(Bloomberg) -- Norinchukin’s credit ratings have been placed on review for downgrade by Moody’s Ratings, which cited the Japanese bank’s impending large losses from sales of foreign bonds. 

The unlisted agricultural bank warned last month that it may incur losses of 1.5 trillion yen ($9.3 billion) this fiscal year as it sells US and European sovereign bonds that lost their value after interest rates rose. 

Any downgrade by Moody’s may put pressure on Norinchukin’s borrowing costs, which already exceed the returns on much of its foreign bond portfolio. The move comes days after S&P Global Ratings cut its outlook on the bank’s debt to negative, citing earnings risks. 

“Higher-for-longer interest rates will continue to hurt the bank’s profitability because foreign funding costs are higher than investment yields on a large share of the foreign bonds,” Moody’s analysts said in a statement. 

Moody’s will assess the ability of Norinchukin to raise new equity capital from its member cooperatives as part of the review, along with factors including its investment and funding strategy. The bank said in May that it plans to raise 1.2 trillion yen from its members to bolster capital. 

“A potential downgrade increases collateral needs and wholesale funding costs,” Bloomberg Intelligence credit analyst Pri de Silva wrote last week. “We don’t see a scenario where Nochu is able to reverse its negative carry in the near term without a large capital infusion.” 

Moody’s rates Norinchukin’s long-term credit at A1, the fifth-highest investment grade. A review for downgrade typically takes one to three months and concludes with a cut in more than half of cases. 

The ratings company expects the bank’s deposits from its member co-ops will remain “solid and sticky,” reflecting its role as the central financial organization for Japan’s agricultural sector.

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