Investors in NYCB experienced significant turbulence on Wednesday as shares in the bank plummeted by 42% before rebounding sharply following the announcement of a $1-billion lifeline from investors.
NYCB is an American regional bank boasting assets exceeding $100 billion. It gained attention after acquiring the once crypto-friendly Signature Bank post its collapse in March 2023.
NYCB faced challenges after reporting weaker-than-expected financial results in Q4, reducing quarterly dividends, and grappling with concerns over potential losses from underperforming loans in the commercial real estate sector.
NYCB stocks dropped to $1.76 on March 6, prompting a trading halt. However, shares surged after news of the strategic equity investment, reaching $4 before settling at $3.40 in after-hours trading.
Former Treasury Secretary Steven Mnuchin, now a NYCB board member, led the capital injection, stating that the $1 billion investment would bolster the bank’s reserves, potentially restoring investor confidence.
NYCB’s tumultuous day occurred just ahead of the conclusion of the Federal Reserve’s Bank Term Funding Program (BTFP) on March 11, initiated in response to previous bank failures.
Angel investor Balaji Srinivasan likened the current banking turmoil to the 2008 financial crisis, highlighting concerns over the reliability of Treasuries, contrasting with the mortgage-backed securities debacle of the past.
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