Embattled New York bank gets lifeline

Embattled lender New York Community Bancorp (NYCB) announced Wednesday that it has lined up more than $1 billion from investors led by the firm of former US Treasury secretary Steven Mnuchin.

NYCB, which had seen its share price plunge more than 40 percent earlier Wednesday before trading was halted, said the consortium headed by Mnuchin’s Liberty Strategic Capital also includes Hudson Bay Capital and Reverence Capital.

“In evaluating this investment, we were mindful of the bank’s credit risk profile,” Mnuchin said in a news release.

Mnuchin, who served for four years as former president Donald Trump’s Treasury secretary, said the move reflected confidence that the bank had taken appropriate actions “to stabilize the company and to position NYCB to become a best-in-class $100+ billion national bank with a diversified and de-risked business model that supports long term profitability.”

Shares of NYCB, the trading of which had been halted for more than two hours, shot up around 30 percent following the announcement near 1945 GMT.

As part of the agreement, Mnuchin will join the board of NYCB, along with representatives of the other two firms and Joseph Otting, a former US Comptroller of the Currency, who will become chief executive officer (CEO), the press release said.

Prior to the announcement, the New York Stock Exchange halted trading in NYCB after shares tumbled more than 40 percent following a Wall Street Journal report that the bank was seeking to raise capital.

Shares of the bank have fallen more than 80 percent since NYCB released quarterly results on January 31.

NYCB reported a surprise $252-million loss in the fourth quarter of 2023.

The bank’s woes stem from weaknesses in commercial real estate and in its internal controls.