8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

May 12, 2008
Date of Report (Date of earliest event reported)

Sovereign Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania (State or other jurisdiction of incorporation)	1-16581 (Commission File Number)	23-2453088 (IRS Employer Identification No.)
1500 Market Street, Philadelphia, Pennsylvania (Address of principal executive offices)		19102 (Zip Code)

(267) 256-8601

Registrant’s telephone number, including area code

n/a

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

Item 1.01. Entry into a Material Definitive Agreement.

     On May 9, 2008, Sovereign Bancorp, Inc. (“Sovereign” or the “Company”), and Banco Santander, S.A., a sociedad anónima (“Santander”), entered into a letter agreement (the “Letter Agreement”) pursuant to which Santander agreed to waive certain notice and preemptive rights under Section 2.04 of the Investment Agreement dated as of October 24, 2005 (the “Investment Agreement”), with respect to the public offering of shares of common stock of Sovereign described in Item 8.01 below. The purpose of the Letter Agreement is to assure that if Santander does not participate in the public offering and its common stock ownership percentage is diluted as a result, Santander will maintain the right to appoint the same number of directors that it can presently appoint until Sovereign’s regular annual meeting in 2009. The Letter Agreement does this generally by excluding, until the date of such meeting, any shares issued in an offering such as the one announced by Sovereign from the ownership percentage calculations applied to determine the number of directors Santander may appoint.

     The foregoing description is a summary of the Letter Agreement and is not complete and therefore is qualified in its entirety by reference to the full text of the Letter Agreement, a form of which is attached hereto as Exhibit 10.1 and incorporated by reference herein.

     The Letter Agreement does not prevent Santander from participating in any offering in which it has waived preemptive rights, including the offering discussed below, and Santander has indicated to the Company that it wishes to participate in such offering. Based on oral expressions of interest made to our management by representatives of Relational Investors, LLC, another substantial shareholder of the Company, we also believe that Relational wishes to participate in the public offering described below.

Item 8.01. Other Events.

     On May 12, 2008, Sovereign issued a press release announcing the public offering of $1.0 billion of shares of common stock and that Lehman Brothers Inc. is acting as the sole book-running manager of the offering. A copy of this press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The shares of common stock to be issued in the public offering are to be registered pursuant to the Company’s current shelf registration statement on Form S-3 (SEC File No. 333-133514).

     Also on May 12, 2008, Sovereign Bank (the “Bank”), a federal savings bank and a subsidiary of Sovereign, issued a press release announcing that the Bank intends to offer, subject to market conditions and approval of certain matters by the Office of Thrift Supervision, approximately $500 million of fixed rate subordinated notes due 2018. The Bank expects to commence the offering as soon as it has obtained the regulatory approvals. A copy of this press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

     On April 28, 2008, a former employee filed a putative class action in Pennsylvania federal court alleging violations of ERISA against the Company, the retirement committee that administers the Company’s retirement plans, all of the current directors and other individuals. The plaintiff alleges that the defendants knew or should have known that the Company’s common stock was not a prudent investment for the Company’s retirement plan. The plaintiff also alleges that the defendants provided the putative class and the investing community with inadequate disclosure concerning the Company’s financial condition, resulting in the stock having an inflated value. The plaintiff further claims that Sovereign charged excessive interest to the ESOP. The putative class period is from January 1, 2005 to the present. The Company believes that the claims are without merit and intends to vigorously defend the claims.

