Director of the Cologne-based Pax Bank, Winfried Hinzen told the city's Domradio, “We want to apologise to our customers that this mistake has happened," according to a report in Sunday's Frankfurter Allgemeine Zeitung.
He said the relevant shares would be sold on Monday morning.
A report in this weekend's edition of Der Spiegel magazine said that the bank invested €158,867 in shares of US pharma firm Wyeth, which produces contraceptives.
A further €577,970 was invested in BAE Systems, a British companies which produces among other things, nuclear submarines and fighter jets.
Shares in British American Tobacco and Imperial Tobacco worth €870,950 also belonged to the bank's portfolio the magazine reported.
It noted that on the Pax Bank website it advertises that it invests in ethically-sound shares, specifically excluding areas such as arms or tobacco, and promising that its dealings will fit with the beliefs of the Catholic Church, which bans artificial contraception.
Most of the investors are Church institutions and Catholic communities.