Deutsche Bank said om Thursday it has had a "slow" start to the year in its investment bank, due to market uncertainty related to the crisis in Ukraine and concerns about economic growth in China and Germany.
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The comment from Germany's biggest bank adds to warnings from U.S. rivals JPMorgan
"To us, the year started slow. Obviously through political uncertainty we started to have market uncertainty again and a slowdown in business," Deutsche Bank's chief financial officer Stefan Krause said on Thursday.
"Ukraine, the data from China caused some slowdown ... We had some ups and downs in Germany on data as well," Krause told reporters on the sidelines of a banking conference in Paris, organized by The Economist magazine.
Revenues from fixed income - especially rates - have slumped since May, blamed on tougher regulation and a move by the U.S. central bank to put the brakes on its bond buying programme.
While some banks say the fall is temporary, other bankers and analysts say requirements to hold more capital has squeezed margins and left overcapacity, and banks will need to cut hundreds of jobs to shrink and restructure.
Last year's drop in investment banking revenues and hefty fines for past wrongdoing hit profitability across the industry, which has been under pressure since the financial crisis.
Krause said banks should be able to generate profitability above the cost of capital and funding from investors in 12 to 18 months.
He said most of what Deutsche Bank currently earned was used to deal with "the sins of the past".
"We hope that starting in 2015 most of the increased expense is behind us," he said.
"I am not so sure that there is 12 to 18 months solution," Ermotti said.
"Without GDP growth, without the economy growing in a sustainable and predictable way that allows clients and people to get less concerned and the interest rates to grow where they should grow, it is very unlikely that we will see a return of profitability in the banking industry that would justify the cost of equity," he said.
Krause said Deutsche Bank still sees positive results for the whole year.
But his comments add to concerns that revenues in the first quarter, often the most lucrative for investment banks, will suffer from continued slow trading in fixed income, which makes up half of investment banks' revenues.
Citigroup said last week its first-quarter bond trading revenue would be down by the "high mid-teens" in percentage terms from a year ago due to economic uncertainty and JPMorgan said on February 25 its markets revenues were down 15 percent on the year.
Revenue in the first quarter from fixed income at Europe's investment banks is set to fall 20 percent from a year ago, analysts at Morgan Stanley estimate. Deutsche and Barclays
Revenues from fixed income, currencies and commodities last year fell by an average of 10 percent across the top dozen banks. By comparison, equities income rose 17 percent last year and advisory revenues grew by just over a tenth on average.
Morgan Stanley said equities income for Europe's banks in the first quarter was likely to be up 4 percent and advisory revenues down 6 percent on the year, leaving overall investment bank revenues down 10 percent.