labels: World economy
American bank Sovereign Bancorp to cut 1,000 jobs news
20 December 2008

Sovereign Bancorp Inc, the struggling regional lender run from Boston, said it would cut about 1,000 jobs as it battles to lower expenses in the face of soured investments and an escalating number of troubled loans.

Kirk Walters, CFO and acting CEO, said in a statement that the cuts are the result of a review of Sovereign's projected 2009 budget. The job reductions will begin this quarter and continue next year, the bank said.

In the statement, Walters said, "We conducted a thorough review of our projected 2009 budget in an effort to reduce our costs and become a more efficient bank. The analysis was part of a broader effort to focus on our fundamental lines of business and to set our long-term strategic direction."

"The decision to reduce our workforce was a very difficult one, especially during the holiday season," Walters said. "There is never a good time to reduce staff, but this step is necessary, particularly during this economic environment. We are working to make the transition from the bank as smooth as possible for all affected team members."

The cuts represent about 8 per cent of the bank's work force. One unnamed executive said more than 100 jobs would be cut in Massachusetts, where Sovereign is No. 3 in deposits behind leader Bank of America Corp. and No. 2 Citizens Bank.

Eliminated employees likely will not get the sort of severance afforded to recently ousted Sovereign CEO Joseph Campanelli. He got a $2,500-an-hour consulting agreement as part of his recent exit package. The deal is on top of Campanelli's $8.6 million severance that includes accumulated restricted stock. In addition, he received a two-year extension on about 258,000 stock options currently below their strike price.

Sovereign, which has most of its business in the Northeast United States, has seen credit losses rise as a result of the sub-prime crisis. The company posted a loss of $1.48 per share for the third quarter in part due to increasing its allowance for credit losses.

The bank, based in Wyomissing, Pennsylvania, agreed in October to a $1.9 billion all-stock deal from Spanish banking giant Santander to buy the 75.65 per cent piece it did not already own. The US Federal Reserve approved the deal earlier this month. (See: Banco Santander bids $2.53-billion for distressed Sovereign Bancorp)

Sovereign shares were up 4 cents at $2.88 on Friday on the New York Stock Exchange. The bank's shares have fallen 75 per cent this year.


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American bank Sovereign Bancorp to cut 1,000 jobs