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 non-residential 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 sections “Credit Risk Ratings” and “Rating Governance” 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, 2014

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 € 5.6 billion as of December 31, 2014.

3

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

4

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

iAAA–iAA

0.00–0.04

46,493

22,938

6,281

23,068

50,808

149,589

iA

0.04–0.11

44,799

39,336

17,696

9,469

3,371

114,670

iBBB

0.11-0.5

54,167

40,145

20,190

7,810

1,746

124,057

iBB

0.5–2.27

50,183

31,492

11,640

3,926

3,140

100,380

iB

2.27–10.22

19,359

18,924

4,929

2,253

17

45,482

iCCC and below

10.22–100

9,417

1,612

1,352

552

50

12,983

Total

 

224,418

154,446

62,087

47,078

59,132

547,161

in € m.
(unless stated otherwise)

Dec 31, 2013

Ratingband

Probability of default in %1

Loans2

Irrevocable lending commitments3,4

Contingent liabilities

OTC derivatives5

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

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

5

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

iAAA–iAA

0.00–0.04

33,213

19,794

8,318

19,222

35,699

116,246

iA

0.04–0.11

43,193

32,452

19,285

11,934

5,332

112,197

iBBB

0.11-0.5

50,441

39,216

20,234

6,700

1,764

118,354

iBB

0.5–2.27

43,529

28,523

11,604

4,775

920

89,351

iB

2.27–10.22

16,173

15,857

4,382

1,711

443

38,566

iCCC and below

10.22–100

11,076

1,360

1,807

374

85

14,702

Total

 

197,625

137,202

65,630

44,716

44,242

489,416

The above table shows an overall increase in our corporate credit exposure in 2014 of € 57.7 billion or 11.8 %. The increase in loans of € 26.8 billion was mainly attributable to North America and Asia driven by the bank’s growth strategy in this region. This includes a significant increase of € 13.3 billion in the strongest rating band, which is mainly driven by collateral restructuring related to ETF business within CB&S. Debt securities available for sale increased by € 14.9 billion mainly driven by a € 12 billion increase in highly liquid securities held in the Group’s Strategic Liquidity Reserve. These increases are the result of the ongoing optimization of our liquidity reserves. The increase in debt securities available for sale is almost entirely related to the top rating band. The quality of the corporate credit exposure before risk mitigation has remained stable at 71 % share of investment-grade rated exposures compared to December 31, 2013.

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 counterparties – net

in € m.
(unless stated otherwise)

Dec 31, 20141

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

33,582

19,407

4,282

15,843

50,808

123,922

iA

0.04–0.11

29,585

36,137

15,268

3,957

3,370

88,318

iBBB

0.11-0.5

28,354

35,807

16,377

6,487

1,746

88,771

iBB

0.5–2.27

24,635

29,634

7,274

2,746

3,140

67,428

iB

2.27–10.22

8,582

17,514

2,865

2,164

17

31,143

iCCC and below

10.22–100

4,308

1,451

556

552

50

6,917

Total

 

129,046

139,950

46,622

31,748

59,131

406,498

in € m.
(unless stated otherwise)

Dec 31, 20131

Ratingband

Probability of default in %2

Loans

Irrevocable lending commitments3

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.

3

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

iAAA–iAA

0.00–0.04

21,474

16,606

5,589

15,901

35,669

95,238

iA

0.04–0.11

28,001

27,946

15,893

8,183

5,332

85,355

iBBB

0.11-0.5

24,302

33,157

15,410

5,878

1,744

80,491

iBB

0.5–2.27

20,835

24,330

6,814

3,694

912

56,584

iB

2.27–10.22

6,257

14,313

2,535

1,536

443

25,084

iCCC and below

10.22–100

4,947

1,160

781

362

25

7,274

Total

 

105,815

117,511

47,022

35,554

44,125

350,027

The corporate credit exposure net of collateral amounted to € 406.5 billion as of December 31, 2014 resulting in a risk mitigation of 26 % or € 140.7 billion compared to the corporate gross exposure. This includes a more significant reduction of 42 % for our loans exposure which includes a reduction by 54 % for the lower rated sub-investment-grade rated loans and 37 % for the higher rated investment-grade loans. The risk mitigation in the weakest rating band was 47 %, which was significantly higher than 17 % in the strongest rating band.

