DZ Bank confessed that it has written off over $2 billion on the value of investments related to the sub-prime mortgage market.
The Frankfurt-based bank still has around $39 billion of asset-backed securities on its books, but insists it is not planning to sell off the holdings at the reduced value.
"It is very difficult to make a prediction for the current year," chief executive Wolfgang Kirsch said. "We believe that the main part of the writedown on the book value of the assets will remain only temporary."
Kirsch admitted, however, that 2008 is likely to see further sub-prime writedowns, but he is cautiously forecasting that later losses will not run into billions of dollars.
DZ Bank is also warning of trouble with rating agency downgrades on investments.
The Bank is the central link between Germany's 1,100 cooperative banks and international capital markets.
German banks have suffered very badly due to the credit crunch, with IKB and SachsenLB nearly collapsing form their losses.