*

Says taking a cautious approach to new investment

*

There's concern about overheating in private credit

markets, CEO

says

*

Bank suffered huge losses last year as value of overseas

bond

holdings crashed

(Recasts and writes through)

By Anton Bridge

TOKYO, Nov 19 (Reuters) - Japan's Norinchukin Bank

, hit hard by mammoth losses last year, logged a small

profit for a second straight quarter and said that it has begun

increasing its investments in securities.

But the bank, one of the world's largest investors in

collateralised loan obligations (CLOs), also noted that markets,

particularly private credit markets, had been volatile of late

and a cautious approach to new investment was warranted.

"We are beginning to see concern that there's overheating in

credit market, particularly private credit markets," Chief

Executive Taro Kitabayashi told a press briefing.

"It's not that everyone will go under, but that as high

interest rates have persisted in the U.S., we are starting to

see winners and losers," he added.

The bank reported net profit of 26 billion yen ($167

million) for July-September, compared with a 481 billion yen

loss for the same period a year earlier.

A joint venture between Norinchukin and Mitsui & Co ( MITSF )

that had exposure to the bankrupt auto parts maker First Brands

Group revised down its net profit forecast for this financial

year by 36.4 billion yen.

This has not yet been fully fed into Norinchukin's results,

Chief Financial Officer Masaki Nagano said.

Last year, the bank posted an annual loss of $12.6 billion,

brought about by huge losses in U.S. and European sovereign

bonds that crashed in value when interest rates rose from 2022

and stayed higher for longer than it anticipated.

Norinchukin is Japan's primary financial institution for

farm, forestry and fishery cooperatives. It earns most of its

money through returns from securities investment rather than

lending.

It has boosted its investments in CLOs, which grew to 9.7

trillion yen at the end of September, up nearly 50% from 6.5

trillion yen a year prior.

Norinchukin may increase its CLO holdings in the short term,

Nagano said, adding that in the medium and long term the bank

expects CLOs as a proportion of its assets to stay broadly flat.

Norinchukin, which still had 1.14 trillion yen of unrealised

losses in its bond portfolio at end-September, maintained its

full-year profit forecast of 30 billion to 70 billion yen.

The bank has said it will use bond sale proceeds for new

investment, including in Japanese government bonds, equities,

real estate, private equity and infrastructure.

($1 = 155.3700 yen)