Main Credit Exposure Categories


The tables in this section show details about several of our main credit exposure categories, namely loans, irrevocable lending commitments, contingent liabilities, over-the-counter (“OTC”) derivatives, traded loans, traded bonds, debt securities available for sale and Repo and repo-style transactions:

  • “Loans” are net loans as reported on our balance sheet at amortized cost but before deduction of our allowance for loan losses.
  • “Irrevocable lending commitments” consist of the undrawn portion of irrevocable lending-related commitments.
  • “Contingent liabilities” consist of financial and performance guarantees, standby letters of credit and others (mainly indemnity agreements).
  • “OTC derivatives” are our credit exposures from over-the-counter derivative transactions that we have entered into, after netting and cash collateral received. On our balance sheet, these are included in financial assets at fair value through profit or loss or, for derivatives qualifying for hedge accounting, in other assets, in either case, before netting and cash collateral received.
  • “Traded loans” are loans that are bought and held for the purpose of selling them in the near term, or the material risks of which have all been hedged or sold. From a regulatory perspective this category principally covers trading book positions.
  • “Traded bonds” include bonds, deposits, notes or commercial paper that are bought and held for the purpose of selling them in the near term. From a regulatory perspective this category principally covers trading book positions.
  • “Debt securities available for sale” include debentures, bonds, deposits, notes or commercial paper, which are issued for a fixed term and redeemable by the issuer, which we have classified as available for sale.
  • “Repo and repo-style transactions” consist of reverse repurchase transactions, as well as securities or commodities borrowing transactions after application of netting and collateral received.

Although considered in the monitoring of maximum credit exposures, the following are not included in the details of our main credit exposure: brokerage and securities related receivables, interest-earning deposits with banks, cash and due from banks, assets held for sale and accrued interest receivables. Excluded as well are traditional securitization positions and equity investments, which are dealt with specifically in the sections “Securitization” and “Nontrading Market Risk – Investment Risk” and “Nontrading Market Risk – Equity Investments Held”, respectively.

Main Credit Exposure Categories by Business Divisions

 

Dec 31, 2012

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.3 billion as of December 31, 2012.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.4 billion as of December 31, 2012.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Corporate Banking & Securities

54,155

100,617

8,741

53,629

14,052

133,519

10,517

189,681

564,911

Global Transaction Bank

58,882

9,392

51,590

732

827

52

133

2,965

124,573

Asset & Wealth Management

29,560

3,503

2,824

555

21

7,540

3,044

76

47,123

Private & Business Clients

209,228

14,503

1,764

1,150

80

17,931

20,936

265,592

Non-Core Operations

49,860

1,451

3,353

6,373

3,250

11,699

12,485

150

88,621

Consolidation & Adjustments

290

191

89

5

2

64

45

686

Total

401,975

129,657

68,361

62,444

18,152

152,954

44,155

213,808

1,091,506

 

Dec 31, 2011

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2011.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2011.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Corporate Banking & Securities

58,428

99,219

12,412

65,145

12,913

134,394

3,006

180,020

565,537

Global Transaction Bank

57,876

8,916

52,479

815

436

50

1,025

2,749

124,346

Asset & Wealth Management

27,638

3,225

3,038

1,042

6,991

2,498

627

45,059

Private & Business Clients

207,653

14,089

2,330

829

14

16,563

12,182

253,660

Non-Core Operations

64,721

2,459

3,345

11,790

4,689

12,839

16,246

6,076

122,165

Consolidation & Adjustments

360

87

49

3

1

45

43

588

Total

416,676

127,995

73,653

79,624

18,039

154,333

39,381

201,654

1,111,355

Our main credit exposure decreased by € 19.8 billion.

  • From a divisional perspective, a significant reduction of € 33.5 billion has been achieved by the recently established NCOU partly offset by an increase in PBC exposure (€ 11.9 billion) mainly driven by Repo and repo-style transactions due to reduced nettable contracts where excess liquidity has been invested in repo transactions.
  • From a product perspective, exposure reductions have been recorded for Loans (€ 14.7 billion) and OTC derivatives (€ 17.2 billion) partly offset by an increase in Repo and repo-style transactions (€ 12.2 billion).

