By Manya Saini and Niket Nishant
(Reuters) - New York Community Bancorp's shares rose on Thursday after a $1 billion infusion from a consortium of prominent investors led by former U.S. Treasury Secretary Steven Mnuchin's firm helped soothe jitters around the lender's finances.
The bank also named ex-financial regulator Joseph Otting as its CEO, the latest in a series of measures undertaken to arrest a persistent stock rout that has pulled down NYCB nearly 67% since it reported a surprise loss in January.
The measures come almost a year after the collapse of Silicon Valley Bank and Signature Bank ignited widespread concerns over the health of the U.S. regional banking sector and its heavy exposure to commercial real estate, which could lead to steep losses in loan portfolios.
"This capital infusion coupled with adding several big names in the banking space to the board of directors should give both depositors and investors comfort," Piper Sandler analysts said.
The bank's troubles began late in January when it reported a surprise loss and slashed its dividend. Last week, it came under renewed pressure after flagging "material weakness" in internal controls and revising its loss to more than 10 times what was previously disclosed.
NYCB shares were last up 4% before the bell on Thursday, following a volatile session in which the stock hit its lowest in 27 years before closing 7.5% higher on the news of the investment.
The company is set to host an investor conference later on Thursday morning.
'MORE QUESTIONS THAN ANSWERS'
Most analysts cheered the capital injection and management shuffle, but some remain concerned about NYCB's future, saying the bank still has a long way to go to repair the damage.
New CEO Otting, the third to take the top job in weeks, is a banking industry veteran who served as the 31st Comptroller of the Currency. He is credited with reviving IndyMac, a mortgage lender Mnuchin bought out of the Federal Deposit Insurance Corporation's receivership in 2009 with an investor group.
"Even the link with the OCC (Office of the Comptroller of the Currency) may not be the glowing endorsement that it seems, given that it was the OCC waived through NYCB's acquisition spree that has done so much to get it in trouble in the first place," said Russ Mould, investment director at AJ Bell.
NYCB's acquisition of Flagstar Bank in 2022 and Signature Bank's assets last year pushed its assets above $100 billion, subjecting it to tougher regulations imposed on lenders of that scale. NYCB had to cut its quarterly dividend by 70% to build capital.
"While the list of investors injecting capital into the company is certainly impressive, with more questions than answers remaining at this juncture, we wait on the sidelines for the upcoming conference call," J.P.Morgan analyst Steven Alexopoulos said.
Other strategic actions being contemplated by NYCB and the fallout to the deposit base would be some issues to look out for on the call, he added.
(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Devika Syamnath)