Sovereign Bancorp (SOV)

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UPDATE 1-Sovereign Bancorp ratings may be raised on purchase

http://www.reuters.com/article/marketsNews/idINN1425463220081014?rpc=44

UPDATE 1-Sovereign Bancorp ratings may be raised on purchase
Tue Oct 14, 2008 5:54pm EDT Email | Print | Share| Reprints | Single Page | Recommend (0) [-] Text [+] Market News
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NEW YORK, Oct 14 (Reuters) - All three major rating agencies said on Tuesday they may raise their ratings on Sovereign Bancorp Inc (SOV.N: Quote, Profile, Research, Stock Buzz) after Spain's Banco Santander SA (SANB4.SA: Quote, Profile, Research, Stock Buzz) (SAN.MC: Quote, Profile, Research, Stock Buzz) said on Monday it will buy the U.S.-based savings and loan.

The transaction, which is worth $1.9 billion, is expected to close in the first quarter of 2009. For details, see [ID:nN13483555]

Standard & Poor's said it may raise Sovereign Bancorp's rating one to three notches from "BBB," the second lowest investment grade, "to reflect support from the higher-rated Santander and Sovereign's strategic importance to the combined entity."

Moody's Investors Service also rates Sovereign "Baa2," the second lowest investment grade, and said the purchase may make it easier for Sovereign to augment its capital base.

Fitch Ratings said it may raise the savings and loan from "BBB-minus," the lowest investment grade, and may cut Santander from "AA," the third highest investment grade.

"While the Sovereign transaction gives Santander a good opportunity to diversify further its business mix and boost its banking business in the U.S. market, it is currently in the process of integrating franchises in the UK and in Brazil under complex operating conditions," Fitch said.

"Furthermore, Santander has tended to manage capital tightly and Fitch would like to evaluate whether capital levels will remain adequate following the integration of all these franchises," the rating agency added.

S&P said its "AA" ratings on Banco Santander are unchanged on the announcement.

(Reporting by Karen Brettell; Editing by Diane Craft)