     Filed herewith are selected slides reflecting certain forward-looking information regarding our credit outlook and pro forma capital information in light of the forecasts reflected in those slides and giving effect to the offerings referenced above. Statements which are not historical facts are “forward-looking statements” that involve risks and uncertainties, including the results of proposed financing activities. For a discussion of such risks and uncertainties, which could cause actual future events to differ from those contained in the forward-looking statements, see “Forward-Looking Statements” in Sovereign’s Annual Report on Form 10-K for the most recently ended fiscal year.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
10.1	Form of Letter Agreement, dated May 9, 2008, by and between Sovereign Bancorp, Inc. and Banco Santander, S.A.
99.1	Press Release, dated May 12, 2008, of Sovereign Bancorp, Inc.
99.2	Press Release, dated May 12, 2008, of Sovereign Bank
99.3	Selected Slides, dated May 12, 2008, of Sovereign Bancorp, Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SOVEREIGN BANCORP, INC.
Dated: May 12, 2008	By:	/s/ Stacey V. Weikel
		Name:	Stacey V. Weikel
		Title:	Senior Vice President

EXHIBIT INDEX

Exhibit No.	Description
10.1	Form of Letter Agreement, dated May 9, 2008, by and between Sovereign Bancorp, Inc. and Banco Santander, S.A.
99.1	Press Release, dated May 12, 2008, of Sovereign Bancorp, Inc.
99.2	Press Release, dated May 12, 2008, of Sovereign Bank
99.3	Selected Slides, dated May 12, 2008, of Sovereign Bancorp, Inc.

EX-10.1

Exhibit 10.1

FORM OF LETTER AGREEMENT

May 9, 2008

Banco Santander, S.A.
Ciudad Grupo Santander
Avda. de Cantabria, s/n-28660
Boadilla del Monte
Madrid, Spain
Attention: Ignacio Benjumea

Gonzalo de Las Heras

Dear Messrs. Benjumea and de Las Heras,

     Reference is made to the Investment Agreement between Banco Santander, S.A. (“Santander”) and Sovereign Bancorp, Inc. (“Sovereign” or the “Company” and together with Santander, the “Parties”), dated as of October 24, 2005, as amended on November 22, 2005 and May 31, 2006 (as so amended, the “Investment Agreement”).

     Pursuant to the recommendations of Lehman Brothers, the financial advisor to Sovereign’s Board of Directors (the “Board”) and the Capital Committee of the Board, the Board, at a meeting held on May 7, 2008, approved by the unanimous affirmative vote of the disinterested directors (namely all the directors other than the directors appointed by Santander), a public offering of $1 billion of Tier I qualifying equity securities. The Company acknowledges that Section 2.04 of the Investment Agreement grants Santander certain rights with respect to such public offering and has requested that Santander waive certain of its rights in respect to such public offering. The Parties acknowledge and agree that this letter agreement (including, without limitation, any waiver set forth herein) shall apply to such public offering only if it meets the terms set forth herein (such public offering, the “Applicable Public Offering”), and shall in no event apply to any other issuance or proposed issuance by the Company of any securities, whether or not approved by the Board at its above-mentioned May 7, 2008 meeting or at any other time. The Parties acknowledge that some of the final terms of the Applicable Public Offering will be established by prevailing market conditions at the time of pricing. Notwithstanding the immediately preceding sentence, the Parties acknowledge and agree that no offering will constitute an Applicable Public Offering unless it meets the terms set forth below:

• The gross proceeds of the Applicable Public Offering shall not be less than $975 million or more than $1.25 billion, subject to increase in the event that the underwriters or placement agents elect to exercise an over-allotment option, which will be on customary market terms covering 15% of the aggregate amount of the firm shares placed in the Applicable Public Offering (the “Gross Proceeds”). The entire amount of the Gross Proceeds received by the Company in the Applicable Public Offering shall qualify for Tier I capital treatment.

• The securities sold by the Company in the Applicable Public Offering are expected to consist of such number of shares of common stock of the Company sufficient to generate the Gross Proceeds (such shares of common stock sold in the Applicable Public Offering are referred to herein as the “Common Portion”); provided, however, that a portion of the Applicable Public Offering may consist of shares of convertible preferred stock of the Company (such shares of convertible preferred stock sold in the Applicable Public Offering are referred to herein as the “Preferred Portion”), but the Preferred Portion will not be more then $500 million. For the sake of clarity, no securities sold by the Company in the Applicable Public Offering shall consist of any securities other than the Common Portion and the Preferred Portion.

