Deutsche Bank

Annual Report 2017

Impaired Loans

Credit Risk Management regularly assesses whether there is objective evidence that a loan or group of loans is impaired. A loan or group of loans is impaired and impairment losses are incurred if:

  • there is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the asset and up to the balance sheet date (a “loss event”). When making our assessment we consider information on such events that is reasonably available up to the date the financial statements are authorized for issuance in line with the requirements of IAS 10;
  • the loss event had an impact on the estimated future cash flows of the financial asset or the group of financial assets, and
  • a reliable estimate of the loss amount can be made.

Credit Risk Management’s loss assessments are subject to regular review in collaboration with Group Finance. The results of this review are reported to and approved by Group Finance and Risk Senior Management.

For further details with regard to impaired loans please refer to Note 1 “Significant Accounting Policies and Critical Accounting Estimates”.

Impairment Loss and Allowance for Loan Losses

If there is evidence of impairment the impairment loss is generally calculated on the basis of discounted expected cash flows using the original effective interest rate of the loan. If the terms of a loan are renegotiated or otherwise modified because of financial difficulties of the borrower without qualifying for de-recognition of the loan, the impairment loss is measured using the original effective interest rate before modification of terms. We reduce the carrying amount of the impaired loan by the use of an allowance account and recognize the amount of the loss in the consolidated statement of income as a component of the provision for credit losses. We record increases to our allowance for loan losses as an increase of the provision for loan losses in our income statement. Charge-offs reduce our allowance while recoveries, if any, are credited to the allowance account. If we determine that we no longer require allowances which we have previously established, we decrease our allowance and record the amount as a reduction of the provision for loan losses in our income statement. When it is considered that there is no realistic prospect of recovery and all collateral has been realized or transferred to us, the loan and any associated allowance for loan losses is charged off (i.e., the loan and the related allowance for loan losses are removed from the balance sheet).

While we assess the impairment for our corporate credit exposures individually, we assess the impairment of our smaller-balance standardized homogeneous loans collectively.

Our collectively assessed allowance for non-impaired loans reflects allowances to cover for incurred losses that have neither been individually identified nor provided for as part of the impairment assessment of smaller-balance homogeneous loans.

For further details regarding our accounting policies regarding impairment loss and allowance for credit losses, please refer to Note 1 “Significant Accounting Policies and Critical Accounting Estimates”.

Impaired loans, allowance for loan losses and coverage ratios by business division

 

Dec 31, 2017

Dec 31, 20163

2017 increase
(decrease)
from 2016

in € m.

Impaired loans

Loan loss allowance

Impaired loan coverage ratio in %

Impaired loans

Loan loss allowance

Impaired loan coverage ratio in %

Impaired loans

Impaired loan coverage ratio in ppt

N/M – not meaningful.

1

Allowance in Consolidation & Adjustments and Other and Deutsche Asset Management fully consists of collectively assessed allowance for non-impaired loans.

2

From 2017 onwards, Non-Core Operations Unit (NCOU) ceased to exist as a standalone division. The remaining impaired assets and the corresponding loan loss allowance as of December 31, 2016 are now managed by the corresponding core operating segments, predominantly Private & Commercial Bank.

3

2016 Impaired loans and Loan loss allowance numbers have been restated to reflect restructuring of business areas.

Corporate & Investment Bank

2,517

1,565

62

3,007

1,893

63

(490)

(1)

Private & Commercial Bank

3,717

2,355

63

3,646

2,217

61

71

3

Deutsche Asset Management

0

0

N/M

0

1

N/M1

0

N/M

Non-Core Operations Unit2

0

0

N/M

794

462

58

(794)

N/M

thereof: assets reclassified to loans and receivables according to IAS 39

0

0

N/M

92

69

75

(92)

N/M

Consolidation & Adjustments

1

1

N/M1

0

4

N/M1

0

N/M

Total

6,234

3,921

63

7,447

4,546

61

(1,213)

2

Impaired loans, allowance for loan losses and coverage ratios by industry

 

Dec 31, 2017

 

Impaired Loans

Loan loss allowance

 

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed allowance

Collectively assessed allowance for impaired loans

Collectively assessed allowance for non-impaired loans

Total

Impaired loan coverage ratio in %

1

Thereof: ‘Transportation, storage and communication’ – Total Impaired Loans € 808 million/Total Loan loss allowance € 469 million. ‘Real estate; renting and business activities’ – € 482 million/€ 234 million, ‘Construction’ – € 378 million/€ 144 million, ‘Mining and quarrying’ – € 169 million/€ 116 million.

