sovereign bancorp, inc. analyst presentation july 19, 2005

Sovereign Bancorp, Inc.

Analyst Presentation

July 19, 2005

2

Agenda

Overview of Sovereign’s Strategies and Performance

Shareholder Value and Corporate Governance

Improving Performance and Strong Operating/Cash Earnings Growth

Capital Allocation Discipline

Comparison to Top 50 Banks and Management’s Priorities

Summary and What to Expect From Sovereign

3

Forward Looking Statement This presentation contains statements of Sovereign’s vision, mission, strategies, goals, beliefs, plans, objectives,

expectations, anticipations, estimates, intentions, financial condition, results of operation, estimates of future operating results for Sovereign Bancorp, Inc. as well as estimates of financial condition, operating efficiencies, revenue creation and shareholder value.

These statements and estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements.

Factors that might cause such a difference include, but are not limited to: general economic conditions; changes in interest rates; inflation; deposit flows; loan demand; real estate values; competition; changes in accounting principles, policies, or guidelines; integration of acquired assets, liabilities, customers, systems and management personnel into Sovereign’s operations and the ability to realize the related revenue synergies and cost savings within expected time frames; possibility that expected merger-related charges are materially greater than forecasted or that final purchase price allocations based on fair value of the acquired assets and liabilities at acquisition date and related adjustments to yield and/or amortization of the acquired assets and liabilities are materially different from those forecasted; deposit attrition, customer loss, revenue loss and business disruption following Sovereign’s acquisitions, including adverse effects on relationships with employees may be greater than expected; anticipated acquisitions may not close on the expected closing date or it may not close; the conditions to closing anticipated acquisitions, including stockholder and regulatory approvals, may not be satisfied; Sovereign’s timely development of competitive new products and services in a changing environment and the acceptance of such products and services by customers; the willingness of customers to substitute competitors’ products and services and vice versa; the ability of Sovereign and its third party processing and related systems on a timely and acceptable basis and within projected cost estimates; the impact of changes in financial services policies, laws and regulations, including laws, regulations, policies and practices concerning taxes, banking, capital, liquidity, proper accounting treatment, securities and insurance, and the application thereof by regulatory bodies and the impact of changes in and interpretation of generally accepted accounting principles: technological changes; changes in consumer spending and saving habits; unanticipated regulatory or judicial proceedings; changes in asset quality; employee retention; reserve adequacy; changes in legislation or regulation or policy or the application thereof; and other economic, competitive, governmental, regulatory, and technological factors affecting the Company’s operations, pricing, products and services.

Sovereign Bancorp is followed by several market analysts. Please note that any opinions, estimates, forecasts, or predictions regarding Sovereign Bancorp’s performance or recommendations regarding Sovereign’s securities made by these analysts are theirs alone and do not represent opinions, estimates, forecasts, predictions or recommendations of Sovereign Bancorp or its management. Sovereign Bancorp does not by its reference to any analyst opinions, estimates, forecasts regarding Sovereign’s performance or recommendations regarding Sovereign’s securities imply Sovereign’s endorsement of or concurrence with such information, conclusions or recommendations.

4

Non-GAAP Financial Measures

This report contains Financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Sovereign’s management uses the non-GAAP measures of Operating/Cash Earnings, and the related per share amounts, in its analysis of the company's performance. These measures, as used by Sovereign, adjust net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature or are associated with acquiring or integrating businesses, and certain non-cash charges. Operating/Cash Earnings represent net income adjusted for after-tax effects of merger-related and integration charges, other various non-recurring charges and the amortization of intangible assets. Since certain of these items and their impact on Sovereign’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the operating results of Sovereign’s core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Overview of Sovereign

6

Overall Market Share(1)

MarketRank Company Share (%) 1 Bank of America 16.51%

2 Royal Bk of Scotland 8.54 3 Wachovia 7.85 4 Sovereign 5.89

5 TD Banknorth proforma 4.46 6 PNC Financial 3.83 7 Commerce 3.07

An Exceptional Franchise Servingthe Northeastern United States

Key: Sovereign Branches

~$60 billion bank; 19th largest bank in the U.S.

