Japan’s Norinchukin Posts $3.1 Bln Q2 Loss after Selling Sovereign Bond Holdings

Reuters

16:56 JST, November 19, 2024

TOKYO (Reuters) – Japan’s Norinchukin Bank posted on Tuesday a net loss of $3.1 billion in the second quarter after realizing losses on its large holdings of foreign government bonds, which dropped in value as interest rates stayed higher than expected.

Norinchukin said it does not plan to raise additional capital beyond the 1.3 trillion yen fundraise announced in August to shore up its finances.

Norinchukin’s results contrast with Japan’s mega banks, which posted record profit in their second-quarter earnings last week, driven by higher interest rates and increased corporate activity. This highlights concerns about Norinchukin’s failure to adequately hedge interest rate risk.

Norinchukin, Japan’s main financial institution for farm, forestry and fishery cooperatives, primarily generates profit from securities investments rather than from lending.

The company is closely monitored as one of Japan’s largest institutional investors, managing 47 trillion yen in assets, as of end of September.

It has sought higher yields abroad amid Japan’s rock-bottom interest rates, but these bets unraveled as interest rates in the U.S. and Europe rose since 2022, slashing the value of bonds purchased during the low-rate period.

Norinchukin still had 1.5 trillion yen of unrealised losses on its bond holdings at the end of September, down from 2.2 trillion yen at end-March.

The bank previously said it would shift its portfolio towards other asset classes from sovereign bonds, but Chief Executive Officer Kazuto Oku told a briefing that the focus since March has been on selling assets and securing its balance sheet.

The company reported a net profit of 80 billion yen last year.

$1 = 154.4400 yen