Main Credit Exposure Categories by Industry Sectors

 

Dec 31, 2012

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.3 billion as of December 31, 2012.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.4 billion as of December 31, 2012.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

5

Loan exposures for Other include lease financing.

Banks and insurance

27,849

22,083

16,021

32,673

2,720

34,750

15,280

207,476

358,852

Fund management activities

16,777

6,248

2,063

4,583

536

7,324

1,092

18

38,641

Manufacturing

23,203

30,347

18,899

1,626

2,395

3,545

482

80,497

Wholesale and retail trade

17,026

8,799

6,080

757

546

1,121

149

34,478

Households

180,974

12,273

2,593

730

1,380

7

45

198,002

Commercial real estate activities

45,225

2,677

691

1,567

2,355

1,335

68

53,918

Public sector

15,378

1,370

107

6,319

318

87,291

25,095

1,027

136,905

Other

75,5435

45,860

21,907

14,189

7,902

17,581

1,989

5,242

190,213

Total

401,975

129,657

68,361

62,444

18,152

152,954

44,155

213,808

1,091,506

 

Dec 31, 2011

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2011.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2011.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

5

Loan exposures for Other include lease financing.

Banks and insurance

35,308

22,553

17,668

50,657

2,416

38,079

15,887

193,621

376,189

Fund management activities

24,952

4,931

2,432

8,943

1,008

7,688

1,127

396

51,477

Manufacturing

22,754

31,297

19,608

3,279

1,290

3,205

697

2

82,132

Wholesale and retail trade

15,045

8,412

5,527

610

392

1,218

251

36

31,491

Households

174,188

10,613

2,706

1,082

2,199

57

26

190,871

Commercial real estate activities

46,143

2,877

2,348

2,187

2,526

508

53

110

56,752

Public sector

16,412

1,479

104

8,625

263

88,036

18,872

740

134,531

Other

81,8745

45,833

23,260

4,241

7,945

15,542

2,494

6,723

187,912

Total

416,676

127,995

73,653

79,624

18,039

154,333

39,381

201,654

1,111,355

From an industry perspective, our credit exposure is lower compared to last year in Banks and Insurance (€ 17.3 billion) and Funds management activities (€ 12.8 billion), partly offset by an increase in Households (€ 7.1 billion) primarily in Loans, reflecting the overall growth of our retail book.

Loan exposures to the industry sectors banks and insurance, manufacturing and public sector comprise predominantly investment grade variable rate loans which are held to maturity. The portfolio is subject to the same credit underwriting requirements stipulated in our Principles for Managing Credit Risk, including various controls according to single name, country, industry and product-specific concentration.

Material transactions, such as loans underwritten with the intention to syndicate, are subject to review by senior credit risk management professionals and (depending upon size) an underwriting credit committee and/or the Management Board. High emphasis is placed on structuring such transactions to ensure de-risking is achieved in a timely and cost effective manner. Exposures within these categories are mostly to good quality borrowers and also subject to further risk mitigation as outlined in the description of our Credit Portfolio Strategies Group’s activities.

Our household loans exposure amounting to € 181 billion as of December 31, 2012 (€ 174 billion as of December 2011) is principally associated with our PBC portfolio. € 142 billion (78 %) of the portfolio comprises mortgages, of which € 112 billion are held in Germany. The remaining exposures (€ 39 billion, 22 %) are predominantly consumer finance business related. Given the largely homogeneous nature of this portfolio, counterparty credit worthiness and ratings are predominately derived by utilizing an automated decision engine.

Mortgage business is principally the financing of owner occupied properties sold by various business channels in Europe, primarily in Germany but also in Spain, Italy and Poland, with exposure normally not exceeding real estate value. Consumer finance is divided into personal installment loans, credit lines and credit cards. Various lending requirements are stipulated, including (but not limited to) maximum loan amounts and maximum tenors and are adapted to regional conditions and/or circumstances of the borrower (e.g., for consumer loans a maximum loan amount taking into account household net income). Interest rates are mostly fixed over a certain period of time, especially in Germany. Second lien loans are not actively pursued.

