DMIT_Annual_Report_2018_EN

N OTES TO THE C ONSOLIDATED F INANCIAL S TATEMENTS (Thousands of US dollars) Dar Al-Maal Al-Islami Trust 42 information). The Group then uses these forecasts to adjust its estimates of PDs. For Corporate portfolio, through the yearly review of the corporate portfolio, the Group observes yearly performances to compute a count based PD over the one-year horizon for the past 5 years. These PDs are grouped as per internal risk ratings (i.e. from 1 to 7). An average default rate of the 5 yearly observed default provides the through the cycle PDs. The retail portfolio is segmented based on products that exhibit distinguished behavior into the following categories: • Auto finance; • Mortgage finance; • Personal Finance and • Credit cards. PDs for each segment are measured using Observed Default Estimation and thus PD is calculated based on DPD bucket level for each segment separately. Under this analysis, the delinquency status of accounts is tracked at an interval of one year with a moving month cycle. A minimum of 5 year DPD data is considered. The PD’s derived are adjusted with forward looking information based on macro-economic variables and calibrated to derive the final PD’s separately for Corporate and Retail portfolio. Credit risk exposure Maximum exposure to credit risk – Financial instruments subject to impairment The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross carrying amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets. 2018 2017 ECL staging Stage 1 Stage 2 Stage 3 12-month ECL USD’000 Lifetime ECL USD’000 Lifetime ECL USD’000 Total USD’000 Total USD’000 Investment grade Low Risk (1-3) 872,363 80,142 - 952,505 991,202 Acceptable risk (4-6) 3,292,994 400,648 - 3,693,641 3,787,508 Watch list (7) 6,232 38,260 - 44,491 46,299 Non performing (8-10) - O/S 89,206 89,206 92,830 Loss allowance (121,733) (10,126) (486,749) (618,608) (643,722) Carrying amount 4,049,856 508,924 642,983 5,248,937 5,462,027 The maximum credit risk exposure from financial assets not subject to impairments “FVPL” amounts to USD 1,258,249.