(Bloomberg) -- The warning for Norinchukin from Japan’s financial regulator was clear — its deep reliance on foreign bond holdings was a risky strategy and...
-- The warning for Norinchukin from Japan’s financial regulator was clear — its deep reliance on foreign bond holdings was a risky strategy and needed to change.Dubai Real Estate’s Resilience May Signal End of Boom-Bust Cycle The agricultural bank , known for its investments in CLOs, became cautious after suffering heavy losses during the financial crisis of 2009.
It turned to the apparent safety of US Treasuries and didn’t quickly adjust its portfolio. It got burned once again.When sustained high interest rates in the US undermined its profitability, the bank was forced to dump its securities. It still didn’t fully grasp how bad its predicament was. Within the space of a month, its estimated loss exploded to 1.5 trillion yen , triple the original forecast. On Friday, Chief Executive Officer Kazuto Oku didn’t rule out that the losses could widen further. “Quick action is needed when the market strays from your expected path,” said Hideyasu Ban, an analyst at Bloomberg Intelligence. “It would’ve been better in retrospect if they’d made a decision earlier.” Norinchukin had begun to diversify its securities portfolio after years of urging by the Financial Services Agency, according to Toshinori Yashiki, the FSA’s deputy director-general. “Given the sheer size of the portfolio, it wasn’t so easy to change,” he said. The bank has close engagement with the FSA and manages its finances in accordance with the agency’s supervision and guidance, a spokesperson said in an email. Norinchukin’s structure contributed to the debacle. The unlisted bank is owned by the country’s roughly 3,300 agricultural cooperatives, which provide it with both capital and deposits.They also depend on returns from the bank because of limited lending opportunities in the countryside. Consequentially, Norinchukin’s loans accounts for far less of its assets than Japan’s main commercial banks. The bank has assets of roughly 100 trillion yen, of which half are securities and less than 20% are loans. In contrast, Japan’s largest bank, Mitsubishi UFJ Financial Group Inc. has about 400 trillion yen in total assets. Its securities portfolio accounts for about 20% of that and lending is about 30%. The farming cooperatives long received an additional interest rate known as shoreikin from the bank. When Japan’s growth surged in the 1970s, deposits from individual members grew, leaving Norinchukin with a surplus of money. It broadened its purview from narrowly financing farmers to lending to other industries as well as investing in local capital markets and government bonds. With Japanese government bonds providing low returns and anemic lending, Norinchukin ventured overseas in the 1990s. The bank’s investment unit built out a global network of operations in New York, London, Singapore, Hong Kong, Beijing, Sydney and Amsterdam. After repeated losses on securitized products, Norinchukin piled into US treasuries and other foreign sovereign debt. However, it funded the investments by borrowing dollars, whose costs soon exceeded the amount that it was earning in interest, making the strategy unsustainable. “Substituting sovereign bonds for CLO seems an equally risky strategy,” said Angela Gallo, a senior lecturer in finance at Bayes Business School in London. Norinchukin was not alone in being hit by a surge in dollar funding costs. Other banks and insurers also had losses on their foreign bonds and they dumped them in the past two years after the Fed’s aggressive rate hikes began in 2022.The bank did take some measures to cut its reliance on its securities portfolio, including building up its project finance division. CEO Oku has pledged to expand that business as well as get more revenue from its asset management subsidiary. While they own the bank, the cooperatives’ oversight is generally accommodative. At Norinchukin’s equivalent of an AGM on Friday, Oku was reappointed. The mood at the meeting was calm and all resolutions were passed unanimously, according to participants. No one has lost their job or resigned because of the losses. “The way that I should take responsibility for this is to fulfill my duty to get us firmly through this situation,” said Oku.Canadian investors can consider holding dividend stocks and supplement their CPP and RRSP payouts in retirement. The post Here’s the Average RRSP Balance at Age 65 and 71 in Canada appeared first on The Motley Fool Canada.We recently compiled a list of the Top 20 Largest Economies in the World by 2050 and in this article we will take a look at the country that’s expected to be the largest in 2050. Global Economic Forecast: Emerging Markets Set to Dominate by 2050 According to a report by the Organisation for Economic Co-operation Former president Donald Trump recently suggested that he is considering instituting a policy of tariffs that would lead to the elimination of the federal income tax. Check Out: Trump-Era Tax Cuts Are...Given their healthy growth prospects and