Deutsche Bank said the asset writedowns and disruption to revenues stemming from global credit turmoil could put its profit goal for this year at risk, sending its shares lower.
Germany's biggest bank is aiming for a pre-tax return on equity of 25 per cent over the business cycle and €8.4 billion ($13.09 billion) of pre-tax profit in 2008.
At Deutsche's annual results news conference last month, Chief Executive Josef Ackermann had predicted that 2008 would be "challenging for our capital-markets related business" and said he would give investors ample notice if Deutsche looked set to miss its targets.
In its annual report today, Deutsche said the subprime crisis could cause problems for earnings in leveraged finance and structured credit markets and other areas, as well as further writedowns.
"Compensating for these negative effects on our profitability through performance in our other businesses may not be feasible, particularly if assumptions for continuing, albeit slower, economic growth in 2008 are not correct and less favourable economic conditions prevail," it said.
"These circumstances would likely adversely affect our ability to achieve our pretax profitability objective."
Shares in Deutsche Bank fell 2.2 per cent to €71.86 by 8.06am, lagging a 0.9 per cent decline among European banking peers and making them the leading decliner among European blue-chip stocks.
Deutsche Bank said its business in corporate and investment banking, the areas most directly affected by financial market turbulence, was likely to be considerably lower in the near term.
However, volumes in foreign exchange and interest rate trading have been high because of the market turbulence and will brighten the outlook for the bank's sales and trading business, it said.
Deutsche said it remained well-positioned for growth over the long term, with its broad global presence benefiting from the expansion of capital markets and asset management in countries outside its home market.