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 tables below show our Corporate Credit Exposure by product types and internal rating bands. Please refer to “Credit Risk Ratings” and “Rating Governance” sections for more details about our internal ratings.

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

in € m.
(unless stated otherwise)

Dec 31, 2013

Ratingband

Probability of default in %1

Loans2

Irrevocable lending commitments3

Contingent liabilities

OTC derivatives4

Debt securities available for sale

Total

1

Probability of default on a 12 month basis.

2

Includes impaired loans mainly in category iCCC and below amounting to € 5.9 billion as of December 31, 2013.

3

Includes irrevocable lending commitments related to consumer credit exposure of € 9.8 billion as of December 31, 2013.

4

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

iAAA–iAA

0.00–0.04

33,213

19,791

8,318

19,222

35,699

116,243

iA

0.04–0.11

43,193

31,009

19,285

11,934

5,332

110,753

iBBB

0.11–0.5

50,441

37,326

20,234

6,700

1,764

116,465

iBB

0.5–2.27

43,529

25,363

11,604

4,775

920

86,191

iB

2.27–10.22

16,173

11,927

4,382

1,711

443

34,635

iCCC and below

10.22–100

11,076

1,245

1,807

374

85

14,587

Total

 

197,625

126,660

65,630

44,716

44,242

478,874

in € m.
(unless stated otherwise)

Dec 31, 2012

Ratingband

Probability of default in %1

Loans2

Irrevocable lending commitments3

Contingent liabilities

OTC derivatives4

Debt securities available for sale

Total

1

Probability of default on a 12 month basis.

2

Includes impaired loans mainly in category iCCC and below amounting to € 6.1 billion as of December 31, 2012.

3

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

4

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

iAAA–iAA

0.00–0.04

49,386

20,233

9,064

23,043

30,054

131,780

iA

0.04–0.11

42,612

37,456

19,192

22,308

8,186

129,754

iBBB

0.11–0.5

53,539

37,754

21,304

7,713

3,788

124,098

iBB

0.5–2.27

45,624

22,631

11,460

5,778

1,749

87,242

iB

2.27–10.22

17,997

10,068

4,886

2,415

227

35,593

iCCC and below

10.22–100

12,907

1,515

2,455

1,187

151

18,215

Total

 

222,065

129,657

68,361

62,444

44,155

526,682

Our gross corporate credit exposure has declined by 9 % since December 31, 2012 to € 478.9 billion. Reductions have been primarily recorded for Loans (€ 24.4 billion) mainly driven by reductions in NCOU and OTC derivatives (€ 17.7 billion). Overall, the quality of the corporate credit exposure before risk mitigation has remained almost stable at 72 % rated investment-grade as of December 31, 2013 compared to 73 % as of December 31, 2012.

We use risk mitigation techniques as described above to optimize our corporate credit exposure and reduce potential credit losses. The tables below disclose the development of our corporate credit exposure net of collateral, guarantees and hedges.

Main corporate credit exposure categories according to our internal creditworthiness categories of our counter-parties – net

in € m.
(unless stated otherwise)

Dec 31, 20131

Ratingband

Probability of default in %2

Loans

Irrevocable lending commitments

Contingent liabilities

OTC derivatives

Debt securities available for sale

Total

1

Net of eligible collateral, guarantees and hedges based on IFRS requirements.

2

Probability of default on a 12 month basis.

iAAA–iAA

0.00–0.04

21,474

16,602

5,589

15,901

35,669

95,234

iA

0.04–0.11

28,001

26,503

15,893

8,183

5,332

83,912

iBBB

0.11–0.5

24,302

31,268

15,410

5,878

1,744

78,602

iBB

0.5–2.27

20,835

21,170

6,814

3,694

912

53,424

iB

2.27–10.22

6,257

10,382

2,535

1,536

443

21,153

iCCC and below

10.22–100

4,947

1,045

781

362

25

7,159

Total

 

105,815

106,969

47,022

35,554

44,125

339,485

in € m.
(unless stated otherwise)

Dec 31, 20121

Ratingband

Probability of default in %2

Loans

Irrevocable lending commitments

Contingent liabilities

OTC derivatives

Debt securities available for sale

Total

1

Net of eligible collateral, guarantees and hedges based on IFRS requirements.

