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NYCB Receives $1 Billion Lifeline

The bank’s deal with a group of investors adds four new directors to its board

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  • Written by  Banking Exchange staff
 
 
NYCB Receives $1 Billion Lifeline

New York Community Bancorp (NYCB) has secured a $1 billion investment, after disclosing a 7% drop in deposits over the last month.

According to a press release, the bank will receive $450 million from Liberty Strategic Capital, a firm run by former treasury secretary Steven Mnuchin.

The remaining sum will come from Hudson Bay Capital, Reverence Capital Partners, Citadel Global Equities as well as “other institutional investors and certain members of NYCB’s management”.

The investment comes as the bank reported total deposits of $77.2 billion in March, which was down from $83 billion a month prior.

NYCB also reported it is reducing its quarterly dividend for the second time this year, to 1 cent per share from 5 cents, an 80% drop.

The announcement of the deal caused the bank’s share to fluctuate significantly. After nearly halving earlier in the day, the stock rose to 30% after the announcement, before leveling off to ultimately close with a gain of 7%.

Under the terms of the deal, NYCB will add four new directors to its board, including Steven Mnuchin, the 77th secretary of the treasury, and Joseph Otting, former comptroller of the currency. Otting will also become CEO of the bank.

Milton Berlinksi, managing partner of Reverence Capital, and Allen Puwalski will also join the board.

Mnuchin said: "In evaluating our investment, we were mindful of the bank's credit risk profile. With 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."

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