Sovereign is set to get new chief executive

Sovereign Bancorp’s wild ride isn't over.

The Spanish bank that is in the process of buying Massachusetts' third-largest lender plans to replace its chief executive after just a month on the job, its fourth leader in three years.

Speaking at a special meeting of shareholders in Madrid today, Emilio Botin, chairman of Spanish financial giant Banco Santander, said it will install as Sovereign's chief executive Gabriel Jaramillo after it completes its purchase of Sovereign by next month, Santander said in a statement today.

Jaramillo would replace Paul Perrault, who just took over as chief executive of Sovereign this month. Perrault stands to receive a $7.2 million payout under the terms of the contract he signed to take the reigns of Sovereign last fall.

A Santander spokesman declined to elaborate on why the bank is making the change now and said Botin and Jaramillo wouldn't comment. Perrault didn't return a message this morning and has declined multiple interview requests since joining the bank this month.

In the statement, Botin also said the bank will write off $2 billion at Sovereign, headquartered in Pennsylvania. Last month Sovereign said it would lay off 1,000 of its 12,000 employees, and Santander said in its statement that it aims to save $215 million in cost savings at Sovereign and to increase its profit to $750 million by 2011. It also plans to reduce Sovereign's risk-weighed assets by $10 billion.

Perrault's unclear role has drawn many questions inside Sovereign because Santander executives helped select him for the job at the end of September after Sovereign's stock plunged in uncertain markets.

Two weeks later, Santander agreed to purchase the 75 percent of Sovereign that it didn't already own. Together the steps appeared to stabilize Sovereign, which had seen a run on its deposits. Because of a non-compete agreement with his past employer, Chittenden Corp., Perrault couldn't start as head of Sovereign until this month.
(By Ross Kerber, Globe staff)