LA IMPLOSIÓN DEL BANCO JAPONÉS NORINCHUKIN

 

NORINCHUKIN BANK IMPLOSION OFFICIALLY BEGINS

During the last quarter alone, Norinchukin Bank incurred a ~500bn JPY net income loss, bringing the total for the first quarters of this fiscal year to ~1.4trillion JPY, equivalent to ~9.2bn USD. Where do these losses come from? They come entirely from Norinchukin Bank’s securities portfolio, which shrank from ~38 trillion JPY to ~35.6 trillion JPY at the end of December 2024. From another perspective, this means that Norinchukin lost ~20% on a 2.4 trillion JPY face value of assets liquidated.

If we already apply the ~20% discount on the real price that the bank could fetch in the market to the ~35.6 trillion JPY of Securities left in its portfolio, the unrealized losses instead are ~7.12 trillion JPY. Considering that the bank only has ~4 trillion JPY of Net Assets left, it is becoming harder and harder for the Bank of Japan and the Japanese government to hide the fact that the second largest bank in the country is more and more insolvent and in desperate need of a bailout to stay in business.

 One thing that struck me the most in the latest Norinchukin Bank financial report is the table “Summary of Performance” which you can see below. Please take a look at the metrics for the third quarter of 2024. Do you notice anything incredible? Yes, my dear reader: EVERY SINGLE PERFORMANCE LINE IS NEGATIVE.

So why did Norinchukin sell all those securities in the last quarter and crystallize such a large amount of losses previously hidden in the hold-to-maturity books? Because the bank’s liquidity crisis is worsening:

• Deposits fell in one quarter from ~58.9 trillion JPY to 57.9 trillion JPY
• Repurchase Agreements (in Liabilities, hence money borrowed against collateral) fell in one quarter from ~9.3 trillion JPY to ~6.2 trillion JPY

Total = minus 4.1 trillion JPY

The bank has been trying to raise capital since May last year (Japan’s Norinchukin Bank eyes raising $7.7bn in fresh capital), but as I flagged already at that time, whoever could read and properly analyze the books of the bank knew they were already insolvent and hiding a massive hole. Considering how much liquidity is being printed non-stop by central banks these days and how bullish stock markets are, if Norinchukin cannot raise capital in the best possible market conditions, then its fate is sealed and in the near future it is doomed to implode unless the government steps in with a massively expensive bailout. Failure to bail out this bank will have incredible repercussions in the global financial system, similar to those that would have occurred if Credit Suisse was let to collapse. The problem here is that governments will not be able to afford to bail out all these giant banks forever, and the scary thing is so many are in this very same situation and I won’t stop warning about it.