Deutsche Bank

Annual Report 2016

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 section "Measuring Credit Risk" for more details about our internal ratings.

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

in € m.
(unless stated otherwise)

Dec 31, 2016

Ratingband

Probability of default in %1

Loans

Irrevocable lending commit­ments2

Contingent liabilities

OTC derivatives3

Debt securities4

Total

1

Reflects the probability of default for a one year time horizon.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 10.3 billion as of December 31, 2016.

3

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

4

Includes debt securities on financial assets available for sale and securities held to maturity.

iAAA–iAA

> 0.00 ≤ 0.04

43,149

21,479

5,699

16,408

46,014

132,749

iA

> 0.04 ≤ 0.11

39,734

45,635

13,712

12,566

6,616

118,264

iBBB

> 0.11 ≤ 0.5

57,287

47,480

16,753

8,300

1,696

131,515

iBB

> 0.5 ≤ 2.27

46,496

29,274

9,663

5,333

366

91,132

iB

> 2.27 ≤ 10.22

22,920

18,173

4,477

1,053

9

46,631

iCCC and below

> 10.22 ≤ 100

15,069

4,022

2,038

533

21

21,683

Total

 

224,655

166,063

52,341

44,193

54,722

541,974

in € m.
(unless stated otherwise)

Dec 31, 2015

Ratingband

Probability of default in %1

Loans

Irrevocable lending commit­ments2

Contingent liabilities

OTC derivatives3

Debt securities available for sale

Total

1

Reflects the probability of default for a one year time horizon.

2

Includes irrevocable lending commitments related to consumer credit exposure of € 9.2 billion as of December 31, 2015.

3

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

iAAA–iAA

> 0.00 ≤ 0.04

50,712

23,035

6,384

22,753

59,157

162,042

iA

> 0.04 ≤ 0.11

49,197

46,220

15,464

10,998

4,515

126,394

iBBB

> 0.11 ≤ 0.5

62,044

44,603

18,283

7,871

1,911

134,711

iBB

> 0.5 ≤ 2.27

51,454

37,643

10,827

5,358

2,621

107,904

iB

> 2.27 ≤ 10.22

20,610

21,212

4,668

1,558

57

48,105

iCCC und schlechter

> 10.22 ≤ 100

9,853

1,834

1,700

515

4

13,906

Total

 

243,871

174,548

57,325

49,053

68,266

593,063

The above table shows an overall decrease in our corporate credit exposure in 2016 of € 51.1 billion or 8.6 %. Loans decreased by € 19.2 billion, mainly attributable to Germany and Asia/Pacific. The decrease is mainly due to managed reductions in Corporate & Investment Banking and our Non-Core Operations Unit with the aim to reduce risk weighted assets. Debt securities decreased by € 13.5 billion, almost entirely related to the top rating band, mainly driven by sale activity in Strategic Liquidity Reserve bond positions with the intention of reducing risk weighted assets. The decrease in irrevocable lending commitments of € 8.5 billion was primarily attributable to Western Europe (excluding Germany), North America and Asia/Pacific partly offset by an increase in Germany. 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, 2015.

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, 20161

Rating band

Probability of default in %2

Loans

Irrevocable lending commit­ments

Contingent liabilities

OTC derivatives

Debt securities

Total

1

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

2

Reflects the probability of default for a one year time horizon.

iAAA–iAA

> 0.00 ≤ 0.04

32,305

19,653

4,351

10,480

46,014

112,802

iA

> 0.04 ≤ 0.11

24,970

41,435

11,393

10,032

6,616

94,448

iBBB

> 0.11 ≤ 0.5

28,369

43,659

13,845

7,439

1,672

94,984

iBB

> 0.5 ≤ 2.27

19,573

27,206

5,932

4,034

361

57,105

iB

> 2.27 ≤ 10.22

8,090

16,745

2,176

1,020

9

28,041

iCCC and below

> 10.22 ≤ 100

5,954

2,872

889

509

21

10,246

Total

 

119,261

151,571

38,586

33,514

54,694

397,626

in € m.
(unless stated otherwise)

Dec 31, 20151

Rating band

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

Reflects the probability of default for a one year time horizon.

iAAA–iAA

> 0.00 ≤ 0.04

37,450

20,567

4,963

14,844

59,157

136,982

iA

> 0.04 ≤ 0.11

31,446

42,466

13,256

7,983

4,515

99,666

iBBB

> 0.11 ≤ 0.5

31,706

41,190

15,230

6,848

1,911

96,885

iBB

> 0.5 ≤ 2.27

23,865

35,173

6,811

4,139

2,621

72,609

iB

> 2.27 ≤ 10.22

8,698

20,309

2,411

1,516

57

32,990

iCCC and below

> 10.22 ≤ 100

4,532

1,670

759

514

4

7,479

Total

 

