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Bank asks members for cash

NORINCHUKIN Bank said it will raise 1.9 trillion yen (US$20.2 billion) and replace its chief executive following the largest losses on asset-backed securities of any Asian lender.

Deputy President Yoshio Kono will replace CEO Hirofumi Ueno on April 1, the company said in a statement yesterday.

Norinchukin, owned by more than 4,000 shareholders including farm, fishing and forestry cooperatives, will raise the funds from its members by the end of March.

The fund-raising is the biggest in Asia since Industrial & Commercial Bank of China Ltd collected US$22 billion in the world's largest initial public offering in 2006.

Norinchukin, which has about US$875 billion in deposits, lost at least US$10 billion on overseas asset-backed securities following the collapse of the United States housing market.

"They just collected all the money from their membership," said Kiyoko Ohora, an associate director at Standard & Poor's in Tokyo. "It seems they just moved money internally so I don't see that being positive for their credit rating. It's clear that their capital ratio wasn't sufficient."

S&P cut Norinchukin's financial-strength rating in December, citing "material" pressure on capital.

Norinchukin still had 6 trillion yen of asset-backed securities at the end of December, more than the market value of Wells Fargo & Co.

Deficit looms

"Norinchukin's capital faces increasing impairment risk due to its relatively large exposure to foreign securitized financial products," said Moody's Investors Service in a November statement, when it revised the outlook on the Tokyo bank's Aa2 credit rating to "negative" from "stable."

Profit at the Tokyo bank, which was founded in 1923 and makes loans to farmers and fishermen, plunged 95 percent to 7.8 billion yen in the six months ended September 30, from 143.6 billion yen a year earlier as it posted an 81.5-billion-yen loss on asset-backed securities.

Ueno said that the bank may post a deficit in the year ending March 31: "We've put a tremendous burden on our members and that's the reason I'm quitting," he said.

Executives at Norinchukin will take a 20-percent pay cut, Kono said.

The global financial crisis that's dragged Japan into recession has forced government bailouts of Citigroup Inc and American International Group Inc and caused more than US$1.1 trillion in losses and writedowns at the world's biggest financial companies.


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