PHILADELPHIA, Dec. 21 /PRNewswire-FirstCall/ -- Sovereign Bancorp, Inc.
("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"),
announced today that management has presented a long-range plan to improve
the operating performance of the company, including a comprehensive review
of Sovereign's balance sheet. Sovereign has taken specific steps to reduce
the company's reliance on wholesale revenues and to increase focus on
Sovereign's core businesses.
Commenting on management's review of the balance sheet, Joseph P.
Campanelli, Sovereign's President and CEO, stated, "Sovereign's Board of
Directors has approved a balance sheet restructuring that involves de-
leveraging a total of approximately $10.0 billion in wholesale assets and
$10.0 billion in wholesale funding. This enhances the quality of our
balance sheet, improves the quality of earnings, and enhances our capital
ratios while repositioning Sovereign for sustainable growth in core
earnings over the long- term."
In an effort to reduce its wholesale portion of earnings and for credit
and interest rate risk purposes, Sovereign intends to sell approximately
$9.5 billion of loans at a weighted average yield of 6.28% and $500 million
of investment securities at a weighted average yield of 5.25% and reduce
wholesale borrowings by about $8.5 billion at a weighted average cost of
4.95% and brokered money markets by approximately $1.5 billion at a
weighted average cost of 5.50%. In addition, Sovereign has sold $1.4
billion of investment securities at a weighted average yield of 4.60% and
reinvested the entire $1.4 billion, for liquidity and collateral purposes.
Last week, Sovereign announced that its Board of Directors had 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.
In the fourth quarter of 2006, Sovereign will report a loss of
approximately $230 million to $244 million, after-tax, or $.45 to $.47 per
share from the sale of the loans and investment securities discussed above.
As previously announced, Sovereign also anticipates fourth quarter charges
related to the acquisition of Independence Community Bancorp, Inc. and
expense management initiatives of $28 million to $32.5 million, after-tax,
or $.05 to $.06 per share. In addition, Sovereign will also record a charge
in the fourth quarter of 2006 of $18.9 million, after-tax, or $.04 per
share related to Jay Sidhu's Retirement-Resignation and Transition
Agreement.
These steps dramatically improve the company's loan to deposit ratio to
103% from 117% at September 30, 2006. On a pro forma basis, the sales of
assets and balance sheet restructuring activity would expand net interest
margin 20 to 25 basis points and Tier 1 leverage by approximately 50 basis
points. The effects of these initiatives are expected to be fully
implemented by the end of the first quarter of 2007.
"Although we do not give earnings guidance, we thought it was important
to give you some indication of our thoughts for 2007. We anticipate year
over year loan growth in the upper single digits for our core lending
businesses; i.e. commercial, direct home equity and indirect auto. We
anticipate year over year core deposit growth in the mid-single digits from
our core markets, tempered by runoff in brokered and government deposits,"
concluded Campanelli.
A presentation providing more detail on the balance sheet restructuring
and expense reduction initiative is available at
http://www.sovereignbank.com>Investor Relations>News and Press>Presentations.
In addition, Sovereign will hold a conference call at 10:00 a.m. ET on
Thursday, December 21st, to discuss the content of this disclosure.
Investors, analysts and other interested parties are invited to dial into
the conference call at 800-464-9103; international parties are invited to
dial into the conference call at 706-634-2282. A replay of the conference
call will be available for approximately 30 days after the date of the call
by dialing 800-642-1687, confirmation id #4912636.
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.
Financial Contacts:
Mark McCollom 610-208-6426 mmccollo@sovereignbank.com
Stacey Weikel 610-208-6112 sweikel@sovereignbank.com
Media Contact:
Ed Shultz 610-378-6159 eshultz1@sovereignbank.com
SOURCE Sovereign Bancorp, Inc.
 back to top
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
|