attractive valuation, these three growth stocks could create superior wealth in the next 10 years. The post 3 Top Canadian Growth Stocks That Could Make You Rich in 10 Years appeared first on The Motley Fool Canada. Here's why baby boomers in America are in serious financial trouble — do any of these reasons apply to you?10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years from now. The post 10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks appeared first on The Motley Fool Canada.America has a problem: We, as a country, are in a massive money hole. It's one of many issues the nation is currently facing and attempting to figure out a solution forward. While many nations...OTTAWA — Economists are forecasting inflation slowed further in May, which would be welcome progress for the Bank of Canada after it cut its key lending rate for the first time in four years.Virginia woman at risk of losing home after this 1 specific mortgage came back to haunt herWe recently published a list of the Forget Magnificent 7: Analysts are Talking About ‘Big 10’ AI Stocks in 2024. Since Micron Technology Inc ranks 8th in the list, it deserves a deeper look. When the AI revolution started with the launch of ChatGPT, investors started pouring money into a handful of companies that are leading The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even...These three growth stocks might be some of the best-performing stocks of the last year, but according to analysts so much more is to come. The post The Top 3 Long-Term TSX Growth Stocks to Buy Today appeared first on The Motley Fool Canada.Intel has had a rough three months with its share price down 26%. We, however decided to study the...Here are the biggest analyst moves in the area of artificial intelligence for this week. Microsoft remains “the best way to play AI in our coverage,” Truist Securities analysts said in a note released this week. “We believe that many of the key themes that are driving the business under the hood at Microsoft are indicative of the major currents in both our infrastructure and security coverage,” the firm states.Canada offers striking beauty, has a high-quality living and is a haven if you're seeking a balanced life. The country also provides big benefits for those in retirement, including an affordable...Are you looking for the best way to max out your CPP benefits? Here are some tips you may not have heard of and how to earn even more. The post 5 Strategies for Maximizing Your CPP Benefits in 2024 and Beyond appeared first on The Motley Fool Canada.Amid a backdrop of declining home prices and mixed economic signals, the Chinese market presents a complex landscape for investors. In such an environment, dividend stocks can offer a measure of stability and predictable returns, making them an attractive option for those looking to navigate the uncertainties of the Chinese economy.I’m a Frugal Self-Made Millionaire: Here Are 5 Savings Tricks To Make Sure You’re on Track for Retirement No one wants to run out of money in retirement. And wealthier retirees can go broke just like everyone else -- if they spend more than they can afford. Also: I'm a Self-Made Millionaire: Here's...Two dividend stocks are ideal anchors for Canadians intending to contribute to their RRSPs in 2024 and save for retirement. The post Essential RRSP Stocks: 2 Canadian Picks to Secure Your Retirement appeared first on The Motley Fool Canada.The final trading week of the first half of the year will greet investors with a quieter economic and earnings calendar, with the Fed's favored inflation reading serving as the key highlight.
Norinchukin Agricultural Cooperatives Kazuto Oku Agricultural Bank Risky Strategy Securities
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Credit Suisse’s Archegos Debacle Takes Hwang Trial SpotlightNewly promoted to equities Delta One head at Credit Suisse Group AG in February 2021, Josh Lukeman said he only became familiar with Archegos Capital Management that month.
Read more »
A dressing down: the CAF’s dress code debacleThe Hill Times
Read more »
Here’s what to know about the $237M donor debacle at Florida A&MIt could be the largest-ever private gift to a historically Black college or university. $237 million — far beyond Florida A&M University's endowment. The...
Read more »
Probe needed to prevent repeat of B.C. sewage plant debacle, former auditor saysWith the North Shore Wastewater Treatment Plant billions of dollars over budget, attention is turning to a similar project on the horizon.
Read more »
Adidas CEO Rides Samba Craze to Revive Brand After Ye DebacleNo matter how Germany fares during Euro 2024 over the coming three weeks, an era of sorts will end for the host country’s football team and one of its best-known brands: Die Mannschaft will play its last European championship tournament match in Adidas uniforms.
Read more »
Norinchukin’s Second Investing Debacle Followed Clear WarningThe warning for Norinchukin from Japan’s financial regulator was clear — its deep reliance on foreign bond holdings was a risky strategy and needed to change.
Read more »