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

Main corporate credit exposure categories according to our internal creditworthiness categories of our counterparties.

in € m.

Dec 31, 2012

Ratingband

Probability of default

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Debt securities available for sale

Total

1

Includes impaired loans mainly in category CCC and below amounting to € 6.1 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.

iAAA-iAA

0.00-0.04 %

48,992

20,233

9,064

23,043

30,054

131,386

iA

0.04-0.11 %

43,047

37,456

19,192

22,308

8,186

130,189

iBBB

0.11-0.5 %

53,804

37,754

21,304

7,713

3,788

124,363

iBB

0.5-2.27 %

45,326

22,631

11,460

5,778

1,749

86,944

iB

2.27-10.22 %

17,739

10,068

4,886

2,415

227

35,335

iCCC and below

10.22-100 %

13,062

1,515

2,455

1,187

151

18,370

Total

 

221,970

129,657

68,361

62,444

44,155

526,587

in € m.

Dec 31, 2011

Ratingband

Probability of default

Loans1

Irrevocable lending commitments2

Contingent liabilities

OTC derivatives3

Debt securities available for sale

Total

1

Includes impaired loans mainly in category CCC and below amounting to € 6.3 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.

iAAA-iAA

0.00-0.04 %

51,321

21,152

6,535

37,569

22,753

139,330

iA

0.04-0.11 %

45,085

37,894

24,410

17,039

8,581

133,009

iBBB

0.11-0.5 %

59,496

36,659

21,002

12,899

5,109

135,165

iBB

0.5-2.27 %

50,236

21,067

13,986

7,478

2,303

95,071

iB

2.27-10.22 %

17,650

9,152

6,051

3,007

263

36,123

iCCC and below

10.22-100 %

18,148

2,071

1,669

1,632

371

23,891

Total

 

241,936

127,995

73,653

79,624

39,381

562,589

Our corporate credit exposure has declined by 6 % since December 31, 2011 to € 526.6 billion. Reductions have been primarily recorded for Loans (€ 20.0 billion) and OTC derivatives (€ 17.2 billion). Overall, the quality of corporate credit exposure has improved with 73 % rated investment grade compared to 72 % as of December 31, 2011. 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 decrease in our OTC derivatives exposure, primarily took place in relation to investment grade counterparties. 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, the remaining current credit exposure was significantly lower, adequately structured, enhanced or well-diversified and geared towards investment grade counterparties. The increase in our debt securities available for sale exposure in comparison to December 31, 2011 is mainly to the strongest counterparties in the rating band iAAA-iAA.

Risk Mitigation for the Corporate Credit Exposure

Our Credit Portfolio Strategies Group (“CPSG”) helps mitigate the risk of our corporate credit exposures. The notional amount of CPSG’s risk reduction activities decreased by 17 % from € 55.3 billion as of December 31, 2011, to € 45.7 billion as of December 31, 2012, due to a decrease in the notional of loans requiring hedging and a reduction in hedges used to manage market risk.

As of year-end 2012, CPSG held credit derivatives with an underlying notional amount of € 27.9 billion. The position totaled € 37.6 billion as of December 31, 2011. The credit derivatives used for our portfolio management activities are accounted for at fair value.

CPSG also mitigated the credit risk of € 17.8 billion of loans and lending-related commitments as of December 31, 2012, through 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 € 17.7 billion as of December 31, 2011.

CPSG 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 CPSG loans and commitments reported at fair value decreased during the year to € 40.0 billion as of December 31, 2012, from € 48.3 billion as of December 31, 2011. By reporting loans and commitments at fair value, CPSG has significantly reduced profit and loss volatility that resulted from the accounting mismatch that existed when all loans and commitments were reported at amortized cost while derivative hedges are reported at fair value.

Consumer Credit Exposure

In our consumer credit exposure we monitor consumer loan delinquencies in terms of loans that are 90 days or more past due and net credit costs, which are the annualized net provisions charged after recoveries.

Consumer credit exposure, consumer loan delinquencies and net credit costs

 

Total exposure in € m.

