Allowance for Credit Losses

Development of allowance for credit losses

 

2014

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.

Individually assessed

Collectively assessed

Subtotal

Individually assessed

Collectively assessed

Subtotal

Total

Balance, beginning of year

2,857

2,732

5,589

102

114

216

5,805

Provision for credit losses

499

631

1,129

(13)

18

4

1,134

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

(45)

(16)

(61)

0

0

0

(61)

Net charge-offs:

(997)

(512)

(1,509)

0

0

0

(1,509)

Charge-offs

(1,037)

(613)

(1,650)

0

0

0

(1,650)

Recoveries

40

101

141

0

0

0

141

Other changes

5

(2)

3

(4)

10

6

9

Balance, end of year

2,364

2,849

5,212

85

141

226

5,439

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

Absolute

(878)

(52)

(930)

2

(3)

(1)

(931)

Relative

(64) %

(8) %

(45) %

(14) %

(14) %

(12) %

(45) %

Net charge-offs

 

 

 

 

 

 

 

Absolute

(296)

(160)

(456)

0

0

0

(456)

Relative

42 %

45 %

43 %

0 %

0 %

0 %

43 %

Balance, end of year

 

 

 

 

 

 

 

Absolute

(494)

117

(376)

(17)

28

11

(366)

Relative

(17) %

4 %

(7) %

(17) %

24 %

5 %

(6) %

The reduction in 2014 in provisions for loan losses in our individually assessed loan portfolio of € 878 million reflects material reductions across all businesses. The reduction in NCOU was driven by decreased provision for credit losses in IAS39 reclassified and commercial real estate assets, while the performance in our Core bank benefited from increased releases and a non-recurrence of large single name bookings. Provisions for our collectively assessed portfolio decreased compared to prior year reflecting among other factors the ongoing good environment in the German credit market.

The main driver of the increase in charge-offs against our individually assessed loan portfolio was an alignment of processes in Postbank. This alignment resulted in an adjustment of the level of loan loss allowance for loans recorded at Postbank by € 233 million reflecting accelerated write-offs as well as the elimination of previous misclassification of recoveries in the credit quality of Postbank loans, which had been impaired after change of control, as interest income. Additionally, higher charge-offs in GTB relating to a single client credit event in the prior year contributed to the overall increase which was partly offset by reductions in charge-offs for IAS 39 reclassified assets. The increase in charge-offs against our collectively assessed loan portfolio mainly related to the disposal of impaired loan portfolios in Italy.

Our allowance for loan losses for IAS 39 reclassified assets, which are reported in NCOU, amounted to € 518 million at the end of 2014, representing 10 % of our total allowance for loan losses, up 8 % from the level at the end of the prior year which amounted to € 479 million (9 % of total allowance for loan losses). This increase was largely driven by foreign exchange as most IAS 39 reclassified assets are denominated in non-Euro currencies while additional provisions for loan losses of € 54 million were largely offset by net charge-offs of € 43 million. Compared to 2013, provision for loan losses for IAS 39 reclassified assets dropped by € 319 million and net charge-offs decreased by € 305 million in 2014. Both reductions result from the non-recurrence of large items in the present year compared to high levels in the comparison period.

 

2013

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.

Individually assessed

Collectively assessed

Subtotal

Individually assessed

Collectively assessed

Subtotal

Total

Balance, beginning of year

2,266

2,426

4,692

118

97

215

4,907

Provision for credit losses

1,377

683

2,060

(15)

21

5

2,065

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

(19)

(2)

(20)

0

0

0

(20)

Net charge-offs:

(701)

(352)

(1,053)

0

0

0

(1,053)

Charge-offs

(730)

(485)

(1,215)

0

0

0

(1,215)

Recoveries

30

132

162

0

0

0

162

Other changes

(85)

(25)

(110)

0

(3)

(4)

(114)

Balance, end of year

2,857

2,732

5,589

102

114

216

5,805

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

Absolute

262

70

332

(8)

20

12

344

Relative

24 %

11 %

19 %

119 %

0 %

(177) %

20 %

Net charge-offs

 

 

 

 

 

 

 

Absolute

61

(28)

33

0

0

0

33

Relative

(8) %

9 %

(3) %

0 %

0 %

0 %

(3) %

Balance, end of year

 

 

 

 

 

 

 

Absolute

591

306

897

(16)

17

1

898

Relative

26 %

13 %

19 %

(13) %

18 %

1 %

18 %

2013 increase of provision for loan losses in our individually assessed loan portfolio is a result of a single client credit event recorded in GTB, increased provisioning for shipping exposure recorded in CB&S and higher charges in NCOU driven by single client items amongst others related to the European commercial real estate sector. The increase in our collectively assessed loan portfolio was driven by NCOU. This increase was partly offset by reductions in our Core business mainly reflecting an improved credit environment in the German retail market compared to prior year. Our overall provisions for off-balance sheet positions increased by € 12 million compared with previous year driven by GTB as a result of increased collectively assessed allowances amongst other driven by volume increase.

Our allowance for loan losses for IAS 39 reclassified assets amounted to € 479 million as at year end 2013, representing 9 % of our total allowance for loan losses, slightly down from € 489 million (10 % of total allowance for loan losses) at prior year end. The slight reduction in 2013 was a result of reductions due to € 349 million charge-offs and € 35 million other changes overcompensating increases due to an additional provision for loan losses of € 373 million. Compared to prior year, provision for loan losses for IAS 39 reclassified assets decreased by € 43 million in 2013 (to € 373 million from € 415 million) driven by reductions across portfolios apart from commercial real estate. Net charge-offs related to IAS 39 reclassified assets slightly increased by € 18 million to € 349 million in 2013 from € 331 million in 2012 caused by a small number of charge-offs in the commercial real estate sector (subsequent to the partial charge-off, the respective borrowers have been consolidated due to the Group obtaining control over the structured entity borrower during the second and third quarters of 2013).