New York Community Bancorp NYCB.N said on Wednesday it had raised $1 billion in equity investment from investors including former U.S. Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.
Hudson Bay Capital, Reverence Capital Partners, Citadel Securities, other institutional investors and certain members of the bank’s management also participated in the investment, according to NYCB.
The bank 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.
Last week, NYCB disclosed it found “material weaknesses” in internal controls tied to its review of loans. It revised its quarterly loss to 10 times higher than previously stated.
Jefferies was the exclusive financial adviser and sole placement agent for NYCB for the latest investment.
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The KBW Regional Banking index .KRX also fell 2.5% on Wednesday, highlighting wider concerns about the health of the sector which has a huge footprint in the CRE industry. The index has declined 7% since NYCB’s earnings report.
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
