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 other similar arrangements (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 before 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, 2014

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 € 9.3 billion as of December 31, 2014.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.4 billion as of December 31, 2014.

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

61,820

119,995

4,865

43,407

14,865

92,272

34,411

112,605

484,239

Private & Business Clients

214,688

11,687

1,735

464

0

2

16,665

8,714

253,955

Global Transaction Banking

77,334

17,121

51,663

595

614

87

184

3,159

150,758

Deutsche Asset & Wealth Management

38,676

4,158

2,681

839

12

7,940

3,403

11

57,719

Non-Core Operations Unit

18,049

954

1,072

1,760

1,163

7,509

4,358

17

34,883

Consolidation & Adjustments

258

530

71

13

0

0

111

0

983

Total

410,825

154,446

62,087

47,078

16,654

107,808

59,132

124,507

982,537

 

Dec 31, 2013

in € m.

Loans1

Irrevocable lending commit­ments2,3

Contingent liabilities

OTC deriva­tives4

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style trans­actions5

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2013.

2

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

3

Comparatives have been restated by € 10.5 billion to include Fronting Commitments erroneously not included in prior disclosure.

4

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

5

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

Corporate Banking & Securities

40,335

102,776

6,716

40,709

14,921

109,864

19,947

176,720

511,988

Private & Business Clients

213,252

13,685

1,595

498

0

1

16,240

15,090

260,362

Global Transaction Banking

72,868

15,931

52,049

500

958

65

171

5,630

148,172

Deutsche Asset & Wealth Management

32,214

3,070

2,795

791

16

9,023

2,946

15

50,869

Non-Core Operations Unit

23,395

1,450

2,416

2,211

1,891

7,203

4,841

15

43,423

Consolidation & Adjustments

106

289

58

7

1

5

97

12

575

Total

382,171

137,202

65,630

44,716

17,787

126,160

44,242

197,482

1,015,390

Our main credit exposure decreased by € 32.9 billion.

  • From a divisional perspective, a reduction of € 27.7 billion has been achieved by CB&S, of € 8.5 billion by NCOU and of € 6.4 billion by PBC.
  • From a product perspective, strong exposure reductions have been observed for Repo and repo-style transactions and for Traded Bonds. Slight exposure reductions were also observed for Contingent Liabilities and Traded Loans.
  • The ETF related collateral restructuring in CB&S entailed replacing our physical securities exposure by entering into fully funded total returns swaps. As a consequence, CB&S loans with embedded securities exposure increased whereas the securities exposure within trading assets decreased.

Main Credit Exposure Categories by Industry Sectors

 

Dec 31, 2014

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 € 9.3 billion as of December 31, 2014.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.4 billion as of December 31, 2014.

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

Commercial real estate activities are based on counterparty industry classification, irrespective of business unit attribution. The business units mostly involved are “Commercial Real Estate” (€ 17.2 billion) and “PBC Mortgages” (€ 11.2 billion).

6

Loan exposures for Other include lease financing.

Banks and insurance

24,179

23,701

14,368

18,967

4,291

34,856

19,227

110,112

249,700

Fund management activities

12,145

6,670

612

3,065

149

3,051

349

49

26,089

Manufacturing

25,633

40,483

18,205

2,292

1,604

2,312

204

0

90,732

Wholesale and retail trade

15,781

11,975

5,926

1,156

865

839

94

0

36,636

Households

197,853

11,203

2,192

739

183

2

0

35

212,207

Commercial real estate activities5

35,743

3,864

646

2,054

3,129

606

74

576

46,691

Public sector

16,790

1,696

231

7,416

446

55,181

34,846

615

117,220

Other

82,7006

54,855

19,908

11,389

5,989

10,963

4,339

13,119

203,262

Total

410,825

154,446

62,087

47,078

16,654

107,808

59,132

124,507

982,537

 

Dec 31, 2013

in € m.

Loans1

Irrevocable lending commit­ments2,3

Contingent liabilities

OTC deriva­tives4

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style trans­actions5

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2013.

2

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

3

Comparatives have been restated by € 10.5 billion to include Fronting Commitments erroneously not included in prior disclosure.

4

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

5

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

6

Commercial real estate activities are based on counterparty industry classification, irrespective of business unit attribution. The business units mostly involved are “PBC Mortgages” and “Commercial Real Estate”.

7

Loan exposures for Other include lease financing.

