Monday, October 13, 2008

Acquisition of Sovereign Bancorp by Santander Bank

According to the The Wall Street Journal Santander bank could close a deal to buy the US banking group Sovereign Bancorp today. Santander bank has confirmed that it is currently negotiating a deal to acquire Sovereign.

In the middle of the global financial crisis it appears that Emilio Botín, the chairman of Santander bank, is eager to go ahead in order to secure his position in a bank which has recently made heavy losses. Sovereign Bancorp is estimated to be worth around 2,530 million dollars (almost 1,900 million euros) and its shares 3.81 dollars (2.8 euros). The Sovereign banking group has 750 branches in the northeast of the US and has around 12,000 employees.

Santander bank already owns about 25% of Sovereign. In October 2005 it bought 20% of this banking group for 2,400 million dollars (about 1,800 euros) in an operation which gave it a foothold in the US market with its gaze clearly fixed on the Hispanic market.

Santander accumulated losses of 2000 million euros due to its previous investment in Sovereign. It has also suffered losses with its investments in Fortis. In June 2007 Santander closed a deal to buy 2.1% of the Belgian bank with an investment of 892 million euros.

Sovereign has been badly affected by the international credit crisis over the last few months especially following its entrance into the loans market for the purchasing of cars which is very competitive. The bank lost its dividend last January following the announcement of annual losses of 1,300 million dollars (841 million euros), after losing 1,602 million dollars (1,036 million euros).

Federal government intervention into two of the largest mortgage lenders in the US, Freddie Mae and Fannie Mac, also damaged Sovereign. At the end of August the bank of Pennsylvania told the US Stock Market Commission that at the end of June 2008 it was in possession of 622.6 million shares in these two entities.
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posted by Euroresidentes at 10:22 AM



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