EXHIBIT 99.1
SOVEREIGN BANCORP SETS EPS TARGET OF
$2.00 PER SHARE WITHIN FIVE YEARS
STRATEGY TARGETING A STOCK PRICE THAT IS 3x HIGHER,
OUTLINED IN THE 2000 ANNUAL REPORT
PHILADELPHIA, PA.Sovereign Bancorp, Inc. ("Sovereign")
(NASDAQ/NMS: SVRN), parent company of Sovereign Bank ("Bank"),
today announced a five year plan to achieve an average growth
rate of about 15% in operating EPS and to increase shareholder
value by about 300 percent over current levels within five
years.
In the company's 2000 Annual Report that is being mailed to
shareholders tomorrow, March 28, 2001, Sovereign outlines the
reasons it believes it has formed a strong foundation for higher
growth through a community-oriented commercial bank model. This
model includes a balanced $22 billion loan portfolio that is
equally distributed between commercial, consumer and residential
loans, a low cost $24 billion deposit base yielding margins in
the 3.5% to 4.0% range and a dominant market position in all
geographic markets the bank services between Boston and
Philadelphia.
During 2000, Sovereign integrated the strategic FleetBoston line
of business acquisition. Sovereign believes this acquisition,
which was acquired at only about seven times earnings, resulted
in a dramatically improved franchise and balance sheet. This
acquisition included substantially all of the Fleet Bank
consumer and small to middle market commercial banking franchise
in eastern Massachusetts and southern New Hampshire,
substantially all of the BankBoston franchise in Rhode Island,
and significant parts of the BankBoston franchise in western
Massachusetts and Connecticut. The acquisition included about
$12 billion in deposits, $8 billion in loans and about 3,500
team members.
"Our goal has always been and remains to deliver above average
returns for our shareholders over the longer haul. With the
FleetBoston acquisition, we took substantial integration and
capital risk in the short run that resulted in a significantly
lower P/E multiple and, hence, a lower stock price. Now that we
have proven to the marketplace that our team has successfully
completed the integration and that capital levels are being
restored more quickly than anticipated by the market, we believe
Sovereign is poised to achieve higher average returns to our
shareholders," stated Jay S. Sidhu, Sovereign's President and
CEO.
Sidhu added, "We believe we have established a solid foundation
for future growth. We are very clear about our strategy and
are totally focused on executing a five point plan to achieve
our financial and business goals".
The five point plan is follows:
-- Increasing fee-based revenues by approximately 15
percent on average a year.
-- Growing low cost core deposits in the 7 percent to 10
percent range annually.
-- Growing consumer and corporate banking loans in the
range of 8 percent to 10 percent annually.
-- Paying down about $1 billion in holding company debt
by 2005.
-- Maintaining an absolute focus on our four critical
success factors. Those being, superior asset quality,
low interest rate risk, high productivity levels and
superior sales and customer service through
experienced and committed team members.
"We have also invested heavily in developing superior cash
management, trade finance and capital market products. We now
look to above average returns from these investments". Sidhu
continued.
In addition to the enhanced franchise and line of business
initiatives, Sovereign has significantly repositioned and
strengthened its balance sheet over the past few months.
Several initiatives were implemented in 2000, including a
reduction of $6 billion in high cost borrowings and an
improvement in the mix of earning assets. This was followed by
the recently announced $150 million increase in common equity
through the issuance of 20 million shares of Sovereign common
stock and the refinancing of the $400 million credit facility
arranged by Citibank with the Bank of Scotland at a lower
interest rate and more favorable terms. Sovereign believes it
is now positioned to internally generate tangible common equity
of over $500 million between now and year-end 2002, without any
new offerings. "We are not planning any more capital offerings.
We are now totally focused on simply executing our strategy and
quickly increasing our equity capital," Sidhu commented.
Sidhu noted, "The $500 million of internally generated tangible
equity we anticipate over the next several quarters would
strengthen our capital base while significantly reducing our
holding company debt and accelerating our earnings. We expect
that the annual run rate of internally generated tangible equity
after October 2001 would be about $400 million, restoring
capital at Sovereign very quickly. We deferred paying about
$340 million to Fleet for the FleetBoston acquisition pursuant
to a non-solicitation agreement, which will be fully paid by
October 2001. After that date, we hope to generate
approximately $35 to $40 million of tangible equity capital each
month."
As a result of this focused and differentiated strategy of
combining the best of a smaller community-oriented commercial
bank with the best of a large bank, Sovereign anticipates
achieving approximately $2.00 per share in earnings by 2005 for
hopefully an implied stock price in the range of $24 to $30 a
share. "We do not envision straight line growth in EPS or our
stock price. It's a longer term target that the company is
totally focused on achieving," commented Sidhu.
