By Niket Nishant, Manya Saini and Anirban Sen
(Reuters) -New York Community Bancorp said on Wednesday it had raised $1 billion from investors including former U.S. Treasury Secretary Steven Mnuchin's Liberty Strategic Capital and named a former Comptroller of the Currency its new CEO.
Investment firms Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities, other institutional investors and certain members of the bank's management also participated in the investment, according to NYCB.
The lender has been under pressure since it posted a surprise fourth-quarter loss on Jan. 31, weighed down by higher provisions tied to its exposure to the beleaguered commercial real estate (CRE) sector.
It slashed its quarterly dividend by 70% to bolster capital to deal with stricter regulation that banks with assets of $100 billion and above are subjected to. NYCB's acquisition of Flagstar Bank in 2022 and Signature Bank assets last year pushed it above that threshold.
"In evaluating this investment, we were mindful of the bank's credit risk profile," Mnuchin said in a statement.
"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."
The latest round of selloff in NYCB shares was triggered last week, when the bank disclosed it found "material weaknesses" in internal controls tied to its review of loans. It also revised its quarterly loss to 10 times higher than previously stated.
The bank on Wednesday named Joseph Otting, former Comptroller of the Currency, its new CEO. Otting would replace Alessandro DiNello, who will be the non-executive chair.
Liberty Strategic would infuse $450 million, Hudson Bay $250 million and Reverence Capital would inject $200 million, NYCB said. Jefferies was the exclusive financial adviser and sole placement agent for NYCB for the latest investment.
CRE CONCERNS
NYCB shares gained nearly 30% before trading in the stock was halted. The KBW Regional Banking index also rose 1.4% after falling earlier.
Several Wall Street analysts have flagged concerns that the lender's exposure to CRE could also require it to build additional capital reserves to absorb potential losses on loans.
"We believe this review of internal controls could lead to additional CRE-related reserve building, particularly related to the company's NYC rent-regulated multifamily exposure," brokerage Wedbush wrote in a note earlier this month.
NYCB has pledged to reduce its exposure to CRE.
(Reporting by Niket Nishant and Manya Saini in Bengaluru and Anirban Sen in New York; Additional reporting by Mehnaz Yasmin; Editing by Anil D'Silva, Sriraj Kalluvila and Shounak Dasgupta)
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