• The price per share at which the Common Portion is sold in the Applicable Public Offering shall be at a discount of approximately no more than 15% to the closing price on the date immediately preceding the date of pricing of the Applicable Public Offering.

• The annual dividend payable on the Preferred Portion (if any) sold in the Applicable Public Offering shall be a non-cumulative dividend payable in cash in the range of 6.5% to 7.5% and such Preferred Portion will be convertible into shares of common stock of Company at a premium to market of 20% to 30%; provided, however, that (1) if the dividend payable on the Preferred Portion is greater than 7.0%, then the conversion premium on the Preferred Portion must be more than 25% and (2) if the conversion premium on the Preferred Portion is less than 25% then the dividend payable on the Preferred Portion must be no greater than 7%.

• The pricing of the Applicable Public Offering will be set on or before market open on May 16, 2008.

• The Applicable Public Offering shall be a public offering effected through Lehman Brothers.

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     Solely with respect to the Applicable Public Offering, Santander hereby agrees to waive its “Gross Up Rights” set forth in Section 2.04(a) of the Investment Agreement and its notice right set forth in Section 2.04(b) of the Investment Agreement.

     In consideration of these waivers, the Company agrees that a Santander representative who is currently a member of the Board will have the right to listen in on every update call from Lehman Brothers to the Company regarding the status of the order book and the price indications from investors relating to the Applicable Public Offering.

     The Parties acknowledge that, if the Applicable Public Offering is consummated, as a result of the waiver of its “Gross Up Rights” set forth in Section 2.04(a) of the Investment Agreement, Santander’s ownership interest in the Company may decrease but that, pursuant to Section 2.03(a) of the Investment Agreement, Santander has the right to increase its ownership interest the Permitted Limit (as such term is defined in the Investment Agreement). Accordingly, in consideration of the waivers set forth herein, the Company and Santander further agree that, if the Applicable Public Offering is consummated, Section 8.11(b) of the Investment Agreement shall automatically without any further action be amended and restated to read in its entirety as follows:

“So long as Buyer and its Affiliates Beneficially Own at least 19.8% and not more than 24.9% of the outstanding shares of Common Stock, the Company shall continue to nominate and recommend for election two persons designated by Buyer to serve as directors on the Board who shall be nominated to serve in the respective class of their respective predecessors; provided that, upon any increase in the size of the Board, the Board shall elect as directors to fill such newly created vacancies persons designated by Buyer in sufficient number so that the number of directors serving on the Board who have been designated by Buyer shall in no event represent less than 20% or more than 25% of the total number of directors, and the Company shall continue to nominate and recommend for election such persons designated by Buyer. So long as Buyer and its Affiliates Beneficially Own less than 19.8% but more than 10% of the outstanding shares of Common Stock, the Company shall continue to nominate and recommend for election one person designated by Buyer to serve as a director on the Board. If Buyer and its Affiliates beneficially own more than 24.9% of the outstanding shares of Common Stock and Buyer has not breached any of its obligations hereunder, Buyer shall be entitled to Board representation proportional to its ownership. Upon the death, disability, retirement, resignation or other removal of a director designated by Buyer, the Board shall elect as a director to fill the vacancy so created a person designated by Buyer to fill such vacancy. Solely for purposes of calculating the number of shares of Common Stock Beneficially Owned by Buyer and its Affiliates for purposes of determining the rights of Buyer and the obligations of the Company under this Section 8.11(b), (i) shares of Common Stock issued at any time after Closing, to any Person other than Buyer or any of its Affiliates, shall be excluded from such calculations, unless Buyer is entitled, pursuant to Section 2.04, to purchase additional securities of the Company in connection with such issuance, and, in each such case, until Buyer

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shall have had the opportunity to exercise its rights to purchase such additional securities pursuant to Section 2.04 and, in the event of such exercise, shall have completed such purchase and (ii) until the day of the regular 2009 Annual Meeting of Sovereign’s shareholders, the number of shares issued by the Company in the Applicable Public Offering shall not be treated as outstanding shares. For purposes of this Section 8.11(b) only, “Applicable Public Offering” means the underwritten public offering by the Company meeting the conditions specified in the letter agreement, dated May 8, 2008, between Buyer and the Company.”

