S&P puts Sovereign Bancorp on positive watch

Standard & Poor's said it placed its BBB- long-term counterparty rating on Sovereign Bancorp on CreditWatch with positive implications.

These ratings actions follow a series of announcements by Sovereign, including the $2.4 billion sale of a 19.8% stake to Banco Santander Central Hispano SA (A+/positive/A-1) with provisions for future increases.

S&P said Sovereign announced another agreement to acquire Independence Community Bank Corp. for $3.6 billion in an all-cash deal. Sovereign will need to finance the gap between the cash flows to fund the Independence acquisition, S&P said.

The rating considers the foothold the acquisition of Independence provides Sovereign in the desirable New York/New Jersey marketplace. The ratings also recognize the strain on Sovereign's already aggressive capital profile, S&P said. Nevertheless, Sovereign has committed to rebuilding capital to predeal levels by the end of 2006.

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