Sovereign counts on capital infusion

Sovereign Bancorp Inc. said yesterday that it planned to raise $1.5 billion in the latest move by big banks to replenish balance sheets depleted by the failure of risky loans made during the credit boom that collapsed last year.

Sovereign, officially headquartered in Philadelphia although its chief executive works in Boston, said it will attempt to sell $1 billion in common stock and $500 million in fixed-rate subordinated notes.

Last year, Sovereign was the fourth-largest bank in the region, with 82 branches and $10.28 billion in deposits, according to the Federal Deposit Insurance Corp.

Lee Calfo, a financial services analyst at Boenning & Scattergood Inc., a regional brokerage and investment bank in West Conshohocken, said the bank is bringing in a reasonable amount of capital, though it will be "painful near term due to any dilution" of existing shareholders.

Another analyst, Robert Hughes, at Keefe, Bruyette & Woods, said "the $1.5 billion capital raise should provide sufficient cushion against probable losses over the next two years."

Sovereign estimated in an SEC filing yesterday its provisions for loan losses in the last nine months of this year could range from $303.5 million to $636.8 million.

Sovereign shares were up 32 cents, or 4 percent, to $8.18 on the New York Stock Exchange.

After a string of acquisitions built Sovereign into the second-largest savings and loan in the United States, the bank got into financial trouble with expansions of home-equity and auto lending, leading to huge write-downs and a $1.4 billion loss in 2007.