     In furtherance of the foregoing, the Company hereby withdraws the letter, dated May 6, 2008, from Sovereign which was delivered to Santander on that date pursuant to the Investment Agreement.

     The Parties acknowledge and agree that the terms set forth in this letter agreement are part of a comprehensive compromise, each element of which is an integral part of this letter agreement and, as such, such terms are non-severable.

[remainder of page intentionally left blank]

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     Please acknowledge your agreement to the foregoing by returning a countersigned of this letter agreement.

Sincerely,
SOVEREIGN BANCORP, INC.
By:
Name:	Richard Toomey
Title: General Counsel

ACKNOWLEDGED AS OF THE DATE FIRST WRITTEN ABOVE:

BANCO SANTANDER, S.A.

By:
	Name: Gonzalo de Las Heras
	Title: Executive Vice President

cc:	Kirk Walters,
	Chief Financial Officer
	Thomas Janson
	Douglas Tanner
	Lee Meyerson
	Franck Cicero
	Diane Kerr

[Signature Page to Letter Agreement]

EX-99.1

Exhibit 99.1

Sovereign Bancorp Announces $1.0 Billion Common Stock Offering

PHILADELPHIA, PA... Sovereign Bancorp, Inc. (“Sovereign or the Company”) (NYSE: SOV), parent company of Sovereign Bank (“Bank”) today announced the public offering of $1.0 billion of shares of its common stock. Lehman Brothers Inc. is acting as the sole book-running manager of the offering. The underwriter will have an option to purchase up to $150 million of additional shares of the Company’s common stock to cover over-allotments. Sovereign intends to use the net proceeds of the offering for general corporate purposes.

The offering will be made under Sovereign’s shelf registration statement filed with the Securities and Exchange Commission and only by means of a prospectus supplement and accompanying prospectus. When available, a copy of the prospectus supplement and accompanying prospectus relating to each offering may be obtained from Lehman Brothers Inc., c/o Broadridge, Integrated Distribution Services, 1144 Long Island Avenue, Edgewood, NY 11717; fax: 631-254-7140, or email: qiana.smith@broadridge.com.

About Sovereign

Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), is the parent company of Sovereign Bank, a financial institution with principal markets in the Northeastern United States. Sovereign Bank has 750 community banking offices, over 2,300 ATMs and approximately 12,000 team members. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, wealth management and insurance. For more information on Sovereign Bank, visit <http://www.sovereignbank.com> or call 1-877-SOV-BANK.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any shares of common stock, nor will there be any sale of common stock or any other securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

—END—

EX-99.2

Exhibit 99.2

Sovereign Bank Announces Proposed Offering of Subordinated Notes

WYOMISSING, PA... May 12, 2008 — Sovereign Bank (“Bank”), a federal savings bank and a subsidiary of Sovereign Bancorp, Inc. (NYSE: SOV) today announced that it intends to offer, subject to market conditions and approval by the Office of Thrift Supervision (“OTS”), approximately $500 million of fixed rate subordinated notes due 2018. Sovereign Bank expects to commence the offering as soon as it has obtained regulatory approval from the OTS. The Bank intends to use the net proceeds of the offering for general corporate and banking purposes.

This press release is not an offer to sell or a solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any securities to any person or in any jurisdiction where such an offering or sale would be unlawful. This press release contains information about a proposed transaction, and there can be no assurance that this transaction will be completed.

Statements in this press release which are not historical facts are “forward-looking statements” that involve risks and uncertainties, including the results of proposed financing activities. For a discussion of such risks and uncertainties, which could cause actual future events to differ from those contained in the forward-looking statements, see “Forward-Looking Statements” in Sovereign Bancorp Inc.’s Annual Report on Form 10-K for the most recently ended fiscal year.

