Mnuchin Sees Opportunity To Turn New York Community Bancorp Into 'Very Attractive' Regional Bank, Highlights Valuation Upside

Former Treasury Secretary Steven Mnuchin and a group of outside investors have invested more than $1 billion in New York Community Bancorp Inc NYCB.

Mnuchin explained the investment in the troubled regional bank Thursday in an interview on CNBC’s “Squawk On The Street.”

What To Know: Mnuchin's Liberty Strategic Capital led a group of investors that invested more than $1 billion to shore up confidence in the regional bank this week. The deal, which was announced on Wednesday, will see Mnuchin join the company’s board and former Comptroller of the Currency Joseph Otting take over as CEO.

Mnuchin told CNBC on Thursday that New York Community Bancorp is a business that he has “known well” and followed for a long period of time. Years ago, the former Treasury Secretary looked into potentially merging OneWest with New York Community Bancorp, he said.

Mnuchin previously led an investor group that acquired failed mortgage lender IndyMac following the 2008 financial crisis. Otting was named CEO of the rebranded company, OneWest, per Bloomberg.

The former Treasury Secretary has kept close tabs on the bank in recent months. He noted that he believed New York Community Bancorp’s purchase of certain assets and liabilities of Signature Bank was a “very attractive deal” for the company.

“At the end of January, the company announced some issues associated with cutting the dividend and increasing reserves. I reached out to the company and began a diligence process in case they wanted to increase capital, and it was really at the end of last week that we moved forward very quickly,” Mnuchin said.

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At the end of February, the selloff in New York Community Bancorp shares intensified after the company identified material weakness in internal controls and shook up its management team. The company has made multiple leadership changes in recent weeks.

Mnuchin told CNBC that New York Community Bancorp is a top 20 bank in the U.S. with “very attractive” markets and a great branch network.

New York Community Bancorp’s situation is much different than the regional banking problems a year ago because the company has a very stable deposit base with 80% of deposits insured. The perceived risk is coming from the company’s exposure to real-estate loans, he said.

“With putting a billion dollars of capital into the balance sheet, it really strengthens the franchise, and whatever issues there are in the loans, we’ll be able to work through,” Mnuchin said.

“Bringing Joseph Otting in, who I worked with very closely in OneWest and then as Controller, you know, I think there’s a great opportunity to turn this into a very attractive regional commercial bank.”

Mnuchin told CNBC that he’s looking at the investment with a three- to five-year time horizon. Tangible book value of the stock is currently above $6 per share, he said.

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NYCB Price Action: New York Community Bancorp shares were up 6.65% at $3.68 at the time of publication, according to Benzinga Pro.

Photo: Wikimedia Commons.