioneuros over the last three years - resulting in the loss of 450jobs in Germany.