* Commerzbank undergoing restructuring
* SocGen says deal will boost its Lyxor fund business
* Lyxor adds 13 bln euros to 140 bln euros in managed assets
* SocGen's shares up 0.6 pct at 1551 GMT
* Commerzbank stock up 0.7 pct at 1551 GMT (Releads, updates share prices, adds detail, background)
PARIS, July 3 (Reuters) - Societe Generale will buy Commerzbank's derivatives and asset management businesses in a move the French bank said will boost its Lyxor funds division and raise its profile in Germany, the euro zone's biggest economy.
Still partly owned by the German government, Commerzbank is in restructuring mode as parts of its business have struggled amid weak markets and slow loan demand.
The two European banks did not disclose the value of the deal, although Commerzbank said the division had 2017 gross revenues of 381 million euros ($443 million). Shares in both lenders rose slightly on news of the transaction.
SocGen said Lyxor already has a strong presence in exchange traded funds and the deal will add 13 billion euros worth of assets under management from Commerzbank to Lyxor's existing 140 billion euros and give it some retail access.
"The operation is transformational for our business in Germany, it will boost our position as number 2 on the growing ETF market, but at a group level, the acquisition's size is limited," SocGen's deputy Chief Executive Severin Cabannes said.
European banks have been frustrated by regulation in the wake of the financial crisis in their attempts to forge cross-border groups, leaving them to grow regionally by grabbing assets outside their home markets.
"We consider current conditions don't allow cross-border mergers," Cabannes said.
SocGen had already identified Germany, where it employs 3,500 people in areas such as corporate financing, investment banking and consumer lending, as one of the markets it wants to develop and had been investing significantly in niche markets in the country for the past five years, Cabannes said.
The deal affects 500 staff in locations such as Hong Kong, Switzerland, Luxembourg, Paris and London, as well as in Commerzbank's home market and SocGen expects regulatory clearance in the second half of 2018.
SocGen's investment bank has been under pressure following the departure of its previous head Didier Valet in March over a financial settlement of an investigation into alleged Libor rates-rigging case.
The bank has been losing ground in key markets such as France's merger and acquisition advisory, where it now ranks 15th, lagging behind its main French and foreign competitors.
It has also had some relatively tepid performances in equity derivatives, an area where it has been traditionally strong.
The sale is in line with Commerzbank's strategy of divesting non-core assets to raise capital for its core banking franchise, its chief executive Martin Zielke said.
"We are simplifying our business, we are contributing to our cost-cutting targets, and we are freeing up capital for the benefit of our core business with private and corporate clients," he added.
The transaction excludes Commerzbank's cash equity brokerage and commodities hedging business, but will include areas such as Commerzbank's structured trading and investment products as well as the German bank's Comstage ETF brand.
Commerzbank is cutting jobs while focusing on digitalising its back office and expanding its retail customer base. It has ambitious customer targets, for which it will need more capital and is also seeking a buyer for its distressed shipping loans.
The deal will allow Commerzbank to cut costs by 200 million euros by 2020, while Cabannes expects synergies will allow SocGen to reduce the operating expenses of the purchase.
While the deal is not transformational for either bank, UBS banking analyst Huw Williams said, it is "still marginally positive" as Commerzbank will cut costs and SocGen will consolidate market share "at a reasonable price". ($1 = 0.8597 euros) (Additional reporting by Jean-Michel Belot in Paris and Maria Sheahan in Frankfurt Editing by Keith Weir and Alexander Smith)