Shen V rebounds! Regional bank NYCB officially announced raising over 1 billion, with the stock price rising over 30% after dropping nearly 50%.

New York Community Bancorp's stock price experienced a huge shake-up in the U.S. region.

On Wednesday, March 6th, Eastern Time, media reports revealed that NYCB is seeking to inject cash by selling equity to enhance external confidence in the bank. Concerns over potential real estate loan losses, weak internal controls, and a significant drop in stock prices prompted NYCB to engage bankers to assess investor interest in purchasing the company's shares.

Following the news, NYCB's stock price plummeted during trading hours, with the intraday decline rapidly expanding from less than 3% to over 40%, hitting a low of over 47% intraday. This downward trend seemed poised to resume the sharp decline seen since the previous Friday after rebounding nearly 19% on Tuesday. Trading of NYCB was halted at least three times during the day.

After the stock price plunge, NYCB announced during the midday trading session on Wednesday that it had raised over $1 billion through equity investments from a company owned by former U.S. Treasury Secretary Mnuchin. Subsequently, the stock price continued to rebound, not only erasing losses but also surging by over 30%, peaking at 36.6%, before retracing most of the gains to ultimately close up over 7.4%.

As of the Wednesday closing, NYCB's cumulative decline over the past five trading days had narrowed to within 25%, following two consecutive days of gains after the sharp drop last Friday.

Prior to the significant stock price fluctuations on Wednesday, NYCB had been grappling with a crisis in commercial real estate bad debts.

Earlier this year, at the end of January, NYCB reported a surprise loss of $260 million in the fourth quarter due to provisions for bad debts in commercial real estate. The culprit for the loss was provisions for loan losses in the fourth quarter amounting to $552 million, far exceeding market expectations and the $62 million in the third quarter, reflecting a deteriorating credit outlook.

Last Friday, NYCB faced another crisis, disclosing issues in its loan review process, resulting in a write-down of $2.4 billion in goodwill. This led to a revision of the fourth-quarter performance, with the loss expanding to $2.71 billion, ten times the $260 million reported at the end of January.

In response to the current turbulent situation, NYCB announced last Friday the appointment of Alessandro DiNello to replace Thomas Cangemi as CEO, along with the appointment of a new Chief Risk Officer and Chief Audit Officer. Board changes were also announced, with Marshall Lux, who has been an independent director since 2022, appointed as Chairman, while former Chairman Hanif "Wally" Dahya stepped down. Some comments suggest that investors are particularly concerned about NYCB's concentration in providing loans for rent-stabilized buildings in New York City. This market has been hit by rising interest rates and a 2019 law that limits landlords from increasing rent significantly. Around half of NYCB's multi-family residential loan portfolio must comply with this rent regulation.