Embattled New York Community Bancorp announced a lifeline of more than $1 billion from a group of investors on Wednesday, after seeing its stock plunge by more than 80% this year.
Shares of the bank, has which has been hammered by weakness in commercial real estate and growing pains caused the recent buyout of another distressed bank, were sent on a wild ride. New York Community Bancorp lost nearly half of its market value Wednesday on rumors that it was seeking cash, then jumped toward its best day in nearly a year on news of the capital infusion, then quickly gave up all those gains.
The deal will bring four new directors to NYCB’s board, including Steven Mnuchin, the former U.S. Treasury secretary under President Donald Trump. Joseph Otting, a former comptroller of the currency, will become the bank’s CEO.
Under the deal, which the bank said still needs “finalization of definitive documentation” and regulatory approvals, the bank would get investments of $450 million from Mnuchin’s Liberty Strategic Capital, $250 million from Hudson Bay Capital and $200 million from Reverence Capital. Cash from other institutional investors and some of the bank’s managers will take the total over $1 billion, the banks aid.
The investors will receive stock in the company valued at $2 per share, along with convertible preferred stock that could pay dividends every three months.
NYCB's stock had tumbled on news the lender sought cash
The stock had tumbled 42% to $1.86 earlier Wednesday, before its trading was halted in the afternoon, pending news. A report from The Wall Street Journal earlier in the day had said the lender was considering raising cash through the sale of stock in order to shore up confidence in it.
After news of the $1 billion investment NYCB’s stock immediately erased those losses and jumped 18%, which would have been its best day since March 20. But the stock gave up the gains and then swiveled between losses and gains. It was up 4.3%, with a little less than an hour remaining before the closing bell.
Stocks of other regional banks, which have been caught up in the same anxieties that have afflicted NYCB, also wobbled. An index of regional bank stocks went from a loss of 3.1% before the announcement to a slight gain and back to a loss of 0.1%.
NYCB was a relatively unknown bank until last year, when it bought the assets of Signature Bank at auction on March 19 for $2.7 billion. Signature crumbled in last year’s mini-crisis for the industry, where bank runs also sped the collapse of Silicon Valley Bank.