By Jenny Strasburg 

Deutsche Bank AG on Wednesday said its second-quarter net income fell 98% from a year earlier, hurt by weaker performances in trading and investment banking, as well as restructuring costs.

Chief Executive John Cryan told analysts that the German bank must do more to control costs, and warned of "more ambitious" steps if market conditions remain difficult. He also said that banking customers will increasingly feel the impact of low interest rates, a fundamental symptom of Europe's economic woes.

"We don't think that banks will just sit there and absorb the costs themselves," Mr. Cryan said on a conference call after the bank released earnings. Banks will likely increase fees and take other measures to pass on the pain, he said.

The German lender said net income fell to EUR20 million ($22 million) from EUR818 million a year earlier, while net revenue dropped 20% to EUR7.4 billion. The bank beat average net-income forecasts of analysts, whose expectations had ranged widely from a quarterly loss of more than EUR1 billion to a profit of more than EUR500 million.

The bank's shares traded down more than 4% after earnings were reported.

The results from Europe's most globally prominent investment bank showed a stark divide between the recent fates of European and U.S. banks.

Deutsche Bank executives emphasized how much harder-hit the German lender was by Europe's wobbly economy and political uncertainty, in contrast to big U.S. banks that benefited from their relative strongholds in more resilient U.S. markets.

Mr. Cryan said in a statement that Deutsche bank is making progress in a multiyear turnaround, but warned that if weak market conditions persist, it "will need to be yet more ambitious in the timing and intensity of our restructuring."

Deutsche Bank's shares have dropped 45% this year, compared with a 27% decline on the Stoxx Europe 600 banks index. Investors have sold European bank shares since the U.K. voted June 23 to leave the European Union.

The Frankfurt-based bank has been hit harder than most. It is cutting costs and clients and trying to satisfy new, more-stringent capital requirements over the next three years. It has further to go to meet those requirements than many peers do.

Deutsche Bank's turnaround strategy has eaten into trading and investment-banking revenue. Investors' concerns about the adequacy of its capital cushion have persisted, but executives have said that a capital raising isn't in their plans.

The bank also has been trying to settle regulatory investigations it expects will result in big fines, as well as civil lawsuits, another uncertainty for investors. Executives said Wednesday that they are still hopeful the bank will settle the biggest regulatory investigations this year. The bank said in its half-year report that it has started talks with the U.S. Department of Justice to resolve claims related to mortgage-back securities, one of the two biggest-ticket legal items the bank faces.

Low interest rates and economic uncertainty stemming from Brexit weighed on the lender's biggest businesses last quarter. Revenue fell year-over-year in all four of Deutsche Bank's business divisions, including asset management.

The worst year-over-year revenue decline was in global markets, the bank's sprawling securities-trading operation and its biggest unit by revenue. That division's second-quarter revenue declined 28% from the year-earlier period, to $2.4 billion. Within the business, overall sales and trading revenue fell 23% during the quarter from a year earlier. Debt-trading declines were an outsize drag on performance, because fixed-income products account for a far bigger chunk of trading business.

The lender said some of the declines were rooted in previously announced decisions to shrink Deutsche Bank's global footprint to cut risks and leverage and meet tougher regulatory requirements. Expenses related to job cuts also weighed on results. So did a decision to transfer some assets into the global markets business from asset management, where Deutsche Bank said they didn't fit.

Lower compensation in the trading business helped results, Deutsche Bank said. Investors have been concerned that the business, which has historically generated healthy profits, has been losing too much talent, but Marcus Schenck, the bank's finance chief, said there was "nothing abnormal" in staff attrition rates in the unit.

Investment-banking revenue was down 12% from a year ago, to $1.9 billion, after suffering from what Mr. Cryan called "paralyzed markets" in Europe.

In July 2015, Mr. Cryan, a former banker and finance chief of UBS Group AG, took over as co-chief executive of Deutsche Bank, replacing Jürgen Fitschen and Anshu Jain. Mr. Fitschen stayed on as co-CEO until May and remains an adviser. Mr. Jain left last year. Mr. Cryan is now sole CEO.

Deutsche Bank's common equity Tier 1 ratio, a key measure of high-quality capital, improved slightly from the first quarter, to 10.8% as of June 30, but the ratio is still down from its year-ago level of 11.4%.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

July 27, 2016 06:42 ET (10:42 GMT)