Proactive Investors - New York Community Bancorp (NYSE:NYCB) shares cratered 42% on Wednesday afternoon forcing trading on the the New York Stock Exchange to be halted on reports the troubled lender was looking to raise capital.
Not long after a report emerged from the Wall Street Journal, the lender said it has raised $1.05 billion at a heavy discount from a group of investors, as well as appointed a new CEO for the second time in less than a week and added four new directors to its board, including former treasury secretary Steve Mnuchin.
At a share price of $2, over a 30% discount on the previous closing share price and 80% on the share price a month ago, Mnuchin's Liberty Strategic Capital vehicle has agreed to invest $450 million, with Hudson Bay Capital investing $250 million and Reverence Capital Partners $200 million, with investment also from Citadel Securities, other institutional investors and certain members of the management team.
Joseph Otting, former Comptroller of the Currency and former OneWest Bank CEO, will be made CEO of the bank as part of the investment, with Sandro DiNello, who was moved from non-executive chairman to CEO last week, moved back to non-executive chairman.
Mnuchin said in a statement from NYCB: "In evaluating this investment, we were mindful of the bank's credit risk profile. With the over $1 billion of capital invested in the bank, we believe we now have sufficient capital should reserves need to be increased in the future to be consistent with or above the coverage ratio of NYCB's large bank peers."
He added that the investors "believe Sandro, alongside new management, has taken the appropriate actions to stabilize the company and to position NYCB to become a best-in-class $100-plus billion national bank."
Shares in NYCB began to crater just before midday when a Wall Street Journal report stated that the bank had contacted other lenders about potentially buying shares in a fundraising as it looks to bolster its balance sheet.
Last month, the bank's management issued a late-night message to reassure investors of its balance sheet strength following a slump in its share price and downgrades from rating agencies Fitch and Moody’s.
These downgrades were made after the bank cut its dividend and reported a surprise fourth quarter loss of US$252 million.
Last week NYCB promoted Sandro DiNello to group chief executive, having previously led Flagstar, which NYCB bought in 2022.
Last year it also purchased Signature Bank, a rescue deal that came in the wake of the Silicon Valley Bank collapse, which itself was precipitated like this morning's drama by reports that it needed to raise money.
The shares rebounded to $4.18 after the trading halt was lifted, before flattening off to $3.22 as trading continued.
** Update: Adds details of $1B fundraising, new directors **