The level of credit risk of the mortgage loan portfolio is determined by assessing the quality of the client and the underlying collateral. The loan amounts are generally larger than consumer finance loans and they are extended for longer time horizons. Consumer Finance loan risk depends on client quality. Given that they are uncollateralized, compared to mortgages they are also smaller in value and are extended for shorter time. Based on our underwriting criteria and processes, diversified portfolio (customers/properties) and low loan-to-value (LTV) ratios, the mortgage portfolio is categorized as lower risk and consumer finance medium risk.

Our commercial real estate loans are generally originated for distribution as securities (CMBS) or in the bank syndication market and accounted for as financial assets at fair value through profit and loss, with the exception of Postbank commercial real estate loans which are generally held to maturity and not sold in the secondary market. Loans are generally secured by first mortgages on the underlying real estate property, and follow the credit underwriting requirements stipulated in the Principles for Managing Credit Risk noted above (i.e., rating followed by credit approval based on assigned credit authority) and are subject to additional underwriting and policy guidelines such as LTV ratios of generally less than 75 %. Additionally given the significance of the underlying collateral independent external appraisals are commissioned for all secured loans by our valuation team (part of the independent Credit Risk Management function). Our valuation team is responsible for reviewing and challenging the reported real estate values.

Excluding the exposures transferred into the NCOU, the Commercial Real Estate Group does not normally retain mezzanine or other junior tranches of debt, though the Postbank portfolio holds an insignificant sub-portfolio of junior tranches. Loans originated for securitization are carefully monitored under a pipeline limit. Securitized loan positions are entirely sold (except where regulation requires retention of economic risk), while we frequently retain a portion of syndicated bank loans. This hold portfolio, which is held at amortized cost, is also subject to the aforementioned principles and policy guidelines. We also participate in conservatively underwritten unsecured lines of credit to well-capitalized real estate investment trusts and other public companies (generally investment grade). In addition, sub-performing and non-performing loans and pools of loans are generally acquired from other financial institutions at substantial discounts to both the notional amounts and current collateral values. The underwriting process is stringent and the exposure is managed under a separate portfolio limit. We provide both fixed rate (generally securitized product) and floating rate loans, with interest rate exposure subject to hedging arrangements. Commercial real estate property valuations and rental incomes can be significantly impacted by macro-economic conditions and underlying properties to idiosyncratic events. Accordingly, the portfolio is categorized as higher risk and hence subject to the aforementioned tight restrictions on concentration.

The category Other loans, with exposure of € 76 billion as of December 31, 2012 (€ 82 billion as of December 31, 2011), relates to numerous smaller industry sectors with no individual sector greater than 5 % of total loans.

Our credit exposure to our ten largest counterparties accounted for 11 % of our aggregated total credit exposure in these categories as of December 31, 2012 compared to 8 % as of December 31, 2011. Our top ten counterparty exposures were with well-rated counterparties or otherwise related to structured trades which show high levels of risk mitigation.

The following two tables present specific disclosures in relation to Pillar 3. Per regulation it is not required to audit Pillar 3 disclosures.

Residual contract maturity profile of the main credit exposure categories (unaudited)

 

Dec 31, 2012

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.3 billion as of December 31, 2012.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.4 billion as of December 31, 2012.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

< 1 year

126,091

30,601

35,777

12,561

3,516

36,043

5,702

211,868

462,159

1 year – 5 years

96,668

82,179

23,996

17,821

8,513

42,794

21,110

1,817

294,898

> 5 years

179,216

16,877

8,588

32,062

6,123

74,117

17,343

123

334,449

Total credit risk exposure

401,975

129,657

68,361

62,444

18,152

152,954

44,155

213,808

1,091,506

 

Dec 31, 2011

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2011.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2011.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

< 1 year

135,407

34,414

39,203

14,094

4,384

40,594

6,386

197,434

471,916

1 year – 5 years

102,883

76,998

20,918

21,486

8,695

38,045

14,339

4,136

287,500

> 5 years

178,386

16,583

13,532

44,044

4,960

75,694

18,656

84

351,939

Total credit risk exposure

416,676

127,995

73,653

79,624

18,039

154,333

39,381

201,654

1,111,355

Average credit risk exposure held over the four quarters (unaudited)

