Norinchukin Bank CEO, Kazuto Oku, to Resign Amidst Mounting Losses
Bloomberg reports that Kazuto Oku, CEO of Norinchukin Bank, intends to resign following the institution's substantial losses due to ill-conceived foreign bond investments.
Oku, 65, reportedly plans to step down at the end of March, while Taro Kitabayashi, CFO, will be nominated as his successor, effective April 1.
The agricultural bank's supervisory committee is expected to meet on Thursday to finalize these changes. A Norinchukin spokesperson declined to comment, citing pending discussions.
The move marks the fallout from Norinchukin's exposure to rising US interest rates, which have diminished the value of its foreign bond holdings and increased its dollar-funding costs beyond its returns.
The incoming CEO will face pressure to diversify the bank's $300 billion investment portfolio, which currently heavily favors bonds. Suggestions have also been made to recruit external talent.
Kitabayashi, who joined Norinchukin in 1994, has held various executive roles, including planning and CFO.
A government panel recently urged Norinchukin to enhance portfolio diversification, strengthen risk management, and appoint board members with financial market expertise. However, more significant business model changes are unlikely.
Norinchukin's limited lending functions and primary focus on securities management pose unique challenges for the new management team.
The bank recently reported wider losses due to increased investments in risky leveraged loans and the need for additional capital. Paper losses on bond holdings reached ¥1.57 trillion.
Norinchukin has been adjusting its portfolio strategy, shifting towards bonds, stocks, and project finance, while reducing exposure to CLOs amid regulatory concerns. However, it is now returning to the CLO market.
In 2009, CEO Hirofumi Ueno resigned due to losses on asset-backed securities during the global financial crisis.