Expensive litigation costs have resulted in significant profit dips for two of the world's biggest investment banks.

Deutsche Bank and Morgan Stanley have both had to set aside additional cash for legal expenses arising from the fall-out of the financial crisis.

Morgan Stanley's earnings for the fourth quarter of 2013 were $433m (£264m), less than half the $982m (£597m) it reported at the equivalent point last year.

Although its revenue grew to £7.8bn (£4.75bn) from $7bn (£4.26bn) in the same period, the US banking giant was hit by legal costs totalling $1.2bn (£730m).

The bank said the amount was set aside "for mortgage-related matters, specifically litigation and investigations related to residential mortgage-backed securities and the credit crisis".

Morgan Stanley chairman and CEO James Gorman added: "Our fourth quarter results demonstrated the consistency embedded in our business model, as revenues increased year-over-year in all three of our business segments.

"Importantly, we are continuing to address many of the legal issues from the financial crisis. We look forward to further progress on our strategic goals as we move into 2014 with strength and momentum."

Deutsche Bank, meanwhile, reported a quarterly loss of €1.153bn (£951.5bn) as group revenue fell by 16% to €6.6bn (£5.4bn).

The bank's litigation expenses rose to €528m (£435.7m) for the quarter after it, after it had set aside €2.5bn (£2.1bn) for the year for various lawsuits.

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. It was fined €725m (£598.3m) by the European Commission last month for its part in rigging interest rates.

The results come after US banking giant JP Morgan last week reported a profit drop for the final quarter of 2013, with earnings hit by $1.1bn (£669m) of legal expenses, including its settlement in relation to the Bernie Madoff investment fraud case.