NY Community Bancorp shares recover after Steven Mnuchin, Ken Griffin come to rescue
Struggling lender New York Community Bank will receive a fresh $1 billion infusion of cash as part of a rescue package from investors including former Treasury Secretary Steven Mnuchin — capping a wild day in which the stock price tanked by some 40% before recovering prior to the closing bell.
NYCB’s share price closed up 7.5% at $3.46 after it was announced that Mnuchin would take a seat on the bank’s board of directors.
Mnuchin’s Liberty Strategic Capital and Ken Griffin’s Citadel Global Equities are among the hedge funds and private equity firms that are taking part in the capital investment, according to a press release issued by the bank.
“We are confident that NYCB is poised to generate sustainable shareholder value,” Mnuchin said.
Joseph Otting, a former comptroller of the currency, will become the bank’s CEO.
The bank will receive a $450 investment from Liberty Strategic Capital, $250 million from Hudson Bay Capital and $200 million from Reverence Capital.
The investors will receive stock in the company valued at $2 per share, along with convertible preferred stock that pays dividends every three months.
Trading in the bank’s stock was suspended earlier on Wednesday afternoon after the share price plummeted to $1.86 – down from Tuesday’s close of $3.22.
Since the start of the year, the bank’s stock price has fallen by a whopping 66% as concerns abound over its commercial real estate portfolio as well as its leadership structure and internal controls.
Last month, NYCB posted unexpected commercial real estate loan losses and slashed its dividend, causing its stock price to sink to a nearly 27-year low.
The bank’s shareholders filed a class action lawsuit in Brooklyn federal court recently accusing the company of defrauding them by failing to disclose it would set aside more money for credit losses.
The Hicksville, New York-based lender operates about 420 branches under several brands, including the original name Queens County Savings Bank.
To make matters worse, Moody’s Investors Service earlier this year downgraded many of the bank’s credit ratings to “junk” status, and said the bank could face limited financial flexibility as well as “potential confidence sensitivity.”
In late January, NYCB posted a surprise $260 million fourth-quarter loss, reflecting loan deterioration tied to offices and apartment buildings, and said the 71% dividend cut would preserve capital to meet regulatory requirements.
The bank’s purchase last spring of the failed Signature Bank in a government-arranged auction, and the December 2022 purchase of Flagstar Bank, boosted overall assets to more than $116 billion.
NYCB’s problems have spurred concern about other midsized lenders exposed to commercial real estate.
Landlords have been struggling with low occupancy rates because of the pandemic, while elevated interest rates make it costlier to refinance loans.
Two other midsize regional banks, Silicon Valley Bank and First Republic, also failed early last year.
