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Sovereign Bancorp to cut 1,000 jobs

Sovereign Bancorp Inc. of Philadelphia said yesterday it was cutting 1,000 jobs, or 8 percent of its staff, to reduce costs.

Sovereign Bancorp Inc. of Philadelphia said yesterday it was cutting 1,000 jobs, or 8 percent of its staff, to reduce costs.

"There is never a good time to reduce staff, but this step is necessary, particularly during this economic environment," Kirk W. Walters, Sovereign's chief financial officer and acting chief executive, said in a statement.

Sovereign is being taken over by Banco Santander SA of Spain for an estimated $1.9 billion in stock. The Spanish bank already is Sovereign's largest shareholder with a 24 percent stake. The deal is expected to close in the first quarter of 2009.

Other banks also have announced layoffs as they absorb losses on defaulting loans, especially mortgages, and on mortgage-related securities. The year-old recession also has hurt banks.

Sovereign's layoffs are to start immediately and continue through next year. It has 12,000 employees and 750 bank branches from New England to Maryland. Of its total workforce, about 2,500 are in the Philadelphia area, including 1,500 in Berks County.

In the eight-county Philadelphia area, the bank ranked sixth in deposits, with a market share of 6.5 percent as of June, the last federal figures available.

The cutback is part of an overall review of Sovereign's 2009 budget, the bank said. "The analysis was part of a broader effort to focus on our fundamental lines of business and to set our long-term strategic direction," Walters said.

In the third quarter, the company posted a loss of $982 million, or $1.48 a share, compared with a profit a year earlier of $63 million, or 11 cents a share. The loss in the latest period included a $575-million charge on the company's preferred shares of Fannie Mae and Freddie Mac, the mortgage companies seized by the federal government in September.

This year's third quarter also included a loss of $602 million on complex mortgage investments at the core of this year's meltdown across the financial services industry.

In October, Sovereign ousted Joseph P. Campanelli as chief executive and replaced him temporarily with Walters. Next month, Paul A. Perrault, a longtime New England banker, will become Sovereign's chief executive.

While Sovereign's official base is in Philadelphia, the company is managed from offices in Boston.

In addition to its retail operation, Sovereign Bank, the company provides business and corporate banking, insurance and cash management services.

Sovereign shares rose 4 cents yesterday to close at $2.88 on the New York Stock Exchange. At the start of the financial meltdown in mid-September, they were above $10.