Update: Crisis-hit Deutsche Bank and its £35tn of trades puts Europe at risk
With profits plunging 67% to £341.5m in Q2 2016, revenues dropping 20% to £6.2bn and a derivative portfolio of £35tn that some consider a "ticking time bomb," Deutsche Bank's precarious future threatens Europe and beyond. As we have previously noted, the International Monetary Fund has warned that the bank's failure could bring the global system crashing down; in addition, its US arm has failed a Federal Reserve stress test for two consecutive years.

The boss of crisis-hit Deutsche Bank has warned staff of further pain after profits crashed amid mounting concern for Europe's beleaguered financial sector.

Profit at Europe's biggest lender plunged 67 per cent to £341.5m in the second quarter of 2016, while revenues dropped 20 per cent to £6.2bn.

After tax, profits were down 98 per cent to £16.7m. It prompted a further sell-off of shares by nervous investors at the lender, which has seen its value fall by 58.5 per cent, or nearly £20bn, in the last 12 months.

The boss of crisis-hit Deutsche Bank, John Cryan, above, has warned staff of further pain after profits crashed amid mounting concern

The International Monetary Fund has warned that Deutsche was so closely entwined with other big banks, its failure could bring the global system crashing down.

And a US arm of Deutsche Bank failed a Federal Reserve stress test for the second year running, due to balance sheet weaknesses.

The lender has a derivatives portfolio of £35trillion – more than half the size of the global economy – which some analysts fear is a ticking time bomb.

Deutsche brought in Yorkshireman John Cryan last July to turn things around, and he has since announced 35,000 jobs will be cut.

But the chief executive yesterday told staff: 'If this weak economic environment persists, we will need to be still more ambitious in our restructuring.

Profit at Europe's biggest lender plunged 67pc to £341.5m in the second quarter of 2016

'We will do everything in our power to accelerate the measures we have already planned.

'We recognise that we are asking a lot of you and that this will continue for the foreseeable future.' Cryan stressed the bank was fundamentally strong and said doubts over its future were unjustified.

If this weak economic environment persists, we will need to be still more ambitious in our restructuring

Yesterday's results throw a spotlight on the Continent's troubled financial system as investors nervously await results of a European Banking Authority stress test.

The report, due out tomorrow, is likely to deliver a damning verdict on Monte dei Paschi di Siena – Italy's oldest bank.

The country's lenders are buckling under the strain of a £307bn pile of bad debt.

Last-ditch efforts are now under way to save Monte dei Paschi with a private rescue fund. In Italy, many ordinary savers own bank bonds and Prime Minister Matteo Renzi is desperate to prevent them from taking a hit. He fears alienating the public ahead of a referendum on political reform in autumn, and is likely to resign if he loses the vote.

German Chancellor Angela Merkel has refused to show flexibility on a rescue. However, there is little doubt that Germany would step in to save the bank if necessary – regardless of EU law.