SEC Form 20-F - Deutsche Bank Annual Report 2012

Deutsche Bank
Annual Report 2010 on Form 20-F
Item 11: Quantitative and Qualitative Disclosures about Credit, Market and Other Risk 152
does not include credit risk mitigants (other than master agreement netting) or collateral (other than cash). Taking
these mitigants into account, we believe that the remaining current credit exposure was significantly lower, adequately
structured, enhanced or well-diversified and geared towards investment grade counterparties.
Our Loan Exposure Management Group (LEMG) helps mitigate our corporate credit exposures. The notional
amount of LEMG’s risk reduction activities increased by 4 % from € 52.9 billion as of December 31, 2009, to
€ 54.9 billion as of December 31, 2010.
As of year-end 2010, LEMG held credit derivatives with an underlying notional amount of € 34.6 billion. The
position totaled € 32.7 billion as of December 31, 2009.
The credit derivatives used for our portfolio management activities are accounted for at fair value.
LEMG also mitigated the credit risk of € 20.3 billion of loans and lending-related commitments as of December 31,
2010, by synthetic collateralized loan obligations supported predominantly by financial guarantees and, to a
lesser extent, credit derivatives for which the first loss piece has been sold. This position totaled € 20.2 billion
as of December 31, 2009.
LEMG 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 LEMG loans and commitments reported at
fair value increased during the year to € 54.1 billion as of December 31, 2010, from € 48.9 billion as of December
31, 2009. By reporting loans and commitments at fair value, LEMG has significantly reduced profit and loss
volatility that resulted from the accounting mismatch that existed when all loans and commitments were reported
at historical cost while derivative hedges were reported at fair value.
Consumer Credit Exposure
The table below presents our total consumer credit exposure, consumer loan delinquencies in terms of loans
that are 90 days or more past due, and net credit costs, which are the net provisions charged during the period,
after recoveries. Loans 90 days or more past due and net credit costs are both expressed as a percentage of
total exposure. Regardless of the past due status of the individual loans, in terms of credit quality the mortgage
lending and loans to small business customers within the consumer credit exposure are allocated to our lower
risk bucket while the consumer finance business is allocated to the moderate risk bucket. This credit risk quality
aspect is also reflected by our net credit costs expressed as a percentage of the total exposure supporting
them, which is the main credit risk management instrument for these exposures.
Total exposure
in € m.
Total exposure
excluding Postbank
in € m.
90 days or more past due
as a % of total exposure
excluding Postbank
Net credit costs
as a % of total exposure
excluding Postbank
Dec 31, 2010 Dec 31, 2010 Dec 31, 2009 Dec 31, 2010 Dec 31, 2009 Dec 31, 2010 Dec 31, 2009
Consumer credit exposure
Germany:
Consumer and small business
130,317 60,706 59,804 1.77 % 1.73 % 0.56 % 0.55 %
financing 19,055 12,733 13,556 3.16 % 2.72 % 1.92 % 1.69 %
Mortgage lending
Consumer credit exposure
111,262 47,973 46,248 1.41 % 1.44 % 0.20 % 0.22 %
outside Germany 38,713 33,027 29,864 3.84 % 3.37 % 0.86 % 1.27 %
Total consumer credit exposure 1 169,030 93,733 89,668 2.50 % 2.28 % 0.66 % 0.79 %
1 Includes impaired loans amounting to € 2.7 billion as of December 31, 2010 and € 2.3 billion as of December 31, 2009.