2

Probability of default on a 12 month basis.

iAAA–iAA

0.00–0.04

35,633

18,810

6,521

20,188

29,907

111,059

iA

0.04–0.11

25,304

32,035

17,154

17,323

7,894

99,710

iBBB

0.11–0.5

25,633

31,626

17,290

6,513

3,554

84,617

iBB

0.5–2.27

13,354

20,924

7,624

4,168

1,718

47,788

iB

2.27–10.22

5,538

9,391

2,412

2,328

217

19,887

iCCC and below

10.22–100

6,194

1,332

1,106

1,117

148

9,897

Total

 

111,657

114,118

52,107

51,638

43,438

372,958

The corporate credit exposure net of collateral amounted to € 339.5 billion as of December 31, 2013 resulting in a risk mitigation of 29 % or € 139.4 billion compared to the corporate gross exposure. This includes a more significant reduction of 46 % for our loans exposure which includes a reduction by 55 % for the lower rated sub-investment-grade rated loans and 42 % for the higher rated investment-grade loans. The risk mitigation in the weakest rating band was 55 %, which was significantly higher than 35 % in the strongest rating band.

The risk mitigation of € 139.4 billion is split into 36 % guarantees and hedges, 64 % other collateral which can be further broken down into 37 % mortgages, 34 % financial instruments,16 % cash, and 13 % others including ship-mortgages.

CPSG 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 26 % from € 45.7 billion as of December 31, 2012, to € 33.8 billion as of December 31, 2013, 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 2013, CPSG held credit derivatives with an underlying notional amount of € 10.4 billion. The position totaled € 27.9 billion as of December 31, 2012. The credit derivatives used for our portfolio management activities are accounted for at fair value.

CPSG also mitigated the credit risk of € 23.4 billion of loans and lending-related commitments as of December 31, 2013, 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 € 17.8 billion as of December 31, 2012.

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 € 25.5 billion as of December 31, 2013, from € 40.0 billion as of December 31, 2012. 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.2

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

Net credit costs
as a % of total exposure

 

Dec 31, 2013

Dec 31, 2012

Dec 31, 2013

Dec 31, 2012

Dec 31, 2013

Dec 31, 2012

1

Includes impaired loans amounting to € 4.2 billion as of December 31, 2013 and € 4.2 billion as of December 31, 2012.

2

Retroactive as per December 31, 2012, the allocation from outside Germany to Germany for Postbank business was restated.

Consumer credit exposure Germany:

145,929

141,167

0.80

0.86

0.23

0.29

Consumer and small business financing

20,778

20,311

0.89

1.19

1.04

1.19

Mortgage lending

125,151

120,856

0.79

0.80

0.10

0.14

Consumer credit exposure outside Germany

38,616

38,837

5.38

4.64

0.76

0.68

Consumer and small business financing

12,307

13,274

11.34

9.13

1.75

1.54

Mortgage lending

26,309

25,563

2.60

2.31

0.29

0.24

Total consumer credit exposure1

184,545

180,004

1.76

1.67

0.34

0.38

The volume of our consumer credit exposure increased from year-end 2012 to year-end 2013 by € 4.5 billion, or 2.5 %, mainly driven by our mortgage lending activities in Private and Commercial Banking (increase of € 4.4 billion) and the consumer and small business financing of Postbank business in Germany (increase of € 665 million) as well as mortgage lending in Poland (increase of € 466 million). As part of our de-risking strategy the credit exposure in Spain decreased by € 430 million, in Italy by € 236 million and in Portugal by € 139 million.

The 90 days or more past due ratio in Germany declined in 2013, driven by Private and Commercial Banking due to a sale of non-performing loans and the favorable 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 derived from observed recoveries of formerly charged off similar loans. This leads to an increase in 90 days or more past due exposure as it is increasing 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 favorable economic development in the German market.

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

 

Dec 31, 2013

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 %

69 %

71 %

> 50 ≤ 70 %

16 %

16 %

> 70 ≤ 90 %

9 %

8 %

> 90 ≤ 100 %

2 %

2 %

> 100 ≤ 110 %

1 %

1 %

> 110 ≤ 130 %

1 %

1 %

> 130 %

1 %

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, 2013, 69 % of our exposure related to the mortgage lending portfolio had a LTV ratio below or equal to 50 %.