Norinchukin CEO to Resign as Bank Forecasts Bigger Annual Loss

(Bloomberg) — Norinchukin Bank said Chief Executive Officer Kazuto Oku will step down at the end of March, as the Japanese lender forecast deeper losses stemming from soured foreign bond investments.

Oku, 65, will be replaced by Chief Financial Officer Taro Kitabayashi, who was nominated to take over the reins effective April 1, the bank said in a statement on Thursday, confirming reports from earlier this week.

Norinchukin said it may post a loss of as much as ¥1.9 trillion ($12.7 billion) in the year ending March, more than the ¥1.5 trillion it had previously projected. It expects to return to profit next fiscal year with net income somewhere between ¥30 billion and ¥70 billion. 

The promotion of Kitabayashi, 54, comes after Norinchukin became one of the most prominent victims of a surge in US interest rates, which drove down the value of its foreign bond holdings and pushed its dollar-funding costs higher than the returns from those securities. Kitabayashi will face calls to diversify the bank’s $300 billion investment portfolio and bring in more outside talent.

“Norinchukin Bank’s new management faces challenges in returning the bank to stable profitability as it restructures its securities investment portfolio by divesting unprofitable foreign bonds,” said Tomoya Suzuki, a senior credit officer at Moody’s Ratings.

The Tokyo-based bank reported losses of ¥1.4 trillion in the first nine months of its fiscal year ending in March. The bank also reported ¥1.57 trillion in paper losses on its bond holdings.

–With assistance from Hideki Suzuki.

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