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New York Community Bank is trying to reassure markets after a $1 billion bailout

New York Community Bank is trying to reassure markets after a $1 billion bailout

A new management team at New York Community Bank is reassuring investors after the troubled bank announced a $1 billion cash infusion led by former Treasury Secretary Steven Mnuchin. Shares of the stricken bank jumped on Thursday after executives provided investors with new information about the company's condition and details about the rescue plan it announced the previous day.

Over the past month, the bank's deposits have fallen by more than $4 billion, or 7 percent, company leaders, including Joseph Oetting, a longtime banking executive and close ally of Mr. Mnuchin who took over as CEO this week, said. They also announced a dividend cut, the second this year, to just one cent per share.

The bank's balance sheet will be “strengthened” by the cash infusion, as well as a comprehensive board overhaul and plans to reduce the major lender's exposure to the fragile commercial property market, Mr. Otting said on a call with analysts and investors. “We have several levers that we can use,” he added. “Withdraw them if necessary while we continue to strengthen the foundation.”

The bank's share price rose more than 10 percent at the beginning of trading on Thursday, before settling at a gain of 7 percent. However, that has left the stock down about 60 percent since the beginning of the year, as the bank has stumbled from one crisis to the next, reporting billions of dollars in writedowns and raising concerns about the accuracy of its past financial reports. The bank's shares rose and credit rating agencies downgraded its bonds.

During another decline in the bank's shares on Wednesday, trading was halted and in the late afternoon a $1 billion deal was announced, which appeared to stabilize the lender. “We view the capital raise as a much-needed step in the right direction, taking the worst-case scenarios, at least temporarily, out of the narrative,” analysts at Stevens wrote in a research note on Thursday.

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Analysts at Fitch, the rating agency that recently downgraded the bank, described the cash injection as a “positive development in the near term,” but warned of “ongoing uncertainty regarding the company’s strategic direction and business mix.”

The Hicksville, New York-based bank operates more than 400 branches under brands such as Flagstar, one of the country's largest residential mortgage servicers, and manages a huge loan book tied to rent-regulated apartments, the value of which has been affected by laws restricting them. Ability to profitably improve properties.

The bank's executives told analysts on Thursday that it will diversify its loan portfolio and look to sell assets to strengthen its balance sheet, among other cost-saving measures. Christopher Marinac, director of research at Janney Montgomery Scott, said the dividend cut was a “bitter pill” for some investors.

Regulators in Washington are keen to avoid another banking crisis as the first anniversary of the collapse of the Silicon Valley bank approaches. It and other lenders that failed last year — including Signature Bank, which was eventually acquired by New York Community Bank — went under after losing a torrent of deposits.

A large share of New York Community Bank's deposits are insured by the Federal Deposit Insurance Corporation, which covers deposits up to $250,000. About 80 percent of the bank's deposits fall below that limit, much more than at banks that went bankrupt last year, the bank said Thursday. Mr. Marinac noted that this may have prevented a significant decline in deposits.