The German lender's New York-listed stock dived after reports emerged that several key funds have slashed their exposure to the bank. The news sent shivers through banking sector equity markets, with the S&P 500's financial shares ending down 1.6 per cent.
Deutsche Bank shares closed down 6.7 per cent, at a record low of $11.18.
Its price started to slide after Bloomberg reported that around 10 of the bank's derivatives-clearing clients, including Millennium Partners, Capula Investment Management and Rokos Capital Management, had decided to shift some of their listed derivatives holdings away from Deutsche to other firms.
A spokesperson for the bank said: “Our trading clients are among the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the US and the progress we are making with our strategy.”
The shares' downward spiral weighed on the S&P 500, which closed down 1.5 per cent, having been in the green in earlier trading.
The news capped another dark day for Germany's ailing banking sector.
The day started with Commerzbank announcing it would be cutting almost 10,000 jobs over the next four years, as it closes down some of its non-core business divisions and focuses on digitisation its workflows.
Commerzbank also revealed that, as its restructuring plans would set it back around €1.1bn (£950m), it would also be halting its dividend.
Deutsche Bank's shares have been on something of a rollercoster ride over the last week, as nervous investors jump at each nugget of news.
Shares in Frankfurt closed down 7.5 per cent at €10.55 on Monday, after reports emerged over the weekend that German Chancellor Angela Merkel was not prepared to offer the bank state assistance, even as it faced a record $14bn (£10.8bn) fine from the US Department of Justice for mis-selling mortgage-backed securities.
It then closed flat on Tuesday, before closing up two per cent yesterday at €10.77. Yesterday, Deutsche Bank announced it had agreed to sell Abbey Life to Phoenix, while reports also emerged that the German government was working on a contingency plan should Deutsche Bank need some help out of a tight spot, although the government later denied the latter.
Ken Odeluga, market analyst at City Index, told City A.M. that the sharp movement in Deutsche Bank's US shares "underscores the jittery sentiment with its stock". He added that, while Deutsche Bank's problems had by no means emerged overnight, the US fine suggested the lender's history with litigation was "coming back to haunt" it.
A number of key financial figures, including Credit Suisse boss Tidjane Thiam, have been sounding the alarm on the state of Europe's banking sector.
Earlier this week, former chancellor of the exchequer Lord Lamont of Lerwick warned "the biggest threat to Europe is the banking crisis", blaming the German and Italian systems in particular.