Hicksville, New York – New York Community Bank (NYCB) made significant strides to rebuild investor trust with the announcement of a new CEO and a $1 billion investment from a group that includes former Treasury Secretary Steven Mnuchin. This strategic move follows a sharp decline in the bank’s stock price, plummeting by up to 45% after reports emerged that NYCB was seeking investors to purchase company shares.
Following the announcement of the $1 billion investment, NYCB witnessed a notable rebound in its stock price, surging by as much as 18% and ultimately closing the day with an 8% increase. The group of firms providing the infusion includes Liberty Strategic Capital, founded by Mnuchin in 2021, along with Hudson Bay Capital, Reverence Capital Partners, and Citadel Global Equities. These entities, along with select bank managers, will acquire common and convertible-preferred stock, effectively gaining control of the Hicksville-based bank.
In addition to the financial infusion, NYCB also underwent a change in leadership. Former Comptroller of the Currency Joseph Otting is set to take over as the new CEO, becoming the third individual to hold this position within a few weeks. The transaction is slated to finalize by March 11, pending regulatory approvals.
Mnuchin expressed confidence in the investment, emphasizing the bank’s credit risk profile in a press release. His firm is the lead contributor with a $450 million investment, surpassing other investors. Reflecting on his past experience, Mnuchin was part of an investor group that acquired IndyMac Bank during the 2008 financial crisis, later renaming it OneWest and eventually selling it to CIT Bank for over $3 billion.
The new rescue efforts at NYCB coincide with various leadership changes within the organization. As Otting assumes the role of CEO, Alessandro DiNello, who had been serving as the interim CEO since February 6, officially stepped down following the departure of long-time CEO Thomas Cangemi. DiNello will transition to the position of non-executive chair on a revamped nine-person board that now includes Mnuchin, Otting, and other industry leaders.
NYCB’s recent struggles stem from its decision to slash dividends and increase provisions for loan losses, triggering a sequence of events leading to a $2.7 billion fourth-quarter loss. This turmoil comes in the wake of concerns surrounding commercial real estate vulnerabilities, echoing fears of a potential ripple effect across the banking sector.
Federal Reserve Board Chair Jerome Powell addressed these concerns, assuring that while the commercial real estate exposures are manageable, some losses are inevitable. NYCB’s previous role as a rescuer during last year’s crisis inadvertently pushed the bank into heightened regulatory scrutiny, prompting the need for tighter requirements and financial adjustments.
The bank allocated $552 million to address weaknesses related to office properties and multifamily apartments, a significant portion of NYCB’s lending portfolio, particularly within New York City. This proactive measure reflects NYCB’s commitment to navigating challenges and strengthening its financial position amidst market uncertainties.
As NYCB forges ahead with its restructuring efforts and new leadership, the banking industry remains vigilant amid evolving market dynamics and regulatory pressures. The ongoing transformation within NYCB underscores the resilience and adaptability required to thrive in a rapidly changing financial landscape.