Deutsche Bank

Annual Report 2017

Allowance for Credit Losses

Development of allowance for credit losses

 

2017

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.

Individually assessed

Collectively assessed1

Subtotal

Individually assessed

Collectively assessed2

Subtotal

Total

1

Thereof ‘Transfer risk reserve’ € 5 million.

2

Thereof ‘Transfer risk reserve’ € 8 million.

Balance, beginning of year

2,071

2,475

4,546

162

183

346

4,892

Provision for credit losses

299

253

552

(23)

(4)

(27)

525

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

(83)

(32)

(115)

0

0

0

(115)

Net charge-offs:

(487)

(532)

(1,019)

0

0

0

(1,019)

Charge-offs

(541)

(605)

(1,146)

0

0

0

(1,146)

Recoveries

54

73

127

0

0

0

127

Other changes

(117)

(41)

(158)

(18)

(16)

(34)

(191)

Balance, end of year

1,766

2,155

3,921

122

163

285

4,207

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

Absolute

(444)

(351)

(795)

(47)

(16)

(62)

(857)

Relative

(60) %

(58) %

(59) %

(196) %

(132) %

(175) %

(62) %

Net charge-offs

 

 

 

 

 

 

 

Absolute

407

338

745

0

0

0

745

Relative

(45) %

(39) %

(42) %

0 %

0 %

0 %

(42) %

Balance, end of year

 

 

 

 

 

 

 

Absolute

(305)

(320)

(625)

(41)

(20)

(60)

(685)

Relative

(15) %

(13) %

(14) %

(25) %

(11) %

(17) %

(14) %

Allowance for credit losses as of December 31, 2017 amounted to € 4.2 billion compared to € 4.9 billion as of December 31, 2016. The reduction was driven by charge-offs, partly compensated by additional provision for credit losses.

As of December 31, 2017, provision for credit losses decreased by € 857 million compared to year-end 2016, driven by a decrease in provision for loan losses of € 795 million, as well as by a reduction in provisions for off-balance sheet positions of € 62 million. The decrease in our individually assessed loan portfolio mainly resulted from CIB, driven by all portfolios including shipping. Despite the year-over-year reduction, shipping continued to be the main driver of provision for credit losses in 2017, in part related to the re-evaluation of the respective impairment method during the year as discussed in Note 1 of this report. A further year-over-year reduction in PCB was driven by a significant release in Postbank. The decrease in provisions for our collectively assessed loan portfolio mainly resulted from the non-recurrence of one-off items related to assets reported under NCOU in the prior year and further reflected the good portfolio quality and ongoing benign economic environment in PCB.

The decrease in net charge-offs of € 745 million compared to 2016 was mainly driven by non-recurrence of net charge offs related to assets reported under NCOU in the prior year as well as in Postbank.

 

2016

 

Allowance for Loan Losses

Allowance for Off-Balance Sheet Positions

 

in € m.

Individually assessed

Collectively assessed1

Subtotal

Individually assessed

Collectively assessed2

Subtotal

Total

1

Thereof ‘Transfer risk reserve’ € 5 million.

2

Thereof ‘Transfer risk reserve’ € 6 million.

Balance, beginning of year

2,252

2,776

5,028

144

168

312

5,340

Provision for credit losses

743

604

1,347

24

12

36

1,383

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

3

(16)

(13)

0

0

0

(13)

Net charge-offs:

(894)

(870)

(1,764)

0

0

0

(1,764)

Charge-offs

(979)

(972)

(1,951)

0

0

0

(1,951)

Recoveries

85

101

187

0

0

0

187

Other changes

(30)

(35)

(65)

(5)

3

(2)

(67)

Balance, end of year

2,071

2,475

4,546

162

183

346

4,892

 

 

 

 

 

 

 

 

Changes compared to prior year

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

Absolute

409

56

465

(34)

(4)

(39)

427

Relative

123 %

10 %

53 %

(59) %

(27) %

(52) %

45 %

Net charge-offs

 

 

 

 

 

 

 

Absolute

(412)

(258)

(670)

0

0

0

(670)

Relative

85 %

42 %

61 %

0 %

0 %

0 %

61 %

Balance, end of year

 

 

 

 

 

 

 

Absolute

(181)

(301)

(482)

18

15

34

(448)

Relative

(8) %

(11) %

(10) %

13 %

9 %

11 %

(8) %

Allowance for credit losses as of December 31, 2016 amounted to € 4.9 billion compared to € 5.3 billion as of December 31, 2015. The reduction was driven by charge-offs, partly compensated by additional provision for credit losses.

As of December 31, 2016, provision for credit losses increased by € 427 million compared to year-end 2015, driven by an increase in provision for loan losses of € 465 million partly offset by a reduction in provisions for off-balance sheet positions of € 39 million. The increase in our individually assessed portfolio mainly resulted from CIB reflecting the continued market weakness of the shipping sector as well as lower commodity prices in the metals and mining and oil and gas sectors. The increase in provisions for our collectively assessed loan portfolio was mainly driven by NCOU partly relating to higher charges for IAS 39 reclassified assets and partly offset by PCB, among other factors reflecting the good quality of the loan book and the benign economic environment. The reduction in provisions for off-balance sheet positions was driven by CIB and reflects releases caused by crystallization into cash of a few guarantee exposures leading to higher provision for loan losses.

The increase in net charge-offs of € 670 million compared to 2015 was mainly driven by NCOU caused by IAS 39 reclassified assets along with disposals.

Our allowance for loan losses for IAS 39 reclassified assets, which were reported in NCOU, amounted to € 69 million as of December 31, 2016, representing 2 % of our total allowance for loan losses, down 82 % from the level at the end of 2015 which amounted to € 389 million (8 % of total allowance for loan losses). This reduction was driven by charge offs of € 355 million along with reduction driven by foreign exchange as most IAS 39 reclassified assets are denominated in non-Euro currencies and partly offset by additional provisions of € 66 million.

Compared to 2015, provision for loan losses for IAS 39 reclassified assets increased by € 110 million mainly related to our European mortgage portfolios. Net charge offs increased by € 242 million mainly driven by the European mortgage portfolio and one large single booking.