On Thursday, Deutsche Bank reaffirmed its Hold rating on New York Community Bancorp (NYSE:NYCB), maintaining a price target of $5.00. The bank's shares have experienced a significant downturn, dropping between 65-70% since the company reported its fourth-quarter earnings on January 31.
The decline was triggered by an unexpected loss due to a higher credit provision, worries about commercial real estate (CRE) office and refinancing risks in the multi-family sector, and a reduction in dividend to conserve capital.
Further exacerbating the bank's challenges, the announcement of material weaknesses in internal controls and the subsequent resignation of the CEO led to additional credit rating downgrades.
These factors contributed to increased selling pressure on the stock. However, on March 6, a notable shift occurred when a group of investors, including former Treasury Secretary Steven Mnuchin and former Comptroller of the Currency Joseph Otting, revealed plans for a $1 billion equity capital raise.
The news of the potential capital raise initially caused such volatility in trading that it was temporarily halted, with the stock plummeting 45-50% at one point during the day. Nevertheless, after the announcement, the stock managed to close with a 7% gain.
Although the equity deal implies significant dilution for shareholders, which includes a series of warrants, it appears to be a welcomed move. Investors seem to have been anticipating an external capital injection to strengthen the bank's balance sheet and improve the overall market sentiment towards the stock.
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