Sovereign reports $1.6 billion loss

Sovereign Bancorp, Inc. ("Sovereign") (NYSE: SOV), parent company of Sovereign Bank ("Bank"), today reported results for the fourth quarter and full year of 2007. As previously announced continued volatility in the financial markets and deterioration in the credit environment had an adverse impact on the fourth quarter of 2007 financial results. For the fourth quarter of 2007, Sovereign reported a net loss of $1.6 billion or $(3.34) per share, primarily driven by goodwill impairments. This compares to a net loss of $129 million or $(.28) per diluted share for the fourth quarter of 2006. For the full year 2007, Sovereign reported a net loss of $1.3 billion or $(2.85) per share as compared to net income of $137 million or $.30 per diluted share in 2006.
Commenting on results for the fourth quarter of 2007, Joseph P. Campanelli, Sovereign’s President and CEO, stated, "As previously announced, our fourth quarter results have been impacted significantly by disruption in the credit markets and continued weakness in the residential mortgage market. Although disappointing, we believe that the majority of the losses are non-cash charges that will not impact future performance or existing tangible capital levels."
"We continue to take the necessary steps to focus on our core businesses and markets and execute on our strategic initiatives. We recently made the decision to discontinue our automobile lending originations in the Southeast and Southwest as losses in these markets have been higher than forecasted and we will provide for losses in this portfolio as it runs off," continued Campanelli.
"Today we are discontinuing the Company’s quarterly common stock dividend to help bolster capital and mitigate risk during the ongoing challenges in the financial services industry. The Board will review this policy from time to time and expects to resume dividend payments when industry conditions normalize. Today’s banking environment dictates proactive measures to strengthen capital and mitigate risk. At the same time, these steps will help the company to prosper when more favorable conditions resume," commented Campanelli.
"Core operating results for the quarter were encouraging. Through disciplined balance sheet management, net interest margin expanded three basis points during the quarter. Fee income results were solid with consumer and commercial banking fees at historic highs. We continue to prudently manage our expenses, with our operating expenses staying roughly flat compared to the prior quarter and are continuing to search for additional ways to cut costs and operate more efficiently in 2008," concluded Campanelli.