Financial intermediation

121

8

129

1

3

40

44

34

Fund management activities

8

8

16

1

0

3

4

24

Manufacturing

520

165

685

439

146

51

635

93

Wholesale and retail trade

333

188

521

211

156

27

394

76

Households

155

2,233

2,388

153

1,290

83

1,526

64

Commercial real estate activities

345

30

376

115

11

42

168

45

Public sector

74

0

74

6

0

12

17

24

Other1

1,792

254

2,046

840

139

153

1,132

55

Total

3,348

2,886

6,234

1,766

1,745

410

3,921

63

 

Dec 31, 2016

 

Impaired Loans

Loan loss allowance

 

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed allowance

Collectively assessed allowance for impaired loans

Collectively assessed allowance for non-impaired loans

Total

Impaired loan coverage ratio in %

1

Thereof: ‘Transportation, storage and communication’ – Total Impaired Loans € 1.1 billion/Total Loan loss allowance € 650 million, ‘Real estate; renting and business activities’ – € 489 million/€ 230 million, ‘Construction’: € 309 million/€ 170 million, ‘Mining and quarrying’ – € 232 million/€ 103 million.

Financial intermediation

122

11

133

27

3

47

77

58

Fund management activities

14

7

21

1

0

4

5

26

Manufacturing

524

229

754

476

149

82

707

94

Wholesale and retail trade

472

234

707

223

161

29

413

58

Households

193

2,467

2,661

220

1,466

67

1,754

66

Commercial real estate activities

385

37

422

168

25

39

233

55

Public sector

19

0

19

4

0

3

7

35

Other1

2,397

334

2,731

953

168

230

1,351

49

Total

4,126

3,321

7,447

2,071

1,972

503

4,546

61

Impaired loans, allowance for loan losses and coverage ratios by region

 

Dec 31, 2017

 

Impaired Loans

Loan loss allowance

 

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed allowance

Collectively assessed allowance for impaired loans

Collectively assessed allowance for non-impaired loans

Total

Impaired loan coverage ratio in %

N/M – not meaningful

Germany

953

1,312

2,266

600

823

104

1,527

67

Western Europe (excluding Germany)

1,471

1,422

2,892

815

822

113

1,749

60

Eastern Europe

45

123

168

45

92

11

147

88

North America

497

1

498

67

0

102

170

34

Central and South America

70

0

70

14

0

21

35

50

Asia/Pacific

264

28

292

223

8

41

272

93

Africa

48

0

49

1

0

9

10

20

Other

0

0

0

0

0

11

11

N/M

Total

3,348

2,886

6,234

1,766

1,745

410

3,921

63

 

Dec 31, 2016

 

Impaired Loans

Loan loss allowance

 

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed allowance

Collectively assessed allowance for impaired loans

Collectively assessed allowance for non-impaired loans

Total

Impaired loan coverage ratio in %

1

Impaired Loans in Central & South America, Asia Pacific and Other are more than fully covered by loan loss allowance due to the latter including collectively assessed allowance for non-impaired loans.

Germany

1,154

1,486

2,639

563

804

122

1,489

56

Western Europe (excluding Germany)

2,021

1,688

3,709

1,008

1,057

130

2,195

59

Eastern Europe

46

132

179

39

106

10

154

86

North America

495

1

496

148

0

128

277

56

Central and South America1

4

0

5

3

0

14

16

363

Asia/Pacific1

341

14

355

286

5

76

367

103

Africa

63

1

64

24

0

8

32

50

Other1

2

0

2

0

0

17

17

908

Total

4,126

3,321

7,447

2,071

1,972

503

4,546

61

Development of Impaired Loans

 

Dec 31, 2017

Dec 31, 2016

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed

Collectively assessed

Total

1

Includes repayments.

