After betting on U.S. Treasuries and suffering huge losses, Japan's Norinchukin Bank is once again caught in a risk whirlpool! Joint ventures may be impacted by U.S. corporate bankruptcies
The Central Agricultural and Forestry Treasury is facing new risks after incurring nearly $12 billion in losses from investing in U.S. Treasury bonds. Its joint venture, JA Mitsui Leasing, may be adversely affected by the bankruptcy of the American brand group. Although JA Mitsui Leasing is responsible for its own operations, the Central Agricultural and Forestry Treasury, as a shareholder, must be accountable for the appointment of the management team. Analysts point out that if JA Mitsui Leasing incurs losses, it will impact the financial reports of its shareholders. The Central Agricultural and Forestry Treasury holds a 43.4% stake, while Mitsui & Co. holds a 42.3% stake
According to the Zhitong Finance APP, just as Norinchukin Bank seems to be gradually recovering from a massive loss of nearly $12 billion incurred from investing in U.S. Treasury bonds and other overseas bonds, this Japanese banking giant is now facing new scrutiny—its joint venture may be impacted by the bankruptcy of First Brands Group, a major U.S. automotive parts company.
It is reported that Norinchukin Bank and Mitsui & Co. are the largest shareholders of JA Mitsui Leasing, whose wholly-owned subsidiary Katsumi Global provided $1.75 billion in trade financing to First Brands Group, which filed for bankruptcy at the end of September. It remains unclear whether this risk exposure will lead to losses for JA Mitsui Leasing and its shareholders. However, this case could become a setback for Norinchukin Bank as it strives to strengthen risk management and restore its reputation.
Earlier this year, Norinchukin Bank disclosed in its annual report for the fiscal year ending March 31 that it recorded a massive loss of 1.8 trillion yen (approximately $11.7 billion) due to investments in U.S. Treasury bonds and other overseas bonds. The company also stated that there were unrealized losses of 1.24 trillion yen on its bond holdings.
Michael Makdad, an analyst at Morningstar, stated that while JA Mitsui Leasing is responsible for its own and its subsidiaries' daily operations, Norinchukin Bank and Mitsui & Co., as shareholders, have the responsibility to vote in the election of board members to appoint management. Makdad pointed out, "If JA Mitsui Leasing incurs losses, those losses will also be reflected in its shareholders' financial statements, so they have the responsibility to select directors who can appoint executives with strong risk control capabilities."
According to data, JA Mitsui Leasing has approximately 2,000 employees and provides leasing and financing services across multiple industries. According to the company's documents, Norinchukin Bank holds a 43.4% stake, while Mitsui & Co. holds a 42.3% stake. As of the fiscal year ending March 31, the company's total assets amounted to 3.4 trillion yen (approximately $22 billion), with a net profit of 37.4 billion yen.
JA Mitsui Leasing's CEO Keito Shimbu, who took office in 2021, previously served as the global investment head at Norinchukin Bank. Additionally, the board members of this joint venture include other former executives from Norinchukin Bank and Mitsui & Co.
In its mid-term plan released in May, JA Mitsui Leasing stated that it plans to strengthen collaboration with strategic partners, including Norinchukin Bank and Mitsui & Co. The company has identified overseas business expansion—especially in the North American market—as a key strategic direction.
Currently, Norinchukin Bank is working to rebuild its $266 billion securities investment portfolio. An expert group from the Japanese government called for the bank to strengthen risk management in January, including the introduction of external directors with market expertise. Under the leadership of new CEO Taro Kitabayashi, Norinchukin Bank achieved profitability in the first fiscal quarter and expects to maintain profitability for the current fiscal year Analyst Hideyasu Ban stated that although the risk exposure of the Norinchukin Bank in the bankruptcy case of the First Brand Group does not imply a fundamental flaw in the bank's risk management framework, it does indeed pose a "reputational risk." He pointed out that given the significant losses the bank has previously suffered in bond investments, the revelation of this "considerable risk exposure" is indeed "unfortunate timing."
