Niket Nishant, Manya Saini and Anirban Sen
(Reuters) – New York Community Bancorp (NASDAQ:) said on Wednesday it has raised $1 billion from investors including former U.S. Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital and named the former Comptroller of the Currency as its new CEO.
Investment firms Hudson (NYSE:) Bay Capital, Reverence Capital Partners, Citadel Global Equities, other institutional investors and certain members of the bank’s management also participated in the equity investment, according to NYCB.
The bank’s shares had been on a rollercoaster ride throughout the day, falling 45% before the announcement, jumping 30% afterward, and rising 6% to $3.43 in recent trading.
The lender has been under pressure since it announced a surprise fourth-quarter loss on Jan. 31, driven by higher provisions related to its exposure to the beleaguered commercial real estate (CRE) sector.
The company cut its quarterly dividend by 70% to shore up capital to cope with stricter regulation faced by banks with assets of $100 billion or more. Acquisition of NYCB Flagstar Bank in 2022 and Bank signature (OTC:) assets took it above that threshold last year. The stock is down about 70% since the Jan. 31 announcement.
“In evaluating this investment, we considered the bank’s credit risk profile,” Mnuchin said in a statement. Mnuchin will join the expanded board of directors.
“With more than $1 billion of capital committed to the bank, we believe we now have sufficient capital should we need to increase reserves in the future to match or exceed the coverage ratios of NYCB’s larger bank peers.”
The latest round of the NYCB stock sell-off began last week when the bank said it had discovered “material deficiencies” in internal controls related to loan review. The company also revised its quarterly loss to 10 times higher than previously reported.
On Wednesday, the bank named Joseph Oetting, the former Comptroller of the Currency, as its new CEO. Oetting will replace Alessandro Dinello, who will serve as non-executive chairman after serving as CEO for just a few days.
Liberty Strategic will invest $450 million, Hudson Bay will invest $250 million and Reverence Capital will invest $200 million, NYCB said. Jeffries served as the exclusive financial advisor and sole placement agent for NYCB’s latest investment.
The capital injection comes nearly a year after the failures of Silicon Valley Bank and Signature Bank, which sparked a regional banking panic that undermined market confidence in some regional lenders.
The Federal Deposit Insurance Corporation (FDIC) facilitated the sale of SVB and Signature, as well as a later auction First Republican Bank (OTC:), through indemnity guarantees and allowing buyers to take on only certain assets: NYCB, for example, did not acquire Signature’s commercial real estate portfolio. Meanwhile, PacWest agreed to the sale in July Bank of California (NYSE:), in a deal that saw private investors back a $400 million offering of new capital to help strengthen the combined bank’s balance sheet.
KRE PROBLEMS
Some Wall Street analysts have expressed concern that a lender’s exposure to CRE could also require it to set up additional capital reserves to cover potential loan losses.
“We believe this review of internal controls may result in additional provisioning related to CRE, particularly in connection with the company’s exposure to rent-controlled multifamily properties in New York City,” brokerage Wedbush wrote in a note earlier this year. month.
NYCB has vowed to reduce its exposure to CRE.