Banks and insurance

25,100

21,234

15,289

22,243

5,389

34,427

14,212

195,273

333,166

Fund management activities

10,029

4,756

1,255

3,326

421

4,771

235

20

24,814

Manufacturing

21,406

33,120

18,767

1,077

1,301

2,999

314

0

78,983

Wholesale and retail trade

13,965

11,850

5,610

904

936

811

128

0

34,205

Households

193,515

10,839

2,645

665

611

1

0

59

208,336

Commercial real estate activities6

34,259

2,808

831

661

2,047

1,140

88

136

41,969

Public sector

16,228

1,931

135

4,299

592

64,286

26,101

681

114,253

Other

67,6687

50,664

21,099

11,541

6,488

17,726

3,166

1,313

179,663

Total

382,171

137,202

65,630

44,716

17,787

126,160

44,242

197,482

1,015,390

The above table gives an overview of our credit exposure by industry; allocated based on the NACE code of the counterparty we are doing business with.

From an industry perspective, our credit exposure is lower compared with last year mainly due to a decrease in banks and insurance of € 83.5 billion, driven by lower Repo and Repo-style transactions, partly offset by increases, especially in the category Other of € 23.6 billion.

Loan exposure increase in category Other is mainly due to ETF related collateral restructuring within CB&S. This is due to replacing our physical securities exposure by entering into fully funded total returns swaps resulting in a corresponding decrease of securities exposure within trading assets.

Loan exposures to the industry sectors banks and insurance, manufacturing and public sector comprise predominantly investment-grade loans. 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 so that 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 € 198 billion as of December 31, 2014 (€ 194 billion as of December 2013) is principally associated with our PBC portfolio. € 153 billion (77 %) of the portfolio comprises mortgages, of which € 119 billion are held in Germany. The remaining exposures (€ 45 billion, 23 %) 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 instalment 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 (i.e., 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 with 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 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 regularly.

Excluding the exposures transferred into the NCOU, the Commercial Real Estate Group only in exceptional cases retains mezzanine or other junior tranches of debt (although we do underwrite mezzanine loans), 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). We provide both fixed rate (generally securitized product) and floating rate loans, with interest rate exposure subject to hedging arrangements. In addition, sub-performing and non-performing loans and pools of loans are acquired from other financial institutions at generally substantial discounts to both the notional amounts and current collateral values. The underwriting process for these is stringent and the exposure is managed under separate portfolio limits. 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 € 83 billion as of December 31, 2014 (€ 68 billion as of December 31, 2013), 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 7 % of our aggregated total credit exposure in these categories as of December 31, 2014 compared with 10 % as of December 31, 2013. Our top ten counterparty exposures were with well-rated counterparties or otherwise related to structured trades which show high levels of risk mitigation.

Main credit exposure categories by geographical region

 

Dec 31, 2014

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 € 9.3 billion as of December 31, 2014.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.4 billion as of December 31, 2014.

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

202,658

26,176

14,356

3,250

1,206

6,679

16,339

13,533

284,198

Western Europe (excluding Germany)

94,386

36,781

18,984

18,190

3,295

21,516

33,683

23,935

250,771

thereof:

 

 

 

 

 

 

 

 

 

France

2,674

6,053

2,434

936

423

3,684

5,346

3,656

25,207

Luxembourg

14,156

3,835

754

1,766

552

2,028

6,240

190

29,522

Netherlands

10,630

5,548

2,548

5,257

436

2,726

7,751

348

35,244

United Kingdom

7,878

9,118

1,911

1,058

586

4,530

5,141

13,607

43,828

Eastern Europe

10,524

1,755

2,136

927

1,542

2,494

561

243

20,183

thereof:

 

 

 

 

 

 

 

 

 

Poland

7,055

651

315

74

0

1,353

64

0

9,511

Russia

2,068

524

693

205

1,081

238

0

39

4,848

North America

55,540

83,400

14,291

14,338

7,531

52,898

5,736

71,306

305,040

thereof:

 

 

 

 

 

 

 

 

 

Canada

880

2,237

932

1,087

240

1,309

278

1,325

8,287

Cayman Islands

2,571

1,982

61

542

322

2,256

124

12,660

20,519

U.S.

45,899

77,960

12,881

12,614

6,725

48,669

5,323

56,630

266,702

Central and South America

5,071

777

1,445

1,350

604

2,936

24

1,151

13,358

thereof:

 

 

 

 

 

 

 

 

 

Brazil

1,787

210

781

241

175

1,558

0

656

5,409

Mexico

363

90

51

447

199

450

19

301

1,919

Asia/Pacific

40,081

4,774

10,062

8,643

2,226

20,677

2,467

13,818

102,747

thereof:

 

 

 

 

 

 

 

 

 

China

9,372

331

950

523

180

1,698

0

1,320

14,373

Japan

866

489

397

3,398

173

2,371

90

4,250

12,032

South Korea

2,069

11

1,095

591

0

842

0

342

4,949

Africa

1,924

627

805

351

124

541

49

520

4,941

Other

640

156

7

29

126

67

273

0

1,297

Total

410,825

154,446

62,087

47,078

16,654

107,808

59,132

124,507

982,537

 

Dec 31, 2013

in € m.

