Norinchukin Bank’s losses expected to grow to US$ 9.5bln
The expanded loss for the private cooperative bank, which collects deposits from agricultural, forestry and fisheries cooperatives nationwide, stems from its plans to shed overseas government bonds.
TOKYO, June 29, 2024 - Norinchukin Bank is expected to report US$ 9.5 billion [1.5 trillion yen] in net losses for the current fiscal year, about triple the projection given less than a month ago, sources said.
The expanded loss for the private cooperative bank, which collects deposits from agricultural, forestry and fisheries cooperatives nationwide, stems from its plans to shed overseas government bonds.
It will sell around 10 trillion yen worth of U.S. and European government bonds, whose prices have declined due to spikes in interest rates in their markets, and book the losses during fiscal 2024, which ends in March next year, the sources said.
The bank, which has one of the largest amounts of deposits after the nation’s megabanks, expects to return to the black in fiscal 2025, they added.
At a news conference on May 22 to announce earnings results for fiscal 2023, President Kazuto Oku said the bank expected to book more than 500 billion yen in net losses for fiscal 2024.
But the bank has decided to fundamentally review its investment portfolio after concluding that U.S. interest rates could continue to rise, the sources said.
Norinchukin Bank, one of Japan’s largest institutional investors, has about 56 trillion yen in assets under management, 56 percent of which are bonds.
The bank has secured profits through investments in securities, primarily bonds, because demand for loans remains weak among agricultural, forestry and fisheries organisations.
However, the prices of bonds it purchased when interest rates were low have fallen.
The latent losses on its bond holdings amounted to about 2.19 trillion yen as of March.
Investors do not incur losses if they hold bonds, which are fixed-income assets, until they mature, but profitability could suffer.
Norinchukin Bank decided to jettison its bond holdings and reinvest in higher-yielding U.S. government bonds and other securities, the sources said.
Oku said on May 22 that the bank plans to bolster its capital base by about 1.2 trillion yen and raise 500 billion yen of the total from prefectural agricultural cooperative organizations.
Even if net losses for the current fiscal year expand to 1.5 trillion yen, they will not affect the bank’s financial health because the appraisal losses on the bonds that would be sold have already been booked, the sources said.
https://thecooperator.news/japanese-government-constructs-maternity-ward-in-kwania-district/
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