New York Community Bancorp (NYCB) grabbed headlines Wednesday as its stock plummeted by 42%, only to recover following the announcement of a $1 billion capital raise. The bank also revealed a leadership overhaul, with former Treasury Secretary Steven Mnuchin joining the board.
In a press release, NYCB confirmed a deal with investment firms like Liberty Strategic Capital (led by Mnuchin), Hudson Bay Capital, and Reverence Capital Partners to raise over $1 billion in exchange for equity. Mnuchin and Joseph Otting, former comptroller of the currency, are set to join the board, with Otting stepping in as CEO.
Following the announcement, NYCB’s stock rebounded sharply, albeit amid significant volatility. Trading briefly halted, with shares surging nearly 30% before retracing some gains upon resumption. Ultimately, the stock closed the day up over 7% after several halts.
The move comes after NYCB faced a tough start to the year, disclosing a notable increase in its allowance for potential loan losses in late January, mostly due to commercial real estate exposure. Moody’s downgraded NYCB’s credit rating to junk status, leading to the appointment of former Flagstar bank CEO Alessandro DiNello as executive chairman.
Last week, NYCB revealed material weaknesses in its internal loan review controls and announced DiNello’s transition to nonexecutive chairman. These developments recall the struggles of regional banks like Silicon Valley Bank, Signature Bank, and First Republic, which failed in spring 2023. NYCB acquired a substantial portion of Signature Bank’s assets, including deposits and loans, totaling nearly $13 billion.
US banks face challenges amid crypto involvement, exemplified by Heartland Tri-State Bank’s closure last year after its CEO lost millions in a crypto scam. The Kansas Office of the State Bank Commissioner declared the bank insolvent, estimating a $54 million loss from the FDIC’s insurance fund. Silvergate Bank, Signature Bank, Silicon Valley Bank, and First Republic Bank also failed, with Silvergate and Signature’s failures partially attributed to the 2022 crypto meltdown.