Balance, beginning of year

4,126

3,321

7,447

4,236

3,915

8,151

Classified as impaired during the year

1,370

1,248

2,618

2,177

1,291

3,469

Transferred to not impaired during the year1

(1,127)

(961)

(2,088)

(1,080)

(723)

(1,803)

Charge-offs

(540)

(605)

(1,146)

(979)

(987)

(1,966)

Disposals of impaired loans

(267)

(116)

(383)

(266)

(161)

(427)

Exchange rate and other movements

(215)

(1)

(216)

38

(15)

23

Balance, end of year

3,348

2,886

6,234

4,126

3,321

7,447

Our impaired loans decreased in 2017 by € 1.2 billion or 16 % to € 6.2 billion. The reduction in our individually assessed portfolio mainly reflects charge-offs in CIB along with de-risking of former NCOU assets, while the reduction in our collectively assessed portfolio was driven by charge-offs related to disposals in PCC International.

The impaired loan coverage ratio (defined as total on-balance sheet allowances) for all loans individually impaired or collectively assessed divided by IFRS impaired loans (excluding collateral) increased from 61 % as of year-end 2016 to 63 % as of December 31, 2017.

Provision for loan losses and recoveries by Industry

 

2017

2016

 

Provision for loan losses before recoveries

 

 

 

in € m.

For individually assessed loans

For collectively assessed impaired loans

For collectively assessed non-impaired loans

Total

Recoveries

Provision for loan losses before recoveries (total)

Recoveries

1

In 2017, the largest contributions to risk provisioning in the "Other" category came from the "Transport, Storage and Communications" sector (€ 107 million) and the "Mining and quarrying" sector (€ 72 million). In 2016, the “Transport, Storage and Communications” sector contributed € 422 million and the “Mining and Quarrying” sector € 91 million.

Financial intermediation

25

(2)

(3)

20

4

(3)

4

Fund management activities

0

0

(2)

(1)

0

(2)

0

Manufacturing

48

18

(28)

38

19

209

14

Wholesale and retail trade

46

19

1

66

5

58

4

Households

11

322

20

354

66

531

99

Commercial real estate activities

(20)

4

5

(10)

12

76

36

Public sector

2

0

9

11

0

0

0

Other1

239

23

(62)

201

20

665

31

Total

352

385

(59)

678

127

1,534

187

Our existing commitments to lend additional funds to debtors with impaired loans amounted to € 28 million as of December 31, 2017 and € 117 million as of December 31, 2016.

Collateral held against impaired loans, with fair values capped at transactional outstanding

in € m.

Dec 31, 2017

Dec 31, 2016

1

Defaulted mortgage loans secured by residential real estate properties, where the loan agreement has been terminated/cancelled are generally subject to formal foreclosure proceedings.

Financial and other collateral1

1,757

2,016

Guarantees received

309

343

Total collateral held for impaired loans

2,066

2,359

Our total collateral held for impaired loans as of December 31, 2017 decreased by € 293 million or 12 % compared to previous year, while coverage ratio including collateral (defined as total on-balance sheet allowances for all loans individually impaired or collectively assessed plus collateral held against impaired loans, with fair values capped at transactional outstanding, divided by IFRS impaired loans) increased to 96 % as of December 31, 2017 compared to 93 % as of December 31, 2016.

Financial assets available for sale

The impairment concept is also applicable for available for sale debt instruments, which are otherwise carried at fair value with changes in fair value reported in other comprehensive income. If an available for sale debt instrument is considered impaired, the cumulative impairment loss reflects the difference between the amortized cost and the current fair value of the instrument. For a detailed discussion of our accounting procedures please refer to Note 1 “Significant Accounting policies and Critical Accounting Estimates”.

Non-impaired past due and impaired financial assets available for sale, accumulated impairments, coverage ratio and collateral held against impaired financial assets available for sale

in € m.

Dec 31, 2017

Dec 31, 2016

Financial assets non-impaired past due available for sale

1,538

1,661

thereof:

 

 

Less than 30 days past due

176

178

30 or more but less than 60 days past due

23

24

60 or more but less than 90 days past due

138

23

90 days or more past due

1,201

1,436

Impaired financial assets available for sale

157

229

Accumulated impairment for financial assets available for sale

113

131

Impaired financial assets available for sale coverage ratio in %

71

57

Collateral held against impaired financial assets available for sale

17

20

thereof:

 

 

Financial and other collateral

17

20

Guarantees received

0

0