Presentation is loading. Please wait.

Presentation is loading. Please wait.

Credit Risk Management Herman Mulder Head of Group Risk Management 12 November 2001.

Similar presentations


Presentation on theme: "Credit Risk Management Herman Mulder Head of Group Risk Management 12 November 2001."— Presentation transcript:

1 Credit Risk Management Herman Mulder Head of Group Risk Management 12 November 2001

2 Credit Risk Management 2 Topic Issues 1How do we manage risk 2Profile of our portfolios

3 Credit Risk Management 3 Effective 15 October 2001 Independent risk management (functional line Group CFO/CRO) Group Risk: 100 staff (at Head Office) C. Norris EVP Consumer Credit M. Seckel EVP Credit Corporate, FI, Retail H. Erbe EVP Portfolio Management Country Risk Policy TBN EVP Operational Risk Policy A.J. van der Linden EVP Market Risk Policy H. Mulder SEVP Group Risk Management T. de Swaan Board Member CFO & CRO Head of Corporate Center Corporate Centre: Group Risk Management organisation chart

4 Credit Risk Management 4 Meeting 3x per week Members: Board Member(s), SEVP Group Risk, SEVP RMW, SEVP relevant BUs Coverage: risk policy, credit risk, market risk Approx. number of applications: 1,250 p.a. WCS Clients: approx. 4,000 relationships/ 12,500 counterpaties Loan Pricing Tool: Economic Profit / RAROC General Comments Group Risk Committee Based on GOOE * (by limits) and UCR** (by counterparty) Delegated authority: to committees / CRO*** Delegated Authority Corporate, Financial Institutions, Public Sector: UCR 1-3 1x p.a.; UCR 4-7: 2x p.a. Country Risk: Whole portfolio bi-monthly Consumer Products Programs: 1x p.a. product / country specific programs Risk Review Discipline Note: * GOOE = Global One Obligor Exposure ** UCR = Uniform Credit Rating *** CRO = Country Risk Officer BU = Business Unit Tested, effective commercial banking, relationship driven, risk management process

5 Credit Risk Management 5 1. Internal rating benchmark tool for commercial credit is a customised version of the "Moody's Risk Analyst 2. Components are (counterparty) financial assessment (60% impact) and (industry & country) business analysis (40% impact) 3. Business Analysis is based on input from (independent) Economic Department: since 12 months the scores of 70% of all industries have been negative leading to a downgrade of up to 1-2 notches on the overall Corporate Score for counterparties in these industries 4. Credit Committees take final decision on internal rating UCR 1 > Aa3 UCR 2 > A3 UCR 3 > Baa3 UCR 4 > Ba3 UCR 5 > B3 UCR 6 > C UCR 7 < C Stable, transparent, credible internal rating methodology (UCR = Uniform Credit Rating)

6 Credit Risk Management 6 Stable portfolio composition (by outstanding) Private Loans Dec-00Mar-01Jun-01Sep-01 WholesaleC&CCPrivateOther Dec % 5% 24% 69% Mar % 5% 24% 69% Jun % 25% 5% 2% WholesaleC&CCPCAMOther Sept % 5% 24% 69% 35% 57% 5% 3% NLUS BrazilOther ( Eur bn - by outstandings)

7 Credit Risk Management 7 North America 29% Europe 49% Latin America 6% Asia Advanced 7% Africa 1% Eastern Europe 1% Asia 6% Middle East 1% Wholesale (WCS): Client base predominantly OECD (by limits; September 2001)

8 Credit Risk Management 8 WCS: 5 Client BUs organised globally by sectors (by limits; September 2001) Financial Institutions 25% Public Sector 7% Automotive, Consumer, Diversified 36% Energy, Chemical, Pharma 19% Telecom, Media, Technology 13% TMT ECP ACD

9 Credit Risk Management 9 WCS Corporate Exposure (Limits): Well diversified (as of September 2001)

10 Credit Risk Management 10 February 2001: Observations underlying risk approval policies

11 Credit Risk Management Dec-2000 Mar-2001 Jun-2001 Sep-2001 TMTECPACDTotal ABN AMRO WCS Portfolio: Effective steps taken since February 2001 (Weighted average UCR by limits)

12 Credit Risk Management 12 Telecom Services 7.7% of AAB Portfolio 7.0% of AAB Portfolio Technology UCR 1, 2, 3 80% UCR >=4 20% UCR 1, 2, 3 85% UCR >=4 15% WCS: Corporate exposure for selected sectors (by limits, September 2001)

13 Credit Risk Management 13 Oil & Gas Airlines 10.3% of AAB Portfolio Utilities 10.0% of AAB Portfolio1.5% of AAB Portfolio (*) Other secured 6% Cash / ECA 31% Unsecured 13% Treasury 10% Aircraft secured 40% UCR >=4 14% UCR 1,2,3 86% UCR >=4 22% UCR 1,2,3 78% (*) Nov. over Sep. portfolio WCS: Corporate exposure for selected sectors (by limits, September 2001)

