PHILADELPHIA – Sovereign Bancorp Inc. (NYSE: SOV), the parent of Sovereign Bank, saw its stock rise today in New York trading despite negative recommendations by brokerage firm RBC Capital Markets and ratings agency Moody’s Investors Service.
RBC, the corporate investment banking division of Royal Bank of Canada, pared its 12-month price target for Sovereign shares to $5.75 from the previous $8.50, Colleen S. King, of Schaeffers Research, wrote in a column this afternoon. Yet meanwhile, she said, at least four other analysts raised their recommendations for the stock.
Meanwhile, New York-based Moody’s last night downgraded its debt and deposit ratings for Sovereign Bancorp and all its subsidiaries, and placed all ratings for the company on watch for further possible downgrades. It lowered its rating on holding company Sovereign Bancorp’s senior debt to “Baa2” from the previous “Baa1” and pared its rating on Sovereign Bank’s long-term deposits to “Baa1” from the previous “A3.”
In its report, the ratings agency blaimed “strain” on Sovereign’s capital ratios, despite the $1.4 billion common-stock sale and $500 million bond offering announced this spring. (READ MORE) Moody’s analysts cited “the sizable charges that the company will incur from its exposure to Fannie Mae (FNM) and Freddie Mac (FRE) preferred stock, as well as the loss taken on the sale of its $750 million CDO portfolio. Additionally, Sovereign remains exposed to a number of problematic asset portfolios that could result in further heightened credit costs.”
Going forward, they wrote, Moody’s will take into account not only Sovereign’s own portfolio but also the level of support available from Banco Santander Central Hispano S.A. – the Spain-based bank that currently holds a 24.43-percent stake in the company (READ MORE) – and the “evolving” actions of U.S. regulators.
“Shares of the financial firm have suffered since March 2007, losing 82 percent,” Schaeffers’ King noted today. But, after falling 72 percent on Monday to close at $2.33 after the U.S. House “failed to pass the $700-billion bailout plan,” she said, the stock “is currently attempting to bounce back.”
Sovereign shares – which yesterday erased much of Monday’s losses, rising 70 percent to close at $3.95 percent per share (READ MORE) – added another 22.02 percent today in New York trading to end the day up 87 cents at $4.82, based on preliminary data from Bloomberg.com.
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Moody’s Investors Service, a division of Moody’s Corp. (NYSE: MCO), is a financial research and credit-rating firm. Additional information, including Moody’s scores for Rhode Island and other bonds, is available at www.moodys.com.
Sovereign Bancorp Inc. (NYSE: SOV), the parent company of Sovereign Bank, had $79.2 billion in posted assets as of June 30. It has 750 community banking offices, more than 2,300 ATMs and about 12,000 employees, mostly in the Northeast. For additional information, visit www.SovereignBank.com.
