Deutsche Bank posted a 98 percent drop in quarterly pre-tax profit to 18 million euros ($24.81 million), below the lowest expectations, weighed by a fall in trading income and a 1.2 billion euros increase in litigation provisions.
Deutsche's litigation reserves, its war chest to deal with anticipated legal difficulties, rose to 4.1 billion euros in the third quarter, the bank said in a statement on Tuesday.
Deutsche was expected to post a 43 percent drop in pre-tax profit to 642 million euros, according to a Reuters poll of nine analysts. The bank's trading contribution to that was expected to fall 47 percent to just over 1 billion euros.
"We expect the litigation environment to continue to be challenging," the bank said in a statement, signalling that the worst may not be over.
Deutsche said a probe into the bank's activities have the potential to result in significant financial penalties and other consequences for the bank.
(Read more: Stressful times for Europe's banks)
More than a dozen banks and brokerage firms, including JP Morgan and Citigroup, are under investigation by regulators over the possible manipulation of benchmark rates -- including the London interbank offered rate, known as Libor -- which are used to price trillions of dollars' worth of loans.
Revenue from Deutsche's profit engine, sales and trading of debt, fell by 48 percent to 1.2 billion euros, compared with the year-ago period.
Weaker trading income has already hit rivals like Credit Suisse and Goldman Sachs this quarter after the Federal Reserve wrong-footed markets with a decision to continue its bond buying stimulus instead of starting to wind it down.
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