New York Community Bank shares double after it announces vital $1 billion investment and new leadership - rebounding from a 40% plunge earlier in the day

Shares in New York Community Bank soared this afternoon after the struggling lender announced a $1 billion capital raise and new leadership.

NYCB agreed to a deal with several investment firms in exchange for equity in the regional bank, it announced on Wednesday afternoon.

Those firms include Liberty Strategic Capital ($450 million), Hudson Bay Capital ($250 million) and Reverence Capital Partners ($200 million).

Liberty is headed by former US Treasury secretary Steven Mnuchin, who will now join the bank's board. NYCB also named Joseph Otting, the former comptroller of the currency, as its new CEO, it announced in a press release.

Shares in the bank had initially fallen this morning after it was reported it was seeking a cash infusion to rectify its dire heading and to avert a spiraling crisis caused by souring real estate loans.

New York Community Bank has been facing a crisis over souring commercial real estate loans

The bank on Wednesday announced an investment of $1 billion from a combination of firms, including Liberty Strategic Capital, headed by former US Treasury secretary Steven Mnuchin

Shares in New York Community Bank rebounded on Wednesday afternoon

Shares hit a low of $1.76 at around 12.30pm ET but after news of the investment had picked up to $3.30 by 3pm - above the $3.18 level it had been at when markets opened in the morning.

The bank has been in crisis in recent months after ratings agencies downgraded its credit status to junk.

Companies are giving up on offices and downtown retail spaces after Covid normalized working from home and catalyzed the decline of downtown shopping.

That left the owners of commercial buildings unable to pay lenders like NYCB. Some 16 percent of its loans are for commercial real estate acquisition, development and construction.

The bank's share price first started to fall at the end of January - after it cut its dividend and posted a surprise loss.

On the last day of the month they plummeted 38 percent from $10.38 to $5.47. 

Covid normalized working from home and catalyzed the decline of downtown shopping

Then, last week, the Long Island-based bank disclosed it had identified 'material weaknesses' in internal controls tied to its review of loans.

Shares fell further after it amended its fourth-quarter results to report losses 10 times higher than it had previously, citing a $2.4 billion charge which it associated with pre-2007 purchases.

On Thursday, the bank also announced that its executive chairman Alessandro DiNello would take on the role of president and CEO, effective immediately.

But less than a week later he has been replaced by Otting. DiNello will be named as non-executive chairman, the bank said.