137,696

161,375

43,429

35,844

68,266

446,610

The corporate credit exposure net of collateral amounted to € 397.6 billion as of December 31, 2016 resulting in a risk mitigation of 27 % or € 144.3 billion compared to the corporate gross exposure. This includes a more significant reduction of 47 % for our loans exposure which includes a reduction by 60 % for the lower-rated sub-investment-grade rated loans and 39 % for the higher-rated investment-grade rated loans. The risk mitigation for the total exposure in the weakest rating band was 53 %, which was significantly higher than 15 % in the strongest rating band.

The risk mitigation of € 144.3 billion is split into 29 % guarantees and hedges and 71 % 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 decreased from € 45.0 billion as of December 31, 2015, to € 43.3 billion as of December 31, 2016

As of year-end 2016, CPSG mitigated the credit risk of € 42.2 billion of loans and lending-related commitments as of December 31, 2016, through synthetic collateralized loan obligations supported predominantly by financial guarantees. This position totaled € 41.4 billion as of December 31, 2015.

CPSG also held credit derivatives with an underlying notional amount of € 1.1 billion. The position totaled € 3.6 billion as of December 31, 2015. The credit derivatives used for our portfolio management activities are accounted for at fair value.

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 € 3.9 billion as of December 31, 2016, from € 8.2 billion as of December 31, 2015.

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.1

90 days or more past due as a % of total exposure1

Net credit costs as a % of total exposure2

 

Dec 31, 2016

Dec 31, 20153

Dec 31, 2016

Dec 31, 20153

Dec 31, 2016

Dec 31, 20153

1

Includes impaired loans amounting to € 3.1 billion as of December 31, 2016 and € 3.6 billion as of December 31, 2015.

2

Net credit costs for the twelve months period ended at the respective balance sheet date divided by the exposure at that balance sheet date.

3

Retrospective as of December 31, 2015, about € 454 million Postbank mortgage loans are no longer assigned to Germany but rather Mortgage lending outside Germany. These mortgage loans were in the context of a securitization, which was cancelled in 2016, previously reported as mortgage loans Germany.

Consumer credit exposure Germany:

150,639

149,748

0.75

0.87

0.13

0.16

Consumer and small business financing

20,316

20,326

2.45

2.77

0.99

0.89

Mortgage lending

130,324

129,422

0.48

0.57

0.00

0.05

Consumer credit exposure outside Germany

38,162

39,158

4.22

4.89

0.68

0.54

Consumer and small business financing

13,663

13,259

8.44

9.55

0.98

1.18

Mortgage lending

24,499

25,898

1.87

2.50

0.51

0.21

Total consumer credit exposure

188,801

188,906

1.45

1.70

0.24

0.24

The volume of our consumer credit exposure decreased from year-end 2015 to December 31, 2016 by € 105 million, or 0.1 %, driven by reductions in our loan books in Italy (€ -1.0 billion), in Spain (€ -147 million) and in Poland (€ -105 million), which were partly compensated by increases in Germany (€ +890 million) and in India (€ +319 million). The volume changes in Italy, Germany, Spain and Poland were influenced by selective non-performing loan portfolio sales. Additionally the reduction in Poland was affected by FX effects.

The 90 days or more past due ratio of our consumer credit exposure decreased from 1.70 % as of year-end 2015 to 1.45 % as of December 31, 2016. The total net credit costs as a percentage of our consumer credit exposure stayed unchanged at 0.24 %. This ratio was positively affected by the further improved and stabilized environment in countries in which we operate and by aforementioned non-performing loan portfolio sale in Italy and negatively affected by non-performing loan portfolio sales in Spain (mainly NCOU unit).

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

 

Dec 31, 2016

Dec 31, 2015

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 %

68 %

> 50 ≤ 70 %

16 %

16 %

> 70 ≤ 90 %

9 %

9 %

> 90 ≤ 100 %

3 %

3 %

> 100 ≤ 110 %

2 %

2 %

> 110 ≤ 130 %

1 %

1 %

> 130 %

1 %

2 %

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, 2016, 68 % of our exposure related to the mortgage lending portfolio had a LTV ratio below or equal to 50 %, unchanged to the previous year.