Movements in the Allowance for Credit Losses

Our allowance for credit losses is comprised of the allowance for loan losses and the allowance for off-balance sheet positions.

Development of allowance for credit losses

 

Six months ended Jun 30, 2014

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.
(unless stated otherwise)

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

191

283

474

13

9

22

496

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

(40)

(4)

(44)

0

0

0

(44)

Net charge-offs:

(640)

(184)

(824)

0

0

0

(824)

Charge-offs

(662)

(230)

(892)

0

0

0

(892)

Recoveries

23

46

69

0

0

0

69

Changes in the group of consolidated companies

0

0

0

0

0

0

0

Exchange rate changes/other

(16)

(6)

(23)

0

1

0

(22)

Balance, end of period

2,392

2,824

5,216

114

124

238

5,454

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

In € m.

(341)

3

(338)

7

(1)

6

(332)

In %

(64)

1

(42)

142

(13)

38

(40)

Net charge-offs

 

 

 

 

 

 

 

In € m.

(319)

(73)

(391)

0

0

0

(391)

In %

99

66

91

0

0

0

91

Our allowance for credit losses was € 5.5 billion as at June 30, 2014, thereof 96 % or € 5.2 billion related to our loan portfolio and 4 % or € 238 million to off-balance sheet positions (predominantly loan commitments and guarantees). The allowance for loan losses is attributable 54 % to collectively assessed and 46 % to individually assessed loan losses. The net decrease in our allowance for loan losses of € 373 million compared with prior year end results from € 824 million of net charge-offs and € 23 million other changes, such as accretion on impaired loans and foreign exchange effects, partly offset by additions of € 474 million provisions. Our allowance for off-balance sheet positions increased net by € 22 million compared with prior year end mainly due to additional provisions.

Provision for credit losses recorded in the first half 2014 decreased by € 332 million or 40 % to € 496 million compared with the first half 2013. Our overall loan loss provisions decreased by € 338 million or 42 % in the first half 2014 compared with the first half 2013. This reduction results from our individually assessed loan portfolio, where provisioning declined by € 341 million reflecting lower provisions in NCOU and the non-recurrence of large single items in our Core business recorded in the first six months 2013. Provisions for our collectively assessed portfolio were almost flat compared to the first half of 2013 as provisioning in PBC remained stable, as the improvements caused by the good environment in Germany largely offset the one-off gain in 2013 from the sale of non-performing loan portfolios. Our overall provisions for off-balance sheet positions increased by € 6 million compared with previous year’s first half driven by CB&S as a result of higher charges for individually assessed positions.

Net charge-offs increased by € 391 million in the first half 2014 compared to the first half 2013 largely driven by the individually assessed loan portfolio at Postbank following an alignment of processes in the first quarter of 2014. These alignments 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.

Our allowance for loan losses for IAS 39 reclassified assets, which are reported in NCOU, amounted to € 471 million as at June 30, 2014, representing 9 % of our total allowance for loan losses, slightly down from the € 479 million (9 % of total allowance for loan losses) at year end 2013. The slight reduction in the first six months of 2014 was a result of charge offs of € 44 million largely offset by additional provisions for loan losses of € 37 million.

Compared to the first half 2013, provision for loan losses for IAS 39 reclassified assets dropped by € 98 million to € 37 million and net charge offs decreased by € 126 million to € 44 million in the first six months of 2014. Both reductions result from the non-recurrence of large items in the present year compared to high levels in the comparison period.

 

Six months ended Jun 30, 2013

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.
(unless stated otherwise)

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

532

280

812

5

11

16

828

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

4

(43)

(39)

0

0

0

(39)

Net charge-offs:

(321)

(111)

(432)

0

0

0

(432)

Charge-offs

(336)

(199)

(535)

0

0

0

(535)

Recoveries

15

88

103

0

0

0

103

Changes in the group of consolidated companies

0

0

0

0

0

0

0

Exchange rate changes/other

(45)

(20)

(65)

0

0

0

(65)

Balance, end of period

2,432

2,575

5,007

123

108

231

5,237

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

In € m.

83

(14)

69

17

9

26

95

In %

18

(5)

9

(144)

444

(260)

13

Net charge-offs

 

 

 

 

 

 

 

In € m.

44

24

68

0

0

0

68

In %

(12)

(18)

(14)

0

0

0

(14)