(Bloomberg) — New York Community Bancorp said it received an equity investment of more than $1 billion led by Steven Mnuchin’s Liberty Strategic Capital, Hudson Bay Capital and Reverence Capital Partners.
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The beleaguered regional bank also named Joseph Otting, the former comptroller of the currency, as its new chief executive officer, NYCB said in a statement Wednesday. Otting replaces Alessandro DiNello, who became CEO on Feb. 29. DiNello remains non-executive chairman.
“In evaluating this investment, we were mindful of the bank’s credit risk profile,” Mnuchin, the former US Treasury secretary, said in the 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.”
Liberty will invest $450 million, Hudson Bay $250 million and Reverence $200 million as part of the transaction, according to the statement. In connection with the deal, NYCB will add four new directors to its board, including Mnuchin and Otting.
NYCB shares have lost more than three-quarters of their value this year after the bank slashed its dividend and set aside more provisions than expected for loan losses. Last week, it announced it was replacing its chief executive officer and had identified “material weaknesses” in how it tracks loan risks.
NYCB is a major lender to owners of apartment buildings subject to tough New York rent laws, limiting the revenue units can generate. It also financed offices in a region beset by vacancies in the work-from-home era.
Credit-rating firms have slashed the company’s grades to junk, with Moody’s Investors Service predicting the bank may set aside more money for souring loans over the next two years.
Some of the pressure on NYCB was exacerbated by its rapid growth through acquisitions in recent years. Takeovers of rival lender Flagstar Bancorp and parts of Signature Bank almost doubled the firm’s size. As its assets swelled beyond $100 billion, NYCB faced more stringent capital requirements for so-called Category IV banks in light of their systemic importance.
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