Deutsche Bank set aside an additional €1.2bn (£1bn) in legal provisions to combat potential litigation over the wave of scandals that have hit the banking sector in recent months.

The provision, which meant Deutsche's legal war chest is now €4.1bn (£3.5bn), severely hit the bank's third quarter pre-tax profit, which plummeted 98% to €18m (£15.4m), down from €747m (£640m) in Q3 2012.

In a statement, the bank said it expected "the litigation environment to continue to be challenging".

Last year, Deutsche was one of a number of banks to become embroiled in the Libor scandal, which revealed that lenders had been allegedly manipulating the inter-bank lending market.

Although Barclays and UBS have reached a settlement over the allegations, Deutsche has yet to do so, meaning it could still face heavy financial penalties.

Regular advisers to Deutsche include White & Case, Slaughter and May, Clifford Chance (CC), Linklaters, Freshfields Bruckhaus Deringer and Allen & Overy.

Following the Libor scandal, both Barclays and the Royal Bank of Scotland created new senior compliance and governance roles, with former Financial Services Authority chief executive Hector Sants and his former managing director Jon Pain taking up the positions at the respective banks.

CC acted for both banks on the fallout from the scandal.

Earlier this month, JPMorgan Chase – another of the banks implicated in the alleged Libor manipulation - revealed that legal costs amounting to $9.2bn(£5.7bn) had been a major factor in its suffering a $400m (£249m) loss in the third quarter.

It was the first time in almost a decade that the investment banking giant had posted a quarterly loss.