TOKYO, May 22 (Reuters) - Japan's Norinchukin Bank said on Wednesday it was considering raising 1.2 trillion yen ($7.67 billion) to shore up its capital after its portfolio suffered a sharp drop in value.
The central institution for farm, forestry and fishery cooperatives expects to post losses of about 500 billion yen in the financial year to March 2025, to be spent on restructuring its portfolio, CEO Kazuto Oku told a press conference.
"We see the market is now at a turning point, and we want to restructure our portfolio at this time," Oku said, adding that the bank would sell low-yielding securities to replace them with high-yielding ones.
The low-yielding products would include sovereign bonds in the United States and Europe, Chief Financial Officer Taro Kitabayashi added.
Norinchukin, with assets of about 56 trillion yen under management, is a big player in global markets and has actively invested in overseas securities, including collateralised loan obligations.
But it was hit hard by prospects of interest rates staying higher for longer that led to a bond market rout.
The bank saw 1.77 trillion yen in valuation losses in its portfolio for the year to March, compared with 946 billion yen in the previous year.
On Wednesday, the benchmark 10-year government bond yield hit 1% for the first time since May 2013, as expectations for further rate hikes by the Bank of Japan grew.
"Going forward the JGBs may become one of our attractive investment targets," Kitabayashi said.
Norinchukin said its common equity Tier-1 capital ratio was at 16.43% in March at a healthy level by Basel III standards.
After the global financial crisis in 2009, the bank raised 1.9 trillion yen in capital from member banks following losses from investments in securitised products. ($1=156.4300 yen) (Reporting by Junko Fujita; Editing by Chang-Ran Kim and Clarence Fernandez)