 

2012

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.3 billion as of December 31, 2012.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.4 billion as of December 31, 2012.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Total average credit risk exposure

409,002

131,348

68,680

68,334

17,164

162,498

42,529

229,549

1,129,104

Total credit risk exposure at year-end

401,975

129,657

68,361

62,444

18,152

152,954

44,155

213,808

1,091,506

 

2011

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2011.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2011.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Total average credit risk exposure

407,212

125,310

68,988

69,490

19,651

174,242

40,797

206,014

1,111,704

Total credit risk exposure at year-end

416,676

127,995

73,653

79,624

18,039

154,333

39,381

201,654

1,111,355

Main credit exposure categories by geographical region

 

Dec 31, 2012

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.3 billion as of December 31, 2012.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.4 billion as of December 31, 2012.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Germany

199,280

24,301

14,863

3,159

309

15,960

12,794

24,526

295,192

Western Europe (excluding Germany)

104,342

33,922

19,279

29,478

5,752

31,529

25,802

50,346

300,450

Eastern Europe

10,187

1,479

1,926

1,075

2,314

4,246

303

380

21,910

North America

52,560

63,302

19,883

18,423

7,386

63,718

2,500

100,779

328,551

Central and South America

4,747

756

1,343

1,053

518

4,812

57

2,694

15,980

Asia/Pacific

29,120

5,253

10,061

9,165

1,761

31,781

2,699

34,621

124,461

Africa

1,635

587

1,006

17

88

766

462

4,561

Other

104

57

74

24

142

401

Total

401,975

129,657

68,361

62,444

18,152

152,954

44,155

213,808

1,091,506

 

Dec 31, 2011

in € m.

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style transactions4

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2011.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2011.

3

Includes the effect of netting agreements and cash collateral received where applicable. Excludes derivatives qualifying for hedge accounting.

4

Before reflection of collateral and limited to securities purchased under resale agreements and securities borrowed.

Germany

199,442

24,448

15,408

5,148

376

17,445

7,848

24,207

294,322

Western Europe (excluding Germany)

115,782

32,399

19,460

35,932

5,720

29,720

24,910

53,520

317,443

Eastern Europe

9,387

1,357

1,682

135

2,001

2,331

369

548

17,810

North America

54,962

63,318

23,884

28,070

7,482

65,424

5,523

79,014

327,677

Central and South America

4,775

852

1,803

396

499

4,936

79

2,524

15,864

Asia/Pacific

30,291

4,791

10,425

9,011

1,815

33,836

628

41,417

132,214

Africa

1,502

598

991

888

127

611

7

424

5,148

Other

535

232

44

19

30

17

877

Total

416,676

127,995

73,653

79,624

18,039

154,333

39,381

201,654

1,111,355

Our largest concentration of credit risk within loans from a regional perspective was in our home market Germany, with a significant share in households, which includes the majority of our mortgage lending business. Within the OTC derivatives business our largest concentrations were in Western Europe (excluding Germany) and North America, with a significant share in highly rated banks and insurance companies for which we consider the credit risk to be limited.

Our largest concentrations of credit risk within tradable assets from a regional perspective were in North America and Western Europe (excluding Germany), with a significant share in public sector and banks and insurance companies. Within the repo and repo-style transactions our largest concentrations were in North America and Western Europe (excluding Germany), with a significant share in highly rated banks and insurance companies.

Our overall loan book as of December 31, 2012 decreased to € 402 billion versus € 417 billion as of December 31, 2011. The decrease in OTC derivatives (€ 17 billion) is mainly in North America and Western Europe (excluding Germany). The decrease in loans (€ 15 billion) was mainly in Western Europe (excluding Germany) and North America with banks and insurance and fund management activities. The increase in repo and repo-style transactions (€ 12 billion) was primarily in positions with banks and insurance companies within North America, partly offset with decreases in Asia/Pacific region.

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