Aozora Bank shares hit near three-year lows Friday, as investors continued to hammer the Japanese commercial lender after it downgraded its annual outlook to a loss on bad U.S. commercial real estate loans.

Aozora, which had earlier forecast a profit, saw its shares plunge by as much as 18.5% to their lowest levels since February 2021 in early Friday Tokyo trade — the Nikkei 225 benchmark was up 0.5%.

The bank's Tokyo-listed shares fell for a second day, tracking losses in U.S. regional lenders overnight.

The commercial lender said Thursday it expects to post a net loss of 28 billion Japanese yen ($191 million) for the fiscal year ending March 31, compared with its previous outlook for a net profit of 24 billion yen. The bank forecast a net profit of 17 billion yen for the next fiscal year.

"Aozora is a major mid-tier lender whose strength lies in its relationships with real estate/business revitalization financing companies and regional financial institutions," Goldman Sachs analysts wrote in a Friday note.

They retained their sell rating on Aozora's shares with a price target of about 2,460 yen per share, mainly due to the short to medium outlook for the bank's profits.

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