Credit Exposure Classification


We also classify our credit exposure under two broad headings: consumer credit exposure and corporate credit exposure.

  • Our consumer credit exposure consists of our smaller-balance standardized homogeneous loans, primarily in Germany, Italy and Spain, which include personal loans, residential and nonresidential mortgage loans, overdrafts and loans to self-employed and small business customers of our private and retail business.
  • Our corporate credit exposure consists of all exposures not defined as consumer credit exposure.

Corporate Credit Exposure

The following table breaks down several of our main corporate credit exposure categories according to the creditworthiness categories of our counterparties.

Corporate credit exposure credit risk profile by creditworthiness category

Loans1

Irrevocable lending  commitments2

Contingent liabilities

OTC derivatives3

Total

in € m.

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

1

Includes impaired loans mainly in category CCC and below amounting to € 3.6 billion as of December 31, 2010 and € 4.9 billion as of December 31, 2009.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 4.5 billion as of December 31, 2010 and € 2.9 billion as of December 31, 2009.

3

Includes the effect of netting agreements and cash collateral received where applicable.

AAA–AA

62,603

28,134

23,068

22,211

7,334

6,573

23,967

23,966

116,972

80,884

A

48,467

29,634

31,945

22,758

21,318

13,231

16,724

13,793

118,454

79,416

BBB

56,096

46,889

36,542

28,814

20,391

15,753

8,408

7,600

121,437

99,056

BB

44,809

43,401

22,083

23,031

11,547

9,860

7,905

12,785

86,344

89,077

B

12,594

9,090

7,775

5,935

5,454

4,290

2,960

1,952

28,783

21,267

CCC and below

17,425

14,633

2,467

1,376

2,012

2,476

2,341

4,444

24,245

22,929

Total

241,994

171,781

123,880

104,125

68,056

52,183

62,305

64,540

496,235

392,629

This table reflects an increase in our corporate loan book and irrevocable lending commitments which was predominantly driven by the inclusion of Postbank exposures. The portion of our corporate loan book carrying an investment-grade rating increased from 61 % as of December 31, 2009 to 69 % as of December 31, 2010, reflecting the first time inclusion of Postbank exposures as well as improvements in counterparty ratings as counterparties recover from the credit crisis and as a result of our proactive risk management activities. The loan exposure shown in the table above does not take into account any collateral, other credit enhancement or credit risk mitigating transactions. After consideration of such credit mitigants, we believe that our loan book is well-diversified. The marginal decrease in our OTC derivatives exposure, particularly in our creditworthiness category “BB”, was predominantly driven by tighter risk reduction activities. The OTC derivatives exposure does not include credit risk mitigants (other than master agreement netting) or collateral (other than cash). Taking these mitigants into account, we believe that the remaining current credit exposure was significantly lower, adequately structured, enhanced or well-diversified and geared towards investment grade counterparties.

Our Loan Exposure Management Group (LEMG) helps mitigate our corporate credit exposures. The notional amount of LEMG’s risk reduction activities increased by 4 % from € 52.9 billion as of December 31, 2009, to € 54.9 billion as of December 31, 2010.

As of year-end 2010, LEMG held credit derivatives with an underlying notional amount of € 34.6 billion. The position totaled € 32.7 billion as of December 31, 2009.

The credit derivatives used for our portfolio management activities are accounted for at fair value.

LEMG also mitigated the credit risk of € 20.3 billion of loans and lending-related commitments as of December 31, 2010, by synthetic collateralized loan obligations supported predominantly by financial guarantees and, to a lesser extent, credit derivatives for which the first loss piece has been sold. This position totaled € 20.2 billion as of December 31, 2009.

LEMG has elected to use the fair value option under IAS 39 to report loans and commitments at fair value, provided the criteria for this option are met. The notional amount of LEMG loans and commitments reported at fair value increased during the year to € 54.1 billion as of December 31, 2010, from € 48.9 billion as of December 31, 2009. By reporting loans and commitments at fair value, LEMG has significantly reduced profit and loss volatility that resulted from the accounting mismatch that existed when all loans and commitments were reported at historical cost while derivative hedges were reported at fair value.

Consumer Credit Exposure

The table below presents our total consumer credit exposure, consumer loan delinquencies in terms of loans that are 90 days or more past due, and net credit costs, which are the net provisions charged during the period, after recoveries. Loans 90 days or more past due and net credit costs are both expressed as a percentage of total exposure. Regardless of the past due status of the individual loans, in terms of credit quality the mortgage lending and loans to small business customers within the consumer credit exposure are allocated to our lower risk bucket while the consumer finance business is allocated to the moderate risk bucket. This credit risk quality aspect is also reflected by our net credit costs expressed as a percentage of the total exposure supporting them, which is the main credit risk management instrument for these exposures.

 

Total exposure in € m.

Total exposure excluding Postbank in € m.

90 days or more past due as a % of total exposure excluding Postbank

Net credit costs as a % of total exposure excluding Postbank

 

Dec 31, 2010

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

Dec 31, 2010

Dec 31, 2009

1

Includes impaired loans amounting to € 2.7 billion as of December 31, 2010 and € 2.3 billion as of December 31, 2009.

Consumer credit exposure Germany:

130,317

60,706

59,804

1.77 %

1.73 %

0.56 %

0.55 %

Consumer and small business financing

19,055

12,733

13,556

3.16 %

2.72 %

1.92 %

1.69 %

Mortgage lending

111,262

47,973

46,248

1.41 %

1.44 %

0.20 %

0.22 %

Consumer credit exposure outside Germany

38,713

33,027

29,864

3.84 %

3.37 %

0.86 %

1.27 %

Total consumer credit exposure1

169,030

93,733

89,668

2.50 %

2.28 %

0.66 %

0.79 %

The volume of our consumer credit exposure increased due to the consolidation of Postbank by € 75.3 billion or 89 %, mainly in German mortgage lending. As loans were consolidated at their fair values representing our expected future cash flows, no consolidated loans were considered 90 days or more past due as of December 31, 2010. The net credit cost incurred on Postbank consumer credit loans since consolidation date were insignificant compared to the consolidated loan volume. The volume of our consumer credit exposure excluding Postbank rose by € 4 billion, or 4.5 %, from year end 2009 to December 31, 2010, driven by volume growth in Germany (up € 902 million), Poland (up € 1,034 million), Italy (up € 949 million) and Portugal (up € 547 million), mainly within mortgage lending. Measures taken on portfolio and country level lead to significant reduction of net credit costs in Spain and India, partially offset by increases in our consumer finance business in Poland. Revised parameter and model assumptions in 2009 led to a one-time release of loan loss allowance of € 60 million in the first quarter 2009 as well as a lower level of provisions for credit losses of € 28 million for the first quarter 2010.

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