The risk mitigation of € 140.7 billion is split into 31 % guarantees and hedges and 69 % other collateral.

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 increased by 13 % from € 33.8 billion as of December 31, 2013, to € 38.2 billion as of December 31, 2014, due to an increase in the notional of loans requiring hedging and an increase in hedges used to manage market risk.

As of year-end 2014, CPSG held credit derivatives with an underlying notional amount of € 6.8 billion. The position totaled € 10.4 billion as of December 31, 2013. The credit derivatives used for our portfolio management activities are accounted for at fair value.

CPSG also mitigated the credit risk of € 31.4 billion of loans and lending-related commitments as of December 31, 2014, 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 € 23.4 billion as of December 31, 2013.

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 € 14.1 billion as of December 31, 2014, from € 25.5 billion as of December 31, 2013. 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 exposure1

Net credit costs
as a % of total exposure

 

Dec 31, 2014

Dec 31, 2013

Dec 31, 2014

Dec 31, 2013

Dec 31, 2014

Dec 31, 2013

1

Retrospective as per December 31, 2013, the 90 days or more past due volume of Postbank Consumer Credit Exposure Germany was restated by € 626 million (or 0.43 % of total Consumer Credit Exposure in Germany) erroneously not included in prior disclosure.

2

Includes impaired loans amounting to € 4.4 billion as of December 31, 2014 and € 4.2 billion as of December 31, 2013.

Consumer credit exposure Germany:

147,647

145,929

1.15

1.23

0.22

0.23

Consumer and small business financing

19,980

20,778

3.93

3.81

1.09

1.04

Mortgage lending

127,667

125,151

0.71

0.81

0.08

0.10

Consumer credit exposure outside Germany

38,761

38,616

5.35

5.38

0.69

0.76

Consumer and small business financing

11,913

12,307

11.19

11.34

1.64

1.75

Mortgage lending

26,848

26,309

2.76

2.60

0.26

0.29

Total consumer credit exposure2

186,408

184,545

2.02

2.10

0.32

0.34

The volume of our consumer credit exposure increased from year-end 2013 to year-end 2014 by € 1.9 billion, or 1.0 %, mainly driven by mortgage lending in Germany which increased by € 2.5 billion; partly offset by decrease of the consumer and small business financing exposure, driven by a sale of acquired receivables at Postbank. Outside Germany, the consumer credit exposure in India increased by € 298 million and in Poland by € 209 million. The credit exposure in Portugal decreased by € 186 million.

The 90 days or more past due ratio of our consumer credit exposure decreased from 2.10 % as per year-end 2013 to 2.02 % as per year-end 2014. The 90 days or more past due ratio in the consumer and small business financing in Germany increased, driven by the aforementioned total volume decrease in the Postbank portfolio, more than compensated for by improved German mortgage lending. The 90 days or more past due ratio in consumer and small business financing outside Germany benefited from a sale of non-performing loans in the third quarter in Italy, while the ratio for Mortgage lending outside Germany increased driven by overdue exposures in Postbank Italy.

The total net credit costs as a percentage of our consumer credit exposure decreased from 0.34 % as per year-end 2013 to 0.32 % as per year-end 2014. The slight increase of net credit costs as a percentage of Consumer and small business financing in Germany compared to last year is driven by a higher positive effect from non-performing loan sales in 2013, which was more than compensated for by the favourable environment for our German mortgages business. The decrease of this ratio outside Germany compared to last year is positively impacted from the aforementioned non-performing loan sale in Italy in the third quarter 2014.

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

 

Dec 31, 2014

Dec 31, 2013

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 %

68 %

69 %

> 50 ≤ 70 %

16 %

16 %

> 70 ≤ 90 %

9 %

9 %

> 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, 2014, 68 % of our exposure related to the mortgage lending portfolio had a LTV ratio below or equal to 50 %.