Exhibit 99.2
Fleet Boston Divestiture
Amended Terms- Addressing the Market's Concerns
February 29, 2000
Forward Looking Statement
- This presentation contains statements of Sovereign's
strategies, plans and objectives, as well as estimates
of future operating results for Sovereign Bancorp, Inc.
as well as estimates of financial condition, operating
efficiencies and revenue creation
- 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; our
ability to successfully complete and integrate our New
England acquisition and retain the related customer
base; changes in interest rates, deposit flows, loan
demand, real estate values and competition; changes in
accounting principles, policies, or guidelines; changes
in legislation or regulations or the application
thereof; and other economic, competitive, governmental,
regulatory, and technological factors affecting the
Company's operations, pricing, products and services
The New Sovereign - A Less Risky Investment
- 3 primary risk factors identified in our SEC disclosure
documents were:
(1) Low holding company tangible capital ratios
(2) Integration Risk from the large size of the
transaction
(3) Retention of management and customers
- Amended transaction addresses all 3 of these risks head-
on
- Sovereign now has several hundred million of
additional capital "cushion" in 2000, and will have
less Holding Co. debt at costly rates
- Sovereign now is performing 3 integrations of 85-110
branches each - we have experience completing
conversions of this size successfully (CoreStates -
93; SVRN - 180 during 1998)
- New England Management team is fully in place
Management Team is in Place
- Office of the Chairman created (Sovereign Bank New
England)
- John Hamill - CEO and Chairman, SBNE
- Former President and Vice-Chairman of Shawmut;
President of Fleet Bank in MA
- Over 35+ years commercial banking experience;
20 years in New England
- Joe Campanelli - President and COO
- Most recently served as President of Sovereign
Bank's Structured Finance Group
- Over 20 years commercial banking experience in New
England
Revised Transaction Terms
- Multiple closings/multiple conversions instead of single
closing
- Earn-out of $340 million - accounted for as non-compete
covenant
Multiple Closings
- Expected staging of the multiple closings and systems
conversions are as follows:
Closing #1 Closing #2 Closing #3
Date March 24 June 16 July 21
Location CT/RI Eastern MA Central MA/NH
# Branches 90 86 109
Deposits $4.0 B $4.0 B $4.0 B
Loans $3.2 B $3.5 B $2.4 B
Changes to Loan Mix
($ in billions) At Signing Today
Consumer $0.5 $1.2
Small Business 0.8 0.8
Commercial 2.8 2.3
Residential 3.8 4.8
Totals $7.9 $9.1
WAC 7.7% 8.0%
Changes to Deposit Mix
($ in billions) At Signing Today
DDA/NOW $ 3.9 $ 4.1
Savings 2.0 2.1
MMDA 2.4 2.4
Time 3.5 3.4
Totals $11.8 $12.0
Weighted Avg. Rate 2.50% 2.65%
Earn-out of $340 Million
- Accounted for as a covenant not to compete
- Payable to Fleet Boston over 5 quarters, contingent on
their compliance with covenant each quarter
- Treated as non-operating expense each quarter commencing
3Q00 until fully expensed
- Contingent nature of the earn-out results in $340
million less goodwill recorded, resulting in $340
million of higher tangible capital at each closing and
beyond
- Earn-out structure accelerates over $100 million of
permanent tangible capital by 3Q01 through the
realization of the tax benefit of the $340 million
Earn-out of $340 Million (cont'd)
- Earn-out structure creates 260 bp of incremental
tangible capital at July 21 closing over previous
transaction
- Resulting Tier 1 Leverage ratio at Sovereign Bancorp is
3.00% or higher at all times; Sovereign Bank is 5.25% or
higher
- Staggered closings reduce integration and run-off risk,
and increase franchise value
Financial Impact of Earn-out
- Anticipated non-operating expense recognition is as
follows:
Recorded
($ in Recorded Expense
millions) Expense (after-tax)
3Q 00 $ 49 $ 32
4Q 00 73 48
1Q 01 73 48
2Q 01 73 48
3Q 01 73 48
4Q 01 24 16
- Earn-out has no impact to 2000 and 2001 operating
earnings
- Earn-out will impact 2000 and 2001 GAAP earnings by
approximately $0.35 and $0.71, respectively
Capital Impact
- Sovereign Bancorp and Sovereign Bank have permanently
enhanced capital ratios:
Pro Forma Capital Ratios
@ Final Closing
Nov. '99(1) Today
Sovereign Bancorp
GAAP Equity/Assets 5.23% 5.39%
Tier 1 Leverage 0.38% 3.01%
Tangible Equity/Assets* 1.50% 2.91%
Sovereign Bank
GAAP Equity/Assets 6.28% 8.65%
Tier 1 Leverage 4.62% 5.26%
Tangible Equity/Assets* 6.20% 6.22%
Additionally, Sovereign Bancorp will achieve over 5.00% Tier 1
capital (tax-adjusted basis) and 4.00% Tier 1 capital by 4Q01,
less than 18 months after closing
* tax-effected basis
(1) Derived from single closing, pro forma data provided in
Nov. 1999 registration statement
Transaction Status
- Revised agreement executed February 28, 2000
- Addresses tangible capital and execution risk concerns
- Staggered closing and systems conversions occur
March 24, June 16 and July 21
- OTS approval received
- DOJ, Fed status - verbal approval received by Fleet;
formal sign-off shortly
- Better deal for Sovereign stakeholders than previously
announced
"WORD"
Long Document Name:
Exhibit 99.2: Fleet Boston Divestiture -
Amended Terms Addressing the Market's
Concerns
System Document Number:
47511_1 PFG
Additional Information:
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Notes:
I cut and pasted this document from a Powerpoint Presentation. /JCB
EDGAR FORMAT USED - PLEASE DO NOT CHANGE ANY STYLES
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Origination Date:
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Author's Initials:
pfg/wjr
Last Revised By:
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Last Revision Date:
2/28/00;2-28;3-2;
Quick Fill Numbering:
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03/02/00/SL1 47511v1/07352.204
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03/02/00/SL1 47511v1/07352.204