About Sovereign

Sovereign Bank is a federal savings bank and a subsidiary of Sovereign Bancorp, Inc., (“Sovereign”) (NYSE: SOV), a financial institution with principal markets in the Northeastern United States. Sovereign Bank has 750 community banking offices, over 2,300 ATMs and approximately 12,000 team members. Sovereign offers a broad array of financial services and products including retail banking, business and corporate banking, cash management, capital markets, wealth management and insurance. For more information on Sovereign Bank, visit <http://www.sovereignbank.com> or call 1-877-SOV-BANK.

—END—

EX-99.3

  Exhibit 99.3

  Credit Outlook

Base Case

§	Detailed review of all of our consumer and commercial loan categories
§	For Consumer loan categories (residential mortgages, home equity loans, and auto loans), assumed a continued worsening of loss trends and projected more severe losses for higher risk categories (i.e. loans with high LTVs and/or low FICO scores)
§	For Commercial portfolios, assumed continued worsening for the commercial portfolios that are impacted the most by current housing and economic conditions (loans to homebuilders and condo builders, commercial real estate for retail and office, building related segments, etc.)
§	$303 million in remaining 2008 provisions realized as follows: $112 million in Q2, $100 million in Q3 and $91 million Q4

§ Total 2008 provisions of $438 million, Q1 provisions of $135 million

§ $294 million in remaining 2008 NCOs realized as follows: $109 million in Q2, $97 million in Q3 and $88 million in Q4

§ Total 2008 NCOs of $368 million, Q1 NCOs of $74 million

Stress Case

§	Assumes significantly higher loss experience, predicated on significant deterioration in the credit environment
§	$617 million in remaining 2008 charge-offs realized as follows: $228 million in Q2, $204 million in Q3 and $185 million in Q4

§ Total 2008 NCOs of $692 million, total 2008 provisions of $772 million

  Credit Loss Expectations — 9 Months Forecast

($ in millions)

	Net Charge-offs				Provision
	Base Case		Stressed		Base Case		Stressed
CRE	$	56.8	$	187.5	$	71.6	$	193.4
Multi-Family		9.8		10.0		9.8		10.3
C&I		61.6		108.0		67.1		111.4
Residential		22.5		80.0		30.0		82.5
Home Equity		21.6		55.8		25.0		57.6
Home Equity *		16.4		36.0		0.0		37.1
		38.0		91.8		25.0		94.7
Auto		105.0		140.0		100.0		144.4
Total 9 months	$	293.7	$	617.3	$	303.5	$	636.8
Q1 2008		74.3		74.3		135.0		135.0
Full Year	$	368.0	$	691.6	$	438.5	$	771.8

* Runoff portfolio

  Projected Pro Forma Capital Position

																"Well-
	1st Quarter			Pro Forma Base Case At						Pro Forma Stress Case At						Capitalized"
Capital Ratios - HoldCo	3/31/08			6/30/08			12/31/08			6/30/08			12/31/08			Ratios
Tangible Common Ratio		3.81	%		5.47	%		6.06	%		5.34	%		5.68	%
Tangible Equity Ratio		4.06			5.73			6.32			5.59			5.94
Tier 1 Ratio		7.15			8.91			9.42			8.76			9.00		³	6.0	%
Leverage Ratio		6.21			7.79			8.44			7.66			8.06		³	5.0	%
Total Capital Ratio		9.47			11.94			12.34			11.79			11.93		³	10.0	%
Double Leverage Ratio		124.5			105.4			101.8			106.8			105.5
Capital Ratios — Bank Level
Tier 1 Ratio		7.48	%		7.77	%		8.26	%		7.64	%		8.15	%	³	6.0	%
Leverage Ratio		6.84			7.15			7.80			7.03			7.69		³	5.0	%
Total Capital Ratio		10.22			11.24			11.73			11.11			11.61		³	10.0	%

Note: Per Wall Street median estimate, projections assume pre-tax, pre-provision annual income of ~$1.0B for 2008.

1. Pro forma bank level capital ratios assume that holdco level financing is not downstreamed to bank level, in order to manage double leverage ratio.