Sovereign replaces CEO; stock price rebounds
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NEW YORK - Sovereign Bancorp Inc., the second-largest US savings and loan, rose the most in 22 years in New York trading yesterday as the bank said its chief executive will be replaced and analysts raised their stock recommendations.
Sovereign, based in Philadelphia, soared 69.5 percent, or $1.62, to $3.95 in New York Stock Exchange composite trading, its biggest increase since August 1986, and almost reversing the 72 percent drop Monday.
Sovereign said Paul Perrault will replace Joseph Campanelli as CEO. Perrault, 57, will start in January, and Campanelli, 52, will leave immediately and be replaced by chief financial officer Kirk Walters on an interim basis.
"The proposed change would reunite two well-respected managers from a very well-run regional bank, which we consider to be a strong positive," Joseph Fenech and Casey Orr, analysts with Sandler O'Neill & Partners, wrote in a report yesterday. They raised their rating on the stock to "hold" from "sell." "With the recent decline in the stock, we think the risk/reward trade-off no longer favors selling the stock at the current level."
Perrault was previously CEO of Chittenden Corp., Vermont's biggest bank, where Walters worked as chief financial officer. Sovereign named Campanelli CEO in October 2006, replacing Jay Sidhu.
Sovereign said in a regulatory filing after the end of regular US trading that Perrault will be paid an annual salary of $800,000, a minimum bonus of $600,000 for 2009, along with a one-time award of 200,000 restricted shares and options to buy 1 million shares of common stock.
Sovereign, whose largest shareholder is Spain's Banco Santander SA, curtailed lending and is shrinking its balance sheet as defaults increase after posting a $1.3 billion 2007 loss. This month the lender said it was selling its portfolio of collateralized debt obligations after revealing it may take "significant" charges on its holdings of Fannie Mae and Freddie Mac, the nationalized mortgage finance companies.
Santander spent $2.9 billion in 2005 and 2006 to buy about 24.9 percent of Sovereign, paying an average $24.83 a share.
