New York Community Bancorp Gets $1B Cash Injection

Former Treasury Secretary Steven Mnuchin leads a team of investors hoping to settle the bank’s recent chaotic run.

Photo of New York Community Bank
Photo by Tdorante10 via CC BY-SA 4.0

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Bigger has not been better for New York Community Bancorp.

On Wednesday, after reports surfaced that the flailing regional lender was seeking an emergency cash infusion, NYCB apparently secured a $1 billion equity infusion, courtesy of former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital, Citadel Securities, and NYCB management, according to sources who spoke with The Wall Street Journal.

Too Big, Starting to Flail

NYCB has been in a tailspin since reporting a surprise loss in its fourth-quarter earnings report at the end of January, when it blamed the twin forces of shaky commercial real estate loans — particularly among rent-stabilized New York City apartment buildings — and the increased demands associated with graduating into the “big leagues” of banks with more than $100 billion of assets under management. The news rocked the bank, sending its share price tanking nearly 70%. 

In February, newly appointed Executive Chairman Alessandro DiNello insisted that there was “virtually no deposit outflow” from its retail branches (by the end of the month, DiNello was made CEO). But the bank has also taken active measures to avoid having to provide evidence for that statement, and Wednesday’s equity injection may suggest otherwise — and comes with yet another sweeping overhaul of NYCB’s C-suite:

  • Last week, NYCB announced it would delay filing its annual 10-K to focus on addressing a “material weakness” in the company’s controls that played a role in its fourth-quarter flop. The 10-K, now due March 15, will be the first publicly available source of information on depositor outflows.
  • Along with the $1 billion raise comes news that DiNello, after just roughly a week on the job, will be replaced by Joseph Otting, former head of the Office of the Comptroller of the Currency, while Mnuchin and others join a board purged of all legacy NYCB directors, the WSJ reports.

Mnuch Ado About Something: “In evaluating this investment, we were mindful of the bank’s credit risk profile,” Mnuchin said in a statement on Wednesday. “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,” he added. The former cabinet member has some experience in this sort of situation. After the collapse of IndyMac Bank back in 2008, Mnuchin and a group of investors bought the bank from the FDIC for $13.5 billion, before running it as OneWest Bank. The group sold it years later to CIT Group, earning hundreds of millions for Mnuchin, who clearly sniffs a similar opportunity.