Swiss bank Credit Suisse has warned that it is unlikely to make a profit in the first three months of 2008 after mark downs to the value of investments.
Credit Suisse has sacked or suspended a number of traders
It is writing off $2.85bn (£1.4bn) related to the US housing market slump.
It partly blames this on the "intentional misconduct" of a number of traders, who are suspected of inflating the value of their investments.
Net income for 2007 was revised down to 7.76bn Swiss francs ($7.75bn; £3.6bn), 6% lower than reported in February.
Its shares closed down 6.4% in anticipation of the bank's first loss in five years.
An internal review found that the write down in value of investments linked to mortgage debt was 2.86bn Swiss francs, Credit Suisse said.
This is 200m Swiss francs less than the company estimated in February.
Credit Suisse chief executive Brady Dougan said a probe had revealed no new valuation flaws since February.
"This incident is unacceptable and does not represent the high standard of Credit Suisse," he said.
The bank said that the traders involved have been sacked or suspended and await disciplinary action.
Credit Suisse says its existing control procedures were "not effective" and it would improve the supervision and training of traders.
Credit Suisse's shares were down at 7.4% in late trading.
Credit Suisse said it was profitable until the end of February.
But it said "in light of the difficult market conditions in March", it is unlikely to make any profit in the first quarter of 2008.
BBC business editor Robert Peston called the prospect of a loss at Credit Suisse a "shock", which underscored the precarious position of all banks at this time.
"That'll put a dent in the hopes of those who felt that just maybe, after all the evasive action by the Federal Reserve of the past few days, we could perhaps have seen the worst of the bad news from banks and the financial sector," he said.
This week, the US central bank, the Federal Reserve, cut interest rates to 2.25% from 3% in a bid to boost the economy and restore confidence in the financial markets.
But there are still fears that this may not be enough to calm investor nerves about the state of banks' balance sheets and the subsequent implications for mortgage lending and business loans.