Embattled New York Community Bancorp has received the cash injection it needed to stay afloat after a $1 billion lifeline came just in time, with a majority of the funds received from former Treasury Secretary Steven Mnuchin's firm, Liberty Strategic Capital.
The troubled lender had sought help and while also assessing interest among investors by Wednesday after shares for the bank fell by almost 32%. Various trading pauses had to be initiated citing volatility. The bank will receive over a $1 billion equity investment, with the majority — $450 million — from Mnuchin's company.
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The other firms who joined include Hudson Bay Capital, Reverence Capital Partners and Citadel Global Equities. NYCB said Wednesday that "other institutional investors and certain members of the Company's management" would also contribute.
The bank pledged to reduce its exposure to commercial real estate, revealing last week that it had "material weaknesses" in how it reviewed loans, related to "ineffective oversight, risk assessment and monitoring activities."
Amid the Wednesday volatility on Wall Street, NYCB's stock fell by over 40% at one point earlier in the day.
The Wall Street Journal was among the first to report that the lender was strongly seeking cash to help put it back on track.
Citigroup analyst Keith Horowitz wrote last week that the firm did not "see a sale as likely outcome for NYCB."
Horowitz said, "In our view, NYCB is on its own to figure out how to course correct," Reuters reported.
CNN reported that it is still unclear if clients with the bank will keep their money in NYCB accounts after such a close call. The bank said last month that deposits it held were stable.
