Sovereign Bancorp will cut 800 jobs, or about 7 percent of its workforce, in the coming months as part of a $100 million cost-saving plan, the company said Friday.
The Philadelphia-based thrift said most of the cuts will be in the fourth quarter. The remainder will come primarily through attrition during 2007. Reductions will be mostly in back office and corporate staff functions.
The bank announced with its third-quarter earnings in October that it was conducting a financial review and that management would soon present recommendations on cost cuts. The job eliminations are expected to generate about half of the overall $100 million of identified reductions.
“The decision to reduce our workforce was a very difficult one to make, especially during the holiday season,” Sovereign president and chief executive Joseph Campanelli said in a statement. “There is never a good time to take these actions. We pledged to aggressively improve our business fundamentals and to openly communicate our decisions promptly. These steps are consistent with that pledge.”
Sovereign said it expects to eliminate about 100 jobs by closing its wholesale mortgage units in Atlanta, Indianapolis and Concord, Calif. Those offices would stop doing business in the first quarter and close in March, company spokesman Ed Shultz said.
The bank will keep open a mortgage unit in Rosemont, just outside Philadelphia, and one in Albany, N.Y.
Another 102 jobs will be eliminated in Pennsylvania, with about 70 of those coming from four offices in Reading, the company said. The corporate office in Boston will see 77 positions cut, and 21 of Sovereign's 928 employees in Rhode Island will be let go. The rest will be spread throughout its other offices.
Sovereign is the third-largest bank in Rhode Island.
Even with the cuts, Sovereign would still employ about 3,600 people in Pennsylvania and 3,300 in Massachusetts, the company said. Sovereign has 12,000 employees overall.
Closing the three mortgage units makes sense because there's excess capacity in that business and Sovereign's main footprint is in the Northeast, said Salvatore DiMartino, a Bear Stearns analyst.
“They're largely small out-of-state operations where they just didn't have a presence,” DiMartino said.
The company expects to take a $40 million pretax charge during the fourth quarter related to the cost-cutting program. Sovereign also expects to take a fourth-quarter pretax charge of up to $10 million related to its June acquisition of Independence Community Bancorp.
It has been a year of change for Sovereign. Campanelli became CEO in October following the resignation of Jay Sidhu, who had held the post for 17 years.
Sidhu stepped down after he angered investors by negotiating the sale of a one-fifth stake in Sovereign to a Spanish bank without asking for shareholder approval. Banco Santander Central Hispano S.A. later increased its ownership to nearly 25 percent and is now Sovereign's largest shareholder.
DiMartino said while the job and cost cuts will make the bank more enticing to a buyer, he doesn't anticipate any deals soon.
“We do not believe these moves will result in a quick sale of the company,” he said.
Sovereign Bancorp, the parent company of Sovereign Bank, is a $90 billion financial institution with nearly 800 banking offices.
Sovereign shares fell 11 cents to $25.59 in afternoon trading on the New York Stock Exchange.