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Deutsche Bank Annual Report 2015 - 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” .

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, 2015

Dec 31, 2014

2015 increase (decrease)
from 2014

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

Corporate Banking & Securities

852

537

63

637

318

50

215

13

Private & Business Clients

3,800

2,365

62

4,269

2,486

58

(469)

4

Global Transaction Banking

1,306

921

71

1,574

995

63

(268)

7

Deutsche Asset & Wealth Management

76

34

45

66

33

50

10

(5)

Non-Core Operations Unit

2,117

1,168

55

2,803

1,380

49

(686)

6

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

667

389

58

986

518

53

(319)

6

Total

8,151

5,028

62

9,348

5,212

56

(1,197)

6

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

Dec 31, 2015

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 %

Financial intermediation

150

5

155

38

5

55

98

63

Fund management activities

6

2

8

1

0

7

8

95

Manufacturing

498

215

712

470

149

70

688

97

Wholesale and retail trade

275

222

497

182

154

45

381

77

Households

332

2,931

3,263

324

1,805

74

2,202

67

Commercial real estate activities

1,365

281

1,646

503

36

36

576

35

Public sector

16

0

16

2

0

2

5

29

Other1

1,594

260

1,854

733

186

153

1,071

58

Total

4,236

3,915

8,151

2,252

2,335

442

5,028

62

Dec 31, 20141

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 %

Financial intermediation

263

7

270

91

2

19

111

41

Fund management activities

64

0

64

1

0

5

6

9

Manufacturing

525

232

757

428

126

71

625

83

Wholesale and retail trade

362

229

591

211

148

36

395

67

Households

451

3,299

3,750

370

1,947

85

2,402

64

Commercial real estate activities

1,734

314

2,048

475

39

21

535

26

Public sector

54

0

54

29

0

0

30

55

Other2

1,539

277

1,815

758

193

157

1,108

61

Total

4,990

4,359

9,348

2,364

2,455

393

5,212

56

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

Dec 31, 2015

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 %

Germany

1,362

1,642

3,004

647

930

105

1,682

56

Western Europe (excluding Germany)

2,280

2,057

4,337

1,294

1,237

132

2,662

61

Eastern Europe

76

179

255

38

165

10

213

83

North America

340

2

342

150

0

107

257

75

Central and South America

0

6

6

0

0

12

12

187

Asia/Pacific

155

23

178

100

2

60

162

91

Africa

21

5

26

23

0

5

28

107

Other

2

0

2

0

0

10

10

553

Total

4,236

3,915

8,151

2,252

2,335

442

5,028

62

Dec 31, 2014

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 %

Germany

1,604

1,896

3,499

740

1,017

116

1,873

54

Western Europe (excluding Germany)

2,683

2,303

4,986

1,302

1,311

128

2,741

55

Eastern Europe

107

152

259

51

125

10

186

72

North America

423

2

425

204

0

70

274

64

Central and South America

2

0

3

3

0

6

9

356

Asia/Pacific

170

5

174

63

1

50

114

65

Africa

0

1

1

0

0

3

4

346

Other

1

0

1

0

0

11

11

0

Total

4,990

4,359

9,348

2,364

2,455

393

5,212

56

Development of Impaired Loans

Dec 31, 2015

Dec 31, 2014

in € m.

Individually assessed

Collectively assessed

Total

Individually assessed

Collectively assessed

Total

Balance, beginning of year

4,990

4,359

9,348

5,922

4,221

10,143

Classified as impaired during the year

898

1,176

2,073

2,112

2,181

4,293

Transferred to not impaired during the year1

(1,010)

(859)

(1,869)

(1,425)

(1,182)

(2,607)

Charge-offs

(537)

(717)

(1,254)

(1,037)

(613)

(1,651)

Disposals of impaired loans

(239)

(53)

(292)

(514)

(254)

(768)

Exchange rate and other movements

135

10

145

(68)

6

(62)

Balance, end of year

4,236

3,915

8,151

4,990

4,359

9,348

In 2015 our impaired loans decreased by€ 1.2 billionor 12.8 % to€ 8.2 billion . The reduction in our individually assessed impaired loans portfolio is mainly driven by NCOU among others resulting from charge-offs and disposals of primarily IAS 39 reclassified assets, partly offset by an increase in CB&S mainly caused by our Shipping and Leveraged Finance Portfolios. The reduction in our collectively assessed impaired loans portfolio mainly reflects charge-offs (also largely related to disposals) in Postbank and PBC Italy.

The impaired loans coverage ratio (defined as total on-balance sheet allowances for all loans individually impaired or collectively assessed divided by IFRS impaired loans (excluding collateral) slightly increased from 56 % as of year-end 2014 to 62 %.

Our impaired loans included€ 667 millionof loans reclassified to loans and receivables in accordance with IAS 39, down€ 319 millionfrom prior year’s level.

Provision for loan losses and recoveries by Industry

2015

20141

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

Financial intermediation

(12)

1

6

(5)

1

0

2

Fund management activities

0

0

2

2

0

1

0

Manufacturing

32

35

(6)

61

16

56

11

Wholesale and retail trade

40

32

6

78

4

67

9

Households

36

472

6

513

101

690

101

Commercial real estate activities

12

12

9

33

18

182

5

Public sector

(18)

0

0

(17)

0

8

0

Other2

299

56

22

378

21

265

13

Total

390

607

45

1,043

161

1,270

141

Our existing commitments to lend additional funds to debtors with impaired loans amounted to€ 54 millionas of December 31, 2015 and€ 76 millionas of December 31, 2014.

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

in € m.

Dec 31, 2015

Dec 31, 2014

Financial and other collateral

2,722

3,215

Guarantees received

223

296

Total collateral held for impaired loans

2,945

3,511

Our total collateral held for impaired loans as of December 31, 2015 decreased by€ 566 millionor 16 % 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 98 % as of December 31, 2015 compared to 93 % as of December 31, 2014.

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, 20151

Dec 31, 2014

Financial assets non-impaired past due available for sale

1,610

N/M

thereof:

Less than 30 days past due

47

N/M

30 or more but less than 60 days past due

0

N/M

60 or more but less than 90 days past due

0

N/M

90 days or more past due

1,563

N/M

Impaired financial assets available for sale

229

200

Accumulated impairment for financial assets available for sale

109

68

Impaired financial assets available for sale coverage ratio in %

47

34

Collateral held against impaired financial assets available for sale

19

N/M

thereof:

Financial and other collateral

19

N/M

Guarantees received

0

N/M


Category: Bank loan

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