PHILADELPHIA, Dec. 15 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc.
("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"),
announced today that its management team has completed a comprehensive
review of Sovereign's operating cost structure and its board of directors
has approved several expense reduction initiatives.
In characterizing the review process, Joseph P. Campanelli, President
and CEO of Sovereign Bancorp stated, "Our focus was on redundancies and
operating inefficiencies, products not meeting profit goals and
consolidation of departments. At the same time we took care to minimize
impacts on customer facing activities and organic revenue generation. This
is a major step toward achieving our goals announced in October to
aggressively reduce costs, strengthen our capital position, improve
customer service, and re-present our company to investors through better
communications."
Consistent with management's recommendations, Sovereign's Board of
Directors approved approximately $100 million of cost reductions involving
consolidation of support groups, exit of business lines performing below
expectations, contract renegotiations, and a reduction in workforce.
Sovereign anticipates realizing 75% of these savings on a run rate basis by
the end of the second quarter of 2007 and 100% by the end of 2007. In
total, Sovereign anticipates that $80 million of these cost reductions will
be reflected in the 2007 expense base.
Sovereign will reduce its workforce by approximately 7% percent, or
about 800 positions, the majority of which will be in the fourth quarter of
2006 with the remainder, primarily through attrition, throughout 2007.
Reductions will be mostly in back office and corporate staff functions.
Team members who are impacted will receive enhanced severance packages,
which include outplacement services and extended benefits coverage. The
workforce reduction is expected to generate approximately half of the
overall $100 million of identified reductions.
"The decision to reduce our workforce was a very difficult one to make,
especially during the holiday season," said Campanelli. "There is never a
good time to take these actions. We pledged to aggressively improve our
business fundamentals and to openly communicate our decisions promptly.
These steps are consistent with that pledge."
Sovereign expects total charges to reported earnings of $125 million to
$140 million, pre-tax, or $.16 to $.18 per share, after-tax, related to the
announced initiatives over the next several quarters. During the fourth
quarter of 2006, Sovereign expects to record a charge of $35 million to $40
million, pre-tax, or $.04 to $.05 per share, after-tax, related to the
expense management reduction program. Additionally, merger and integration
costs related to the acquisition of Independence Community Bancorp, Inc. of
$8.5 million to $10.0 million, pre-tax, or approximately $.01 per share,
after-tax, will also be charged to reported earnings in this quarter.
"The next step in our business realignment program, which will be
announced shortly, will be initiatives to rationalize our balance sheet to
current industry conditions and our operating objectives of focusing on
core operations and business fundamentals. These balance sheet initiatives
may require an additional charge in the fourth quarter of 2006 or in future
periods," concluded Campanelli.
About Sovereign
Sovereign Bancorp, Inc., ("Sovereign") (NYSE: SOV), the parent company
of Sovereign Bank, is a $90 billion financial institution with nearly 800
community banking offices, over 2,000 ATMs and approximately 12,000 team
members with principal markets in the Northeast United States. Sovereign
offers a broad array of financial services and products including retail
banking, business and corporate banking, cash management, capital markets,
wealth management and insurance. Sovereign is the 18th largest banking
institution in the United States. For more information on Sovereign Bank,
visit http://www.sovereignbank.com or call 1-877-SOV-BANK
Note:
This press release contains financial information determined by methods
other than in accordance with U.S. Generally Accepted Accounting Principles
("GAAP"). Sovereign's management uses the non-GAAP measure of Operating
Earnings, and the related per share amount, in their analysis of the
company's performance. This measure, as used by Sovereign, adjusts net
income determined in accordance with GAAP to exclude the effects of special
items, including significant gains or losses that are unusual in nature or
are associated with acquiring and integrating businesses. Operating
earnings for 2005 and 2006 EPS purposes represent net income adjusted for
the after-tax effects of merger- related and integration charges, certain
restructuring charges, other-than- temporary impairment charges on Fannie
Mae and Freddie Mac preferred equity securities and proxy and related
professional fees. Since certain of these items and their impact on
Sovereign's performance are difficult to predict, management believes
presentations of financial measures excluding the impact of these items
provide useful supplemental information in evaluating the operating results
of Sovereign's core businesses. These disclosures should not be viewed as a
substitute for net income determined in accordance with GAAP, nor are they
necessarily comparable to non-GAAP performance measures that may be
presented by other companies.
This press release contains statements of Sovereign's strategies,
plans, and objectives, as well as estimates of financial condition,
operating and cash efficiencies and revenue generation. These statements
and estimates constitute forward-looking statements (within the meaning of
the Private Securities Litigation Reform Act of 1995), which involve
significant risks and uncertainties. Actual results may differ materially
from the results discussed in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand,
real estate values and competition; changes in accounting principles,
policies, or guidelines; changes in legislation or regulation; Sovereign's
ability in connection with any acquisition to complete such acquisition and
to successfully integrate assets, liabilities, customers, systems and
management personnel Sovereign acquires into its operations and to realize
expected cost savings and revenue enhancements within expected time frame;
the possibility that expected one time merger-related charges are
materially greater than forecasted or that final purchase price allocations
based on the fair value of acquired assets and liabilities and related
adjustments to yield and/or amortization of the acquired assets and
liabilities at any acquisition date are materially different from those
forecasted; other economic, competitive, governmental, regulatory, and
technological factors affecting the Company's operations, integrations,
pricing, products and services; and acts of God, including natural
disasters.
Sovereign Bancorp is followed by several market analysts. Please note
that any opinions, estimates, forecasts, or predictions regarding Sovereign
Bancorp's performance or recommendations regarding Sovereign's securities
made by these analysts are theirs alone and do not represent opinions,
estimates, forecasts, predictions or recommendations of Sovereign Bancorp
or its management. Sovereign Bancorp does not by its reference to any
analyst opinions, estimates, forecasts regarding Sovereign's performance or
recommendations regarding Sovereign's securities imply Sovereign's
endorsement of or concurrence with such information, conclusions or
recommendations.
SOURCE Sovereign Bancorp, Inc.
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Related links:
http://www.sovereignbank.com/
CONTACT:
Financial: Mark McCollom, +1-610-208-6426, or
mmccollo@sovereignbank.com, or Stacey Weikel, +1-610-208-6112, or
sweikel@sovereignbank.com; or Media: Ed Shultz, +1-610-378-6159,
or eshultz1@sovereignbank.com, all of Sovereign Bancorp, Inc.
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