Norinchukin Bank is expected to fall into the red in fiscal 2008 through March 31 with a record parent-only pretax loss of around ¥620 billion due to valuation losses on its portfolio of securitized instruments amid the global financial crisis, sources said Thursday.
It will be the first red ink for the de facto central bank for Japanese agricultural cooperatives since fiscal 1995, when "jusen" housing loan firms heavily indebted to the bank went under, the sources said.
Norinchukin had previously estimated a pretax profit of ¥100 billion for fiscal 2008, but it is expected to announce revised forecasts next week, the sources said.
As of Dec. 31, Norinchukin's holdings of securitized products were worth an estimated ¥6 trillion. Anticipating sizable losses from such high-risk assets, it raised about ¥1.9 trillion mainly from its affiliated prefectural financial institutions, called "shinren," to help recapitalize itself by March 31.
This is believed to have pushed up the bank's capital adequacy ratio to about 14 percent at the end of March, well over the 8 percent minimum required of financial institutions that run overseas operations.
Norinchukin manages the surplus assets of agricultural cooperatives and shinren across Japan to distribute to them a total return of ¥300 billion or so each year. Since the bank will prioritize securing payouts to these institutions, its profit will likely stay at a low level for the next two or three years, the sources said.