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In keeping with SEC industry guidance, we continue to monitor and report problem loans.
Our problem loans consist of nonaccrual loans, loans 90 days or more past due and still accruing and troubled debt restructurings. All loans where known information about possible credit problems of borrowers causes management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms are included in our problem loans.
In addition, as of December 31, 2007, we had loans of € 7 million available for sale and € 1 million of lease financing transactions that were nonperforming. These amounts are not included in our total problem loans.
The following table presents the components of our December 31, 2007 and December 31, 2006 problem loans and 
IFRS impaired loans.
|
|
Dec 31, 2007 |
Dec 31, 2006 | ||||
|---|---|---|---|---|---|---|
|
in € m. |
Individually assessed |
Collectively assessed |
Total |
Individually assessed |
Collectively assessed |
Total |
|
Nonaccrual loans |
1,702 |
1,129 |
2,831 |
1,828 |
1,092 |
2,920 |
|
Loans 90 days or more past due and still accruing |
30 |
191 |
220 |
4 |
181 |
185 |
|
Troubled debt restructurings |
93 |
– |
93 |
109 |
– |
109 |
|
Total problem loans |
1,824 |
1,320 |
3,144 |
1,941 |
1,273 |
3,214 |
|
Thereof: |
1,516 |
1,129 |
2,645 |
1,625 |
1,092 |
2,717 |
The € 70 million decrease in our total problem loans in 2007 was due to € 752 million of gross charge-offs, a € 26 million decrease as a result of exchange rate movements and a € 708 million net increase of problem loans. The reduction in problem loans is fully attributable to our individually assessed loans with gross charge-offs of € 244 million, net increases of € 153 million and a € 26 million decrease as a result of exchange rate movements. In the collectively assessed loan portfolio, charge-offs of € 508 million were more than offset by net increases of € 555 million. Included in the € 1.3 billion of collectively assessed problem loans as of December 31, 2007 are € 1.2 billion of loans that are 90 days or more past due as well as € 147 million of loans that are less than 90 days past due but for which, in the judgment of management, the accrual of interest should be ceased.
Our commitments to lend additional funds to debtors with problem loans amounted to € 129 million as of December 31, 2007, an increase of € 83 million compared to December 31, 2006. Of these commitments € 1 million had been committed to debtors whose loan terms have been modified in a troubled debt restructuring, a decrease of € 3 million compared to December 31, 2006.
The following table illustrates our total problem loans split between German and non-German counterparties based on the country of domicile of our counterparty for the last two years.
|
in € m. |
Dec 31, 2007 |
Dec 31, 2006 |
|---|---|---|
|
Nonaccrual loans: |
|
|
|
German |
1,913 |
2,167 |
|
Non-German |
918 |
753 |
|
Total nonaccrual loans |
2,831 |
2,920 |
|
Loans 90 days or more past due and still accruing: |
|
|
|
German |
199 |
183 |
|
Non-German |
21 |
2 |
|
Total loans 90 days or more past due and still accruing |
220 |
185 |
|
Troubled debt restructurings: |
|
|
|
German |
49 |
85 |
|
Non-German |
44 |
24 |
|
Total troubled debt restructurings |
93 |
109 |
Nonaccrual Loans
We place a loan on nonaccrual status if:
- the loan has been in default as to payment of principal or interest for 90 days or more and the loan is neither well secured nor in the process of collection, or
- the accrual of interest should be ceased according to management’s judgment as to collectibility of contractual cash flows.
When a loan is placed on nonaccrual status, the recorded investment in the loan includes accrued interest. Cash receipts of interest on nonaccrual loans are recorded as a reduction of principal.
As of December 31, 2007, our nonaccrual loans totaled € 2.8 billion, a net decrease of € 89 million, or 3%, from 2006. The net decrease in nonaccrual loans took place substantially in our individually assessed loans driven by charge-offs more than offsetting net increases, and a decrease as a result of exchange rate movements.
Loans Ninety Days or More Past Due and Still Accruing
These are loans in which contractual interest or principal payments are 90 days or more past due but on which we continue to accrue interest. These loans are well secured and in the process of collection.
In 2007, our 90 days or more past due and still accruing loans increased by € 35 million, or 19%, from 2006.
Troubled Debt Restructurings
Troubled debt restructurings are loans that we have restructured due to deterioration in the borrower’s financial position on terms that we would not otherwise consider.
If a borrower performs satisfactorily for one year under a restructured loan, we no longer consider that borrower’s loan to be a troubled debt restructuring, unless at the time of restructuring the new interest rate was lower than the market rate for similar credit risks.
In 2007, the volume of troubled debt restructurings decreased by € 16 million, or 15%, from 2006.
