Allowance for Credit Losses


Development of allowance for credit losses

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

2012

in € m.

Individually assessed

Collectively assessed

Subtotal

Individually assessed

Collectively assessed

Subtotal

Total

Balance, beginning of year

2,011

2,150

4,162

127

98

225

4,386

Provision for credit losses

1,115

613

1,728

(7)

0

(7)

1,721

thereof: (Gains)/Losses from disposal of impaired loans

79

(55)

24

24

Net charge-offs:

(762)

(324)

(1,086)

(1,086)

Charge-offs

(798)

(483)

(1,281)

(1,281)

Recoveries

36

158

195

195

Changes in the group of consolidated companies

Exchange rate changes/other

(98)

(9)

(107)

(2)

(1)

(3)

(111)

Balance, end of year

2,266

2,430

4,696

118

97

215

4,911

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

absolute

208

(312)

(104)

(26)

12

(14)

(118)

relative

23 %

(34 %)

(6 %)

(137 %)

(103 %)

(191 %)

(6 %)

Net charge-offs

 

 

 

 

 

 

 

absolute

(249)

61

(189)

(189)

relative

49 %

(16 %)

21 %

21 %

Balance, end of year

 

 

 

 

 

 

 

absolute

255

279

534

(9)

(1)

(10)

524

relative

13 %

13 %

13 %

(7 %)

(1 %)

(4 %)

12 %

In a volatile economic environment our credit standards have kept new provisions for loan losses under control. This included pro-active management of the homogeneous retail portfolios as well as strict underwriting standards in CB&S and continued diligent monitoring of higher risk exposures. With the creation of the NCOU, we have begun actively de-risking higher risk assets, which we intend to continue in 2013.

Our allowance for credit losses was € 4.9 billion as of December 31, 2012, thereof 96 % or € 4.7 billion related to our loan portfolio and 4 % or € 215 million to off-balance sheet positions (predominantly loan commitments and guarantees). Our allowance for loan losses as of December 31, 2012 was € 4.7 billion, 52 % of which is related to collectively assessed and 48 % to individually assessed loan losses. The increase in our allowance for loan losses of € 534 million mainly relates to € 1.7 billion of additional loan loss provisions partly offset by € 1.1 billion of charge-offs. Our allowance for off-balance sheet positions decreased by € 10 million or 4 % compared to the prior year due to releases of previously established allowances overcompensating new provisions in our portfolio for individually assessed off-balance sheet positions.

Provisions for credit losses recorded in 2012 decreased by € 118 million to € 1.7 billion compared to 2011. The overall loan loss provisions decreased by € 104 million or 6 % in 2012 compared to 2011. This decrease was driven by our collectively assessed loan portfolio, where we saw a reduction of € 312 million or 34 % driven by lower levels of provisioning for non-impaired loans within our NCOU mainly as a result of our de-risking measures along with lower provisioning in our homogenous Postbank portfolio. The latter decrease however excludes the effect of Postbank releases related to loan loss allowances recorded prior to consolidation. The impact of such releases is reported as interest income on a group level. The increase in provisions for our individually assessed loans of € 208 million or 23 % is related to assets which had been reclassified in accordance with IAS 39 in North America and United Kingdom now held in the NCOU. Provisions for off-balance sheet positions decreased by € 14 million or 191 % driven by our portfolio for individually assessed off-balance sheet positions, where releases of previously established allowances overcompensated new provisions in 2012.

Net charge-offs increased by € 189 million or 21 % in 2012. Net charge-offs for our individually assessed loans were up € 249 million mainly related to assets which had been reclassified in accordance with IAS 39.

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

2011

in € m.

Individually assessed

Collectively assessed

Subtotal

Individually assessed

Collectively assessed

Subtotal

Total

Balance, beginning of year

1,643

1,653

3,296

108

110

218

3,514

Provision for credit losses

907

925

1,832

19

(12)

7

1,839

thereof: (Gains)/Losses from disposal of impaired loans

1

(33)

(32)

(32)

Net charge-offs:

(512)

(385)

(897)

(897)

Charge-offs

(553)

(512)

(1,065)

(1,065)

Recoveries

41

127

168

168

Changes in the group of consolidated companies

(0)

(0)

(0)

0

0

Exchange rate changes/other

(26)

(43)

(69)

(0)

0

0

(69)

Balance, end of year

2,011

2,150

4,162

127

98

225

4,387

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

absolute

345

175

520

37

10

46

566

relative

61 %

23 %

40 %

(209 %)

(45 %)

(119 %)

44 %

Net charge-offs

 

 

 

 

 

 

 

absolute

384

19

403

403

relative

(43 %)

(5 %)

(31 %)

(31 %)

Balance, end of year

 

 

 

 

 

 

 

absolute

369

497

866

19

(12)

7

873

relative

22 %

30 %

26 %

18 %

(11 %)

3 %

25 %

At year end 2011, our allowance for credit losses amounted to € 4.4 billion, thereof 95 % or € 4.2 billion related to our loan portfolio and 5 % or € 225 million to off-balance sheet positions.

Our allowance for loan losses as of December 31, 2011 was € 4.2 billion, a 26 % increase from prior year end. The increase in our allowance was principally due to increased new provisions following the first full year consolidation of Postbank and lower net charge-offs compared to the prior year. Our allowance for off-balance sheet positions at the end of 2011 was almost on the same level as of the end of 2010.

Provisions for credit losses in 2011 amounted to € 1.8 billion, up € 566 million compared to 2010. Our provision for loan losses showed an increase of € 520 million or 40 % in 2011, thereof € 345 million or 61 % related to individually assessed loans, and € 175 million or 23 % related to our collectively assessed loan portfolios. The rise in individually assessed provision for loan losses was driven by the first time consolidation of Postbank and furthermore reflected impairment charges taken on a number of exposures in the Americas and in Europe in an overall challenging global economic credit environment. Reduced provisioning levels for IAS 39 reclassified assets partly compensated these increases. Loan loss provisions for our collectively assessed loan portfolios, which increased by 23 % compared to 2010, were also affected by the first time consolidation of Postbank. Excluding Postbank, the loan loss provision for our collectively assessed exposure was reduced due to our retail business in Germany which contributed lower provisions, despite the challenging economic environment. Our provisions for off-balance sheet positions increased by € 46 million or 119 % compared to 2010 driven by our portfolio for individually assessed off-balance sheet positions.

Our net charge-offs decreased by € 403 million or 31 % in 2011, almost fully related to our individually assessed loans, where we saw a reduction of € 384 million fully driven by IAS 39 reclassified assets.

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