NYCB’s deposits shrink by over US$12b; Mnuchin leads US$1b rescue
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The news: The New York Community Bank faced a cash crunch as its deposits shrank by USD12 billion ($18.13 billion) in three days, leading it to raise USD1 billion in a deal led by Steven Mnuchin’s investment fund, Liberty Strategic Capital.
The numbers: Shares in NYCB plunged over 40% during trading on Wednesday, before being halted at USD1.86 for the funding announcement. The stock rebounded on the news, closing up 7.5% and continued to climb during trading on Thursday.
The context: Mnuchin, former US Treasury Secretary will join the NYCB’s board as part of the USD1 billion investment, and stated that the injection of capital should now be sufficient “should reserves need to be increased in the future to be consistent with or above the coverage ratio of NYCB’s large bank peers.”
The NYCB’s credit rating was downgraded to ‘junk’ by Moody’s over the weekend, which led to a cash crunch as core deposits shrank by just over USD12 billion in three days. The USD12 billion amounts to around half of the bank’s total uninsured deposits.
The sources: Barron's, Financial Times