"We believe this is a realistic expectation and is supported by
the fact that Sovereign has historically provided our
shareholders with a 25 percent total annual return to
shareholders over the past ten years. We believe we have an
excellent management team at Sovereign and these initiatives
will again put us among the top performing companies in the
country," stated Richard E. Mohn, Chairman of the Board,
Sovereign Bancorp, Inc.
Sidhu concluded, "We have a tremendous amount of optimism and
excitement at Sovereign as we look to build upon our foundation.
We envision making about $12.5 billion in loans to small and
medium size business in our market area over the next five
years, and an additional similar amount to consumers. Our
mortgage banking operations, which are more cyclical in nature,
may originate up to $10 billion in loans over this time period
also. We envision opening well over 200,000 new checking
accounts each year for our customers and having among the best
internet banking operations in the marketplace."
Sovereign is a $33 billion financial institution with
approximately 556 community banking offices and over 1,000 ATMs
in Pennsylvania, Delaware, New Jersey, Connecticut, New
Hampshire, Rhode Island and Massachusetts. Sovereign is
currently the third largest financial institution headquartered
in Pennsylvania and the third largest serving New England.
Note: This press release contains statements of Sovereign's
strategies, plans, and objectives, as well as estimates of
future operating results for 2001 and beyond for Sovereign
Bancorp, Inc. and Sovereign Bank. 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.
These forward-looking statements include statements with respect
to Sovereign's vision, mission, strategies, goals, beliefs,
plans, objectives, expectations, anticipations, estimates,
intentions, financial condition, results of operations,
operating efficiencies, revenue creation, shareholder value,
future performance and business of Sovereign, including:
(i) statements relating to Sovereign's expectations and goals
with respect to (a) growth in earnings per share and increases
in shareholder value; (b) growth in cash earnings, operating
earnings, net income and internal tangible equity generation;
(c) return on equity; (d) return on assets; (e) efficiency
ratio; (f) tier 1 leverage ratio; (g) annualized net charge-offs
and other asset quality measures; (h) fee income as a percentage
of total revenue; (i) tangible equity to assets; (j) book value
and tangible book value per share; (k) loan and deposit
portfolio compositions, employee retention, deposit retention,
asset quality, reserve adequacy; and (ii) statements preceded
by, followed by or that include the words "may," "could,"
"should," "pro forma," "looking forward," "would," "believe,"
"expect," "anticipate," "estimate," "intend," "plan," "hope,"
"envision," "strive," "try," or similar expressions. Although
we believe that the expectations reflected in our forward-
looking statements are reasonable, these forward-looking
statements involve risks and uncertainties which are subject to
change based on various important factors (some of which, in
whole or in part, are beyond Sovereign's control). The
following factors, among others, could cause Sovereign's
financial performance to differ materially from the goals,
plans, objectives, intentions and expectations, forecasts and
projections (and underlying assumptions) expressed in such
forward-looking statements: (1) the strength of the United
States economy in general and the strength of the regional and
local economies in which Sovereign conducts operations, (2) the
effects of, and changes in, trade, monetary and fiscal policies
and laws, including interest rate policies of the Board of
Governors of the Federal Reserve System; (3) inflation, interest
rate, market and monetary fluctuations; (4) the ability of
Sovereign and Sovereign Bank to successfully integrate the
assets, liabilities, customers, systems and management we
acquire into our operations; (5) the timely development of
competitive new products and services by Sovereign and the
acceptance of such products and services by customers; (6) the
willingness of customers to substitute competitors' products and
services and vice versa; (7) the success of Sovereign and
Sovereign Bank in meeting the post-closing regulatory
requirements with respect to the FleetBoston acquisition and the
ability to timely pay installments related to non-solicitations
agreement in connection with the acquisition; (8) the impact of
changes in financial services' laws and regulations and the
application of such laws and regulations (including laws
concerning taxes, capital, liquidity, proper accounting
treatment, securities and insurance) and the impact of changes
in generally accepted accounting principles; (9) technological
changes; (10) changes in consumer spending and savings habits;
(11) unanticipated regulatory or judicial proceedings;
(12) changes in asset quality; and (13) the success of Sovereign
at managing the risks involved in the foregoing.
Sovereign cautions that the foregoing list of important factors
is not exclusive, and neither such list nor any such forward-
looking statement takes into account the impact that any future
acquisition may have on Sovereign and any such forward-looking
statement, Sovereign does not undertake to update any forward-
looking statement, whether written or oral, that may be made
from time to time by or on behalf of Sovereign.
Operating earnings and cash operating earnings, as defined, are
not a substitute for other financial measures determined in
accordance with generally accepted accounting principles.
Because all companies do not calculate operating earnings and
cash operating earnings in the same fashion, these measures as
presented may not be comparable to other similarly titled
measures of other companies.