NYCB to raise $1bn in deal led by Steven Mnuchin’s investment firm

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New York Community Bank will raise more than $1bn in a deal led by the investment firm of former US Treasury secretary Steven Mnuchin, in an effort to shore up its finances and calm fears after weeks of turmoil surrounding the bank.

The regional lender also appointed Joseph Otting, a former Comptroller of the Currency in the Donald Trump administration, as its new chief executive. Otting replaces Alessandro DiNello, who became CEO of the bank less than a week ago and will return to a previous role as non-executive chair. Mnuchin is also joining the board.

Mnuchin said: “With the over $1bn 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.”

NYCB’s shares had plunged more than 40 per cent earlier on Wednesday, before being halted at $1.86 for the announcement, after a report about the potential stock sale. The stock, rebounded on the news of the deal, almost doubling from its lows, but is still down about two-thirds since the end of January. The shares closed up more than 7 per cent at $3.46.

The latest fall in NYCB’s stock was not echoed in the wider regional banking sector. The KBW Regional Bank index, which includes NYCB, closed down just 0.4 per cent on Wednesday.

The investor group will purchase NYCB’s common stock at a price of $2 per share and convertible preferred stock at the same conversion price, according to a press release. It will also receive warrants to buy additional non-voting shares at $2.50 per share.

Mnuchin’s firm, Liberty Strategic Capital, is being joined by other investors including Hudson Bay Capital, Reverence Capital Partners and hedge fund Citadel. The group cautioned that its $1.05bn total investment was subject to “finalisation of definitive…