Loans1

Irrevocable lending commit­ments2,3

Contingent liabilities

OTC deriva­tives4

Traded Loans

Traded Bonds

Debt securities available for sale

Repo and repo-style trans­actions5

Total

1

Includes impaired loans amounting to € 10.1 billion as of December 31, 2013.

2

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

3

Comparatives have been restated by € 10.5 billion to include Fronting Commitments erroneously not included in prior disclosure.

4

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

5

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

Germany

200,106

24,099

14,572

2,413

1,451

12,608

10,961

16,444

282,655

Western Europe (excluding Germany)

86,846

37,457

19,991

17,056

5,179

31,296

26,309

58,843

282,978

thereof:

 

 

 

 

 

 

 

 

 

France

2,675

7,815

2,014

1,273

672

6,585

3,691

11,811

36,536

Luxembourg

5,566

2,186

622

1,735

1,362

3,892

3,976

572

19,912

Netherlands

12,163

6,446

3,179

3,099

863

4,111

6,382

429

36,674

United Kingdom

8,719

8,414

1,817

3,834

942

6,421

5,018

31,403

66,567

Eastern Europe

9,773

1,573

2,173

844

2,177

2,532

390

529

19,991

thereof:

 

 

 

 

 

 

 

 

 

Poland

6,862

761

215

59

38

867

259

0

9,061

Russia

1,752

463

753

74

1,822

600

0

357

5,822

North America

42,748

67,833

17,212

14,404

6,111

52,298

4,041

92,099

296,745

thereof:

 

 

 

 

 

 

 

 

 

Canada

572

2,286

1,571

648

499

2,132

165

798

8,672

Cayman Islands

2,294

1,725

486

1,118

313

1,909

154

25,633

33,632

U.S.

35,019

63,067

14,680

12,308

5,113

47,710

3,716

64,532

246,146

Central and South America

4,539

745

1,338

701

364

3,016

129

1,310

12,143

thereof:

 

 

 

 

 

 

 

 

 

Brazil

1,413

249

712

120

162

1,638

17

349

4,660

Mexico

271

122

34

218

163

279

74

321

1,483

Asia/Pacific

36,151

4,782

9,392

9,081

2,341

23,740

2,286

28,043

115,817

thereof:

 

 

 

 

 

 

 

 

 

China

8,894

432

788

623

69

1,183

0

2,123

14,113

Japan

848

408

396

3,920

405

5,112

884

16,065

28,038

South Korea

2,150

7

930

515

22

977

65

337

5,004

Africa

1,879

668

932

191

111

552

0

214

4,546

Other

130

44

19

25

52

118

126

0

515

Total

382,171

137,202

65,630

44,716

17,787

126,160

44,242

197,482

1,015,390

The above table gives an overview of our credit exposure by geographical region, allocated based on the counterparty’s country of domicile, see also section “Credit Exposure to Certain Eurozone Countries” of this report for a detailed discussion of the “country of domicile view”.

Our largest concentration of credit risk within loans from a regional perspective is 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, tradable assets as well as repo and repo-style transactions, our largest concentrations from a regional perspective were in Western Europe (excluding Germany) and North America. From the industry perspective, exposures from OTC derivative, tradable assets as well as repo and repo-style transactions have a significant share in highly rated banks and insurance companies. For tradable assets, a large proportion of exposure also with public sector companies.

As of December 31, 2014 our loan book increased to € 411 billion (versus € 382 billion as of December 31, 2013) mainly in North America and Western Europe (excluding Germany) with other, households and manufacturing experiencing largest increases. The increase in loans for Luxembourg is due to ETF related collateral restructuring within CB&S which involved replacing our physical securities exposure by entering into fully funded total returns swaps. The decrease in repo and repo-style transactions (€ 73 billion) was primarily in positions with banks and insurance companies within Western Europe (excluding Germany) and North America coupled with an increase in irrevocable lending commitments (€ 17 billion) mainly in North America. Credit exposure to Russia has decreased by € 1 billion to € 5 billion as a result of successful de-risking and is focused on corporates in strategic important industry sectors. Credit exposure to Ukraine is relatively small at € 370 million.