Struggling regional lender New York Community Bancorp announced a $1 billion capital raise and a leadership shakeup on Wednesday, headlined by former Treasury Secretary Steven Mnuchin, leading to a sharp rebound for its stock.
NYCB has agreed to a deal with several investment firms including Mnuchin’s Liberty Strategic Capital, Hudson Bay Capital and Reverence Capital Partners for over $1 billion in exchange for equity in the regional bank, according to a press release Wednesday afternoon.
Mnuchin will be one of four new members the bank’s board of directors as part of the deal. Joseph Otting, former comptroller of the currency, is also joining the board and taking over as CEO.
The stock jumped after the announcement and was halted for volatility up nearly 30% for the day. It gave back much of those gains and then was halted again, up about 4% for the day.
Prior to the press release, the stock was halted down 42% on the day, amid reports from Reuters and the Wall Street Journal that NYCB was exploring a capital raise.
Shares of NYCB fell sharply on Wednesday.
The stock was below $2 per share at its lowest point on Wednesday after starting the year above $10.
The cash infusion is the latest development in a turbulent start to the year for NYCB. The bank disclosed in late January that it was dramatically raising the allowance for potential loan losses on its balance sheet, with its exposure to commercial real estate being a potential issue. That was followed shortly by Moody’s Investors Service downgrading the bank’s credit rating to junk status, and NYCB naming former Flagstar bank CEO Alessandro DiNello as executive chairman.
Then last week, NYCB disclosed that it had “identified material weaknesses in the company’s internal controls related to internal loan review” and announced that DiNello was taking over as CEO, for what proved to be a brief tenure.
