EXHIBIT 99
SOVEREIGN OUTLINES
STRATEGIC VISION FOR YEAR 2000
WYOMISSING, PA . . . Sovereign Bancorp, Inc. (NASDAQ/
NMS:SVRN), parent company of Sovereign Bank, FSB ("Sovereign").
Speaking at Salomon Brothers First Annual Financial Institutions
Conference in New York City, President and Chief Executive
Officer Jay S. Sidhu outlined Sovereign's Corporate Strategy and
its Strategic Vision & Initiatives for 1996 and beyond.
"Sovereign's goal is to double its earnings from the present
level of $1 per share to about $2 per share by the year 2000,"
said Sidhu. "Of course, this is not a projection, it is our goal
that can be influenced by several external and internal factors,
including national economic trends, competition within the
banking industry, the opportunities that the continuing
consolidation of the industry may create for Sovereign and the
ability of Sovereign to successfully implement the strategic
initiatives we will describe today. We will do everything
possible to strive toward about $2 per share in earnings by the
year 2000 or so," Sidhu told investors.
"At Sovereign, we remain focused on our financial goals of
delivering sustainable high quality earnings and increasing those
earnings approximately 15%, on average, each year. The year 1995
marked Sovereign's 10th straight year of higher earnings," said
Sidhu.
"Earnings have increased an average of 52% over the last
5 years, Net Income was up 22% in 1995 and EPS was up 10%,"
Sovereign's Chief Financial Officer, Karl D. Gerhart commented at
the conference.
"We want to combine the best features of Commercial Banks
and Thrifts. Sovereign is a highly focused Community Bank
specializing in Consumer and Small Business Markets," remarked
Sidhu. "We look like a Commercial Bank in franchise and interest
rate risk and resemble a Thrift in asset quality and overhead
ratios. Based upon this, the strategy of Sovereign for 1996 and
beyond remains consistent with the strategy articulated in
previous annual reports which consists of four (4) Critical
Success Factors including high asset quality, low interest rate
risk, low overhead coupled with excellence in sales, service and
continued growth of Team Members," Sidhu continued.
Commenting on Sovereign's successful acquisition strategy,
Sidhu noted that Sovereign has completed 14 acquisitions over the
past 6 years without incurring any restructuring charges. All of
these acquisitions have been accretive to earnings from the date
of consummation or within the first year. "Sovereign remains
committed to only doing acquisitions which complement our
franchise, our businesses and are accretive to earnings within
the first year," said Sidhu.
To prepare for 1996 and beyond, Sovereign studied its
external environment and noted that during 1995 the largest
concentration of bank mergers and acquisitions in the US occurred
within Sovereign's market area. The potential to attract other
institution's customers as consolidations and system conversions
occur is a once-in-a-lifetime opportunity. In addition, these
consolidations create an excellent opportunity to add talented
and experienced Team Members to the Sovereign family. The merger
and acquisition activity has also increased the premiums paid and
expected by sellers, thus reducing the opportunity for accretive
acquisitions.
After studying the environment, Sovereign has embarked on
several strategic initiatives focused on increasing interest
income, lowering interest Expense, increasing Fee Income and
controlling Expenses. "We remain a growth company. It is growth
in Earnings, not size that matters," said Sidhu.
To increase Interest Income, Sovereign has focused on
increasing its market share of Consumer Loans, primarily home
equity related, by use of the print media, direct mail and tele-
marketing. Sovereign also intends to increase Interest Income by
significantly increasing its commitment to variable rate Mortgage
Lending and Small Business Banking. "Although small businesses
historically were not a primary line of business for Sovereign,
Small Business Banking is one of those niches often overlooked by
big banks when involved in mega acquisitions," commented Sidhu.
"We recently hired a team of several very experienced Small
Business Lenders who can bring their long standing relationships
with them," he continued. "We intend to further increase
Interest Income by replacing lower yielding investments with
loans," Sidhu continued. In addition to the traditional methods,
Sovereign is currently implementing Affinity Lending, Tele-
Marketing, InterNet access and constantly researching new
techniques.
To lower Interest Expense, Sovereign continues to emphasize
its Free Checking Product (60,000 new accounts opened in 1995)
plus other low cost products such as Escrow Deposits, Small
Business Deposits, Money Management Accounts for Consumers &
Small Businesses and Municipal Accounts. "In 1996, Sovereign
will further focus on relationship selling, i.e. the "bundling of
products" rather than one product per customer," said Sidhu.
Another initiative for 1996 will be the non-traditional or direct
banking, i.e. offering banking directly through telephone
PC Banking or on the InterNet.
Sovereign anticipates increasing its Fee Income by
increasing deposit fees (up 42% in 4th Quarter 1995), with higher
usage of alternative investment products (up over 300% in 1995),
by increasing profitability from its servicing business and by
the continued increases in volume from Mortgage Banking. In
addition, Sovereign has recently introduced several new products,
such as a Check Card and its Choice One Club which can also lead
to higher Fee Income.
To control Non-Interest Expenses, Sovereign will remain
focused on its head count. There are also several Process
Improvement Teams under way as well as some new technological
initiatives which can contribute to keeping Sovereign's Expense
Ratio below 1.30% of Total Assets. "Our long-term goal is
actually to bring this ratio down to about 1%," Sidhu added.
Sidhu concluded by offering five major reasons why he and
some other insiders are buying Sovereign stock presently:
- Sovereign's clear cut focused strategy with a proven
track record.
- Clearly articulated financial goals of about 15% growth
in earnings.
- Strong market share in a rapidly consolidating market
place.
- Strategic initiatives that can improve Sovereign's
financial position.
- Sovereign's philosophy of studying all strategic
options at least once a year.
Sovereign is an $8.1 billion company with 120 Community
Banking Offices operating in Marketing Divisions in eastern
Pennsylvania, northern Delaware and New Jersey. Now the
4th largest Bank headquartered in Pennsylvania, Sovereign's
closing price of its Common Stock on Tuesday, January 30, 1996
was $10.125 per share and its Preferred Stock closed at
$56.75 per share.
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