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

Net credit costs as a % of total exposure1

 

Dec 31, 2012

Dec 31, 2011

Dec 31, 2012

Dec 31, 2011

Dec 31, 2012

Dec 31, 2011

1

Releases of allowances for credit losses established by consolidated entities prior to their consolidation are not included in the ratio until December 31, 2011 but recorded through net interest income (for detailed description see next section “Impairment Loss and Allowances for Loan Losses”). Taking such amounts into account, the net credit costs as a percentage of total exposure would have amounted to 0.42 % as of December 31, 2011. In 2012 releases of our consolidated entities are included in the net credit costs.

2

Includes impaired loans amounting to € 4.2 billion as of December 31, 2012 and € 3.8 billion as of December 31, 2011.

Consumer credit exposure Germany:

139,939

135,069

0.84 %

0.95 %

0.29 %

0.49 %

Consumer and small business financing

20,137

19,805

1.20 %

1.88 %

1.20 %

1.55 %

Mortgage lending

119,802

115,264

0.78 %

0.79 %

0.14 %

0.31 %

Consumer credit exposure outside Germany

40,065

39,672

4.58 %

3.93 %

0.66 %

0.61 %

Consumer and small business financing

13,448

13,878

9.01 %

7.22 %

1.52 %

1.31 %

Mortgage lending

26,617

25,794

2.34 %

2.15 %

0.23 %

0.23 %

Total consumer credit exposure2

180,004

174,741

1.67 %

1.63 %

0.38 %

0.52 %

The volume of our total consumer credit exposure increased by € 5.3 billion, or 3.0 %, from year-end 2011 to December 31, 2012. Postbank contributed a net exposure increase of € 1.0 billion, or 1.3 %, mainly originated in Germany. The volume excluding Postbank rose by € 4.3 billion, or 4.4 %, mainly driven by our mortgage lending activities in Germany (up € 4.1 billion). As part of our growth strategy the consumer credit exposure increased in Poland, mainly mortgage lending, by € 725 million and in India by € 174 million. The volume in Spain decreased by € 440 million and in Portugal by € 108 million following our ongoing de-risking strategy.

The 90 days or more past due ratio in Germany declined in 2012 driven mainly by a sale of non-performing loans, in addition to benefiting from the favourable economic environment. Apart from the economic development in the rest of Europe the increase in the ratio outside Germany is mainly driven by changes in the charge-off criteria for certain portfolios in 2009. Loans, which were previously fully charged-off upon reaching 270 days past due (180 days past due for credit cards), are now provisioned based on the level of historical loss rates, which are derived from observed recoveries of formerly charged off similar loans. This leads to an increase in 90 days or more past due exposure as the change increased the time until the respective loans are completely charged-off. Assuming no change in the underlying credit performance, the effect will continue to increase the ratio until the portfolio has reached a steady state, which is expected approximately 5 years after the change.

The reduction of net credit costs as a percentage of total exposure is mainly driven by the aforementioned sale of nonperforming loans, but also due to the favourable economic developments in the German market.

Consumer mortgage lending exposure grouped by loan-to-value buckets1

 

Dec 31, 2012

1

When assigning the exposure to the corresponding LTV buckets, the exposure amounts are distributed according to their relative share of the underlying assessed real estate value.

≤ 50 %

71 %

> 50 ≤ 70 %

16 %

> 70 ≤ 90 %

8 %

> 90 ≤ 100 %

2 %

> 100 ≤ 110 %

1 %

> 110 ≤ 130 %

1 %

> 130 %

1 %

The LTV expresses the amount of exposure as a percentage of assessed value of real estate.

Our LTV ratios are calculated using the total exposure divided by the current assessed value of the respective properties. These values are updated on a regular basis. The exposure of transactions that are additionally backed by liquid collaterals is reduced by the respective collateral values, whereas any prior charges increase the corresponding total exposure. The LTV calculation includes exposure which is secured by real estate collaterals. Any mortgage lending exposure that is collateralized exclusively by any other type of collateral is not included in the LTV calculation.

The creditor’s creditworthiness, the LTV and the quality of collateral is an integral part of our risk management when originating loans and when monitoring and steering our credit risks. In general, we are willing to accept higher LTV’s, the better the creditor’s creditworthiness is. Nevertheless, restrictions of LTV apply for countries with negative economic outlook or expected declines of real estate values.

As of December 31, 2012, 71 % of our exposure related to the mortgage lending portfolio had a LTV ratio below or equal to 50 %.

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