Problem Loans and IFRS Impaired Loans


Our problem loans consist mainly of our impaired loans. Under IFRS we consider loans to be impaired when we recognize objective evidence that an impairment loss has been incurred. While we assess the impairment for our corporate credit exposure individually, we assess the impairment of our smaller-balance standardized homogeneous loans collectively. The second component of our problem loans are nonimpaired problem loans, where no impairment loss is recorded but where either 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 or that are 90 days or more past due but for which the accrual of interest has not been discontinued.

We continue to monitor and report our problem loans in line with SEC industry guidance. Our problem loans comprise 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 contractual loan repayment terms are included in our problem loans, even if no loss has been incurred.

With the acquisition of Sal. Oppenheim Group and parts of ABN AMRO’s commercial banking activities in the Netherlands we acquired certain loans for which a specific allowance had been established beforehand by Sal. Oppenheim or ABN AMRO. These loans were taken on to our balance sheet at their fair values as determined by their expected cash flows which reflected the credit quality of these loans at time of acquisition. As long as our cash flow expectations regarding these loans have not deteriorated since acquisition they are not considered problem loans.

The following two tables show the breakdown of our problem loans and IFRS impaired loans.



Jun 30, 2010

Impaired loans

Nonimpaired problem loans

Problem loans

in € m.

German

Non-German

Total

German

Non-German

Total

Total

Individually assessed

835

4,119

4,954

279

1,391

1,670

6,624

Nonaccrual loans

767

3,962

4,729

168

704

872

5,601

Loans 90 days or more past due and still accruing

38

34

72

72

Troubled debt restructurings

68

157

225

73

653

726

951

Collectively assessed

919

1,537

2,456

279

40

319

2,775

Nonaccrual loans

917

1,417

2,334

2,334

Loans 90 days or more past due and still accruing

265

9

274

274

Troubled debt restructurings

2

120

122

14

31

45

167

Total problem loans

1,754

5,656

7,410

558

1,431

1,989

9,399

thereof: IAS 39 reclassified problem loans

30

2,789

2,819

486

486

3,305

Dec 31, 2009

Impaired loans

Nonimpaired problem loans

Problem loans

in € m.

German

Non-German

Total

German

Non-German

Total

Total

Individually assessed

758

4,145

4,903

304

1,037

1,341

6,244

Nonaccrual loans

707

4,027

4,734

200

1,003

1,203

5,937

Loans 90 days or more past due and still accruing

50

5

55

55

Troubled debt restructurings

51

118

169

54

29

83

252

Collectively assessed

907

1,391

2,298

274

97

371

2,669

Nonaccrual loans

905

1,281

2,186

2,186

Loans 90 days or more past due and still accruing

260

6

266

266

Troubled debt restructurings

2

110

112

14

91

105

217

Total problem loans

1,665

5,536

7,201

578

1,134

1,712

8,913

thereof: IAS 39 reclassified problem loans

28

2,750

2,778

159

159

2,937

The € 485 million, or 5 %, increase in our total problem loans in first half of 2010 was due to a € 508 million gross increase of problem loans and a € 439 million increase as a result of exchange rate movements, partly offset by € 462 million of charge-offs. The increase in problem loans is mainly attributable to our individually assessed loans with a € 422 million increase as a result of exchange rate movements and a € 169 million gross increase in problem loans, partly offset by charge-offs of € 212 million. For collectively assessed problem loans, gross increases of € 338 million and exchange rate movements of € 17 million were partly offset by charge-offs of € 250 million. Included in the € 2.8 billion of collectively assessed problem loans as of June 30, 2010 are € 2.3 billion of loans that are 90 days or more past due as well as € 437 million of loans that are less than 90 days or not past due.

Our problem loans included € 3.3 billion of problem loans among the loans reclassified to the banking book as permitted by IAS 39. For these loans we recorded a € 200 million increase as a result of exchange rate movements and gross increases in problem loans of € 170 million.

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