New York Community Bank (NYCB), which had fueled concerns about a crisis in the U.S. commercial real estate sector, has taken a breather by securing over 1 trillion won in new investment funds. This was thanks to Liberty Strategic Capital, led by former U.S. Treasury Secretary Steven Mnuchin, stepping in as a savior. NYCB's stock price experienced a rollercoaster ride during the trading session.
On the 6th (local time), NYCB announced that it had raised a total of $1 billion (approximately 1.33 trillion won) in investments from multiple institutional investors. These include Liberty Strategic Capital ($450 million), Hudson Bay Capital ($250 million), and Leverance Capital Partners ($200 million).
Following this investment, four new members from the fund side, including former Secretary Mnuchin, will join the board of directors. Former U.S. Comptroller of the Currency Joseph Otting will be appointed as NYCB's Chief Executive Officer (CEO). A major management overhaul is underway, with existing directors stepping down and the total number of board members being reduced.
Mnuchin, a former Goldman Sachs executive, stated in a press release, "When evaluating this investment, we considered the bank's credit risk profile," adding, "Since the bank has received over $1 billion in capital investment, we believe it will have sufficient capital to increase its payment capacity in the future, matching or exceeding the coverage ratios of large peer institutions."
Since January, NYCB has been under pressure related to commercial real estate loans. When its fourth-quarter results last year showed unexpected losses due to large loan loss provisions in anticipation of commercial real estate loan defaults, the market reacted negatively, recalling the Silicon Valley Bank (SVB) crisis. The company tried to ease market concerns by reducing quarterly dividends and working to strengthen capital, but this only fueled further anxiety. Subsequently, last week, NYCB disclosed that it had found material weaknesses related to loan reviews. This led to credit rating downgrades by rating agencies including Moody's.
The Wall Street Journal (WSJ) reported, "NYCB's search for new capital under pressure is eerily similar to the SVB crisis exactly one year ago," and expressed concern that "investors are particularly worried because NYCB is focused on loans for rent-stabilized buildings in New York City."
On that day, NYCB's stock price plunged as much as 47% intraday, experiencing a rollercoaster ride. The sharp decline was triggered by reports that NYCB was seeking equity investors amid growing concerns over commercial real estate loan defaults. However, after the announcement of the successful $1 billion investment in the afternoon session, the stock price soared again. NYCB closed up 7.5% compared to the previous trading day.
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