14 Credit Risk Management 14 C&CC NL Commerical Portfolio by Product - September % 56% Corporate Clients SME C&CC NL Commerical Portfolio by UCR - September % 42.5% 57.0% UCR 1, 2 and 3 UCR >= 4Not rated C&CC NL portfolio - Outstanding

15 Credit Risk Management 15 UCR >= 4 35% UCR 1/2/3 65% LaSalle 58% Standard Federal 26% Michigan 16% Asset Quality 0% 10% 20% 30% 40% 50% 60% 70% 80% Dec-1999 Dec-2000 Mar-2001 Jun-2001 Sep-2001 UCR Percentage UCR 1, 2, and 3UCR >=4 C&CC US portfolio (outstanding by UCR, as per September 2001)

16 Credit Risk Management 16 Car financing 43% Retail 40% Middle Corp 17% Not rated 10% UCR >=4 27% UCR 1/2/3 63% - 1,000 2,000 3,000 4,000 5,000 Dec.00Jun.01Sep.01 Car financingRetailMiddle Corp B R L M l n C&CC Brazilian portfolio (outstanding by UCR, as per September 2001)

17 Credit Risk Management 17 By ProductBy Geography USA 16.5% Brasil 4.4% Netherlands 73.6% Rest of Latin America 0.3% Rest of Europe,Middle East,Africa 0.9% Asia 4.3% Other 1% Loans against shares 1% Overdraft 1% Auto Loans 5% Personal Loans 9% Credit cards 1% Mortgage loans other 3% Mortgage loans USA 14% Mortgage loans NL 65% Consumer Credit Outstanding (Sept 2001)

18 Credit Risk Management 18 C&CC Worldwide - Asset Quality US –Seasoned management teams at LaSalle, Standard Federal and Michigan National. –Increased provisioning in 2Q01; maintaining conservative standards on new lending in light of market conditions. –Halted Leverage business (currently, 2.7% of C&CC USA portfolio) and winding down existing portfolio. Possible asset securitisation as market conditions improve. Brazil –In 2001, major portfolio reviews were done: April 2001 and Aug An update following Sep. 11th. terrorist strikes was also conducted. –Following portfolio reviews outcomes, Brazilian Risk Management actively implemented protection measures. Actions proved to be effective: stable provisions and credit losses are within budget. –98% of the credit limits approved with an automated credit scoring system. Behaviour scoring has been introduced to the retail portfolio, for constant monitoring of clients and early actions. Netherlands –Economic slowdown in NL is leading to increased infection, but not beyond our own scenarios / targets. –Credit structures in the Netherlands are generally well collateralised. –Seasoned risk management organisation is able to manage a downturn scenario effectively. –Dutch mortgage portfolio provides stability.

19 Credit Risk Management 19 Other 38% Turkey 4% Brazil 15% China / HK 17% India 10% Pakistan 0% Argentina 3% South Korea 7% Thailand 4% Indonesia 2% Large part of ABN AMRO's cross border portfolio is short term, trade related and/or otherwise mitigated, to diverse corporate and consumer borrowers After Sep 11th, impact analysis on the portfolio was made, followed by reduction and re-evaluation of limits and exposures in Emerging Markets. The share of exposure on Brazil, Turkey and Argentina (after the recent sale of our consumer business to Banco Galicia) is low and decreasing Group-wide: Cross-border risk (September 2001)

20 Credit Risk Management 20 Summary of provisioning by SBU (Including Netherlands BU; EUR million) SBU1Q012Q013Q01YTD Sept C&CC WCS PCAM313 CC / other Total WCS 27% C&CC 72% PCAM 0% CC / other 1% Annualised Provisioning/ RWA 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% Q1Q2Q3YTD C&CCWCSABN AMRO Net loan loss provisioning 2001

21 Credit Risk Management 21 Net loan loss provisioning: Last 10 years bps / RWA (Net provisioning as % gross loans) 0.57% 0.56% 0.54% 0.24% 0.37% 0.27% 0.42% 0.25% 0.19% 0.29% 0.31% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% Q013Q01

22 Credit Risk Management 22 Source: Bank Scope Net loan loss provisioning to loans: Stable performance relative to peers

23 Credit Risk Management 23 Non-performing loans to loans: Stable performance relative to peers Source: Bank Scope

24 Credit Risk Management 24 Final remarks Reality Check 1 Cannot escape macro-economic & business reality 2 Hence: migration in the portfolio However 3 Well-diversified portfolio by client segments, industry sectors and countries 4 Proven risk management practices with adequate early warning systems and effective response So 5 Will suffer less in downside, will benefit more in upside

25 Credit Risk Management 25


Download ppt "Credit Risk Management Herman Mulder Head of Group Risk Management 12 November 2001."

Similar presentations


Ads by Google