The incoming chief executive at Sovereign Bancorp Inc. will face challenges getting the nation's largest thrift company back on track, according to analysts who follow the company.
The $79 billion-asset Philadelphia company said Tuesday that Paul Perrault, a former chairman and chief executive of Vermont's Chittenden Corp., would become its president and CEO on Jan. 3, succeeding Joseph P. Campanelli, 52, who the company said had stepped down.
Kirk Walters, Sovereign's chief financial officer, will be the interim president and CEO until Mr. Perrault, 57, joins the company.
Analysts said Mr. Perrault must deal with lingering credit issues from out-of-market consumer businesses Sovereign quit last year. The company also has notable exposures to Fannie Mae and Freddie Mac securities.
Joseph Fenech, an analyst at Sandler O'Neill & Partners LP, wrote in a note to clients that the management change could be "too little, too late," given the number of issues Sovereign faces. Its independence is "uncertain," he wrote, and the new CEO "must contend with inherited problems that continue to carry substantial risk."
Banco Santander SA of Madrid, which bought a 25% stake in Sovereign in 2006, has an option to buy the entire company, though it would be obliged to pay roughly $38 a share until mid-year 2009. On Tuesday afternoon, Sovereign was trading at roughly $4 a share.
Albert Savastano, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, said in an interview Tuesday that, though hiring a new CEO "isn't going to cure those problems right away," Mr. Perrault's hiring gives further evidence the company "is on the right track."
A Sovereign spokeswoman said Mr. Perrault would be unavailable for interviews until he joins the company.
However, Mr. Walters said in an interview Tuesday that the company's strategic direction is unchanged. "We are focusing heavily on our core franchise both in the commercial and retail arenas and deemphasizing any out-of-market opportunities," he said. When asked about remaining independent, he kept all options open. "In terms of running a publicly traded company, it is important to build that company for the future," he said. "Whatever the ultimate outcome is, isn't a factor. The value proposition for shareholders or an eventual acquirer is the same."
Analysts said they are encouraged by the decision to reunite Mr. Perrault with Mr. Walters, a former CFO at Chittenden who joined Sovereign in March. Chittenden, which was based in Burlington, Vt., sold itself to People's United Financial Inc. in January 2007. Mr. Walters got the added title Tuesday of chief administrative officer.
Chittenden had a return on assets of 1.39% and return on equity of 13.04% before selling itself, analysts noted, nearly double Sovereign's ratios at June 30. Sovereign's shares soared 69.5% on Tuesday, a day after losing 72% of their value in the bloody market rout after the government bailout package failed and Wachovia Corp. was forced to sell its bank.