665 branches & over 1,000 ATM’s

PA

NH

DE

WV

VAMD

RICT

NY

NJ

VTME

MA

Demographics

Median HH

Income

HH Inc Change’05-’10

SOV $59,889 20.47

US $49,747 17.36

Source: SNL DataSource(1) Includes CT, MA, NH, NJ, Eastern PA and RI

7

Mission

When consumers and businesses think of a World Class financial services provider, they choose Sovereign

Vision

Sovereign is a World Class financial services provider, committed to helping our customers succeed by understanding and anticipating their individual financial needs and providing customized solutions, resulting in each customer having six or more services with Sovereign

8

Sovereign’s Business Strategy

Combining the best of a large bank with the best of a smaller community bank.Best of a Large Bank:

–Products and services–Technology–Brand–Delivery channels and distribution system–Talent–Diversification–Sophistication of risk management

Best of a Small Bank:–Flat structure–Local decision making–Cross functional lines to deliver bank to customer–Treat customers as “individuals”–Active community involvement culture

9

Summary of Sovereign’s Business Model

Target attractive markets (growth opportunities, market insight)

Community banking delivery model in all markets, effective 1/1/05 10 local markets, each with a Market CEO Local decision making by experienced

commercial bankers

Consumer banking emphasizes convenience and customer service Many markets offer 7 day banking Appointment banking 24/7/365 phone and internet availability Guaranteed minimum customer service

standards/”Red Carpet” service

Best-in-class customer/product makeup Full product suite Customer mapping/segmentation Targeting 6+ services sold/used

Extremely attractive franchise in one of the most desired geographic markets in the world

Consistent growth in operating/cash earnings, improving operating metrics and high internal generation of capital

10

Local Market Tactics

Presidents calling on small/medium sized businesses

Small community banking, commercial real estate and C&I focus

Courier pick-up service for small businesses

Localized banking for consumers

Localized marketing compliments bank-wide brand advertising

Free checking for consumers, businesses and not-for-profit organizations

Free bill pay

Local market private banking services

Sales results are monitored on a daily basis

11

Initial Results of Local Markets Are Good

Consumer Banking

Business Banking

$ in thousands

January 2005

March 2005

June2005

# of new consumer checking accounts 11,300 16,100 23,100

# of new Net Banking customers 11,300 12,400 15,500

# of POS transactions 5,732,300 7,089,500 7,206,400

Consumer deposit fees $16,433 $18,057 $19,012

$ in thousands

January 2005

March 2005

June2005

# of new commercial checking accounts 2,600 3,100 3,100

Commercial loan originations $323,600 $475,300 $488,300

12

Emphasis on Teamwork and Continuous Improvement Culture

13

Team Members Continuously Involved in Improving Operations

Revenue: Make good loans with good margins + Interest Income Hold A grade investment securities + Interest Income Sell other financial services + Fee Income Collect fees for deposits, cash mgmt, loans, capital markets, precious metals, etc. + Fee IncomeMistakes: Bad loans - Provision/Charge-offs Bad checks, fraud, poor reconcilements, etc. - LossesDeposit Sales: Core and other deposits - Interest ExpenseWe Invest in People - Salary/BenefitsOur People Need Systems, Space, Computers, etc. - Operating ExpensePay Uncle Sam - Tax Expense

OUR GOAL – Net income growth of 10% - 15% a year NET INCOME

EPS (Net income divided by number of shares) EPS=

How We Make Money

Shareholder Value and Corporate Governance

15

Above Average Shareholder Value Creation

6/30/05 closing price of $22.34

3-Year Stock Price Performance

60%

80%

100%

120%

140%

160%

180%

Jun-2002 Dec-2002 Jun-2003 Dec-2003 Jun-2004 Dec-2004 Jun-2005

Daily from 30-Jun-2002 to 30-Jun-2005

Ind

exed

Pri

ces

Sovereign Bancorp S&P 500 Banks S&P 500 Dow Jones

49.4 %

16.5 %

20.4 %

11.2 %

% Appreciation

16




0%

50%

100%

150%

200%

250%

300%

350%

400%

Jun-2000 Jun-2001 Jun-2002 Jun-2003 Jun-2004 Jun-2005


Ind

ex

ed

Pri

ce

s


217.7 %

55.2 %

(18.1)%

(1.7)%

% Appreciation

17




0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

Jun-1995 Jun-1997 Jun-1999 Jun-2001 Jun-2003 Jun-2005


Ind

ex

ed

Pri

ce

s


264.1 %

183.2 %

119.9 %

126.1 %

% Appreciation

18

Insider Ownership and Buys Last Twelve Months

8.07%

Insider Ownership*as of March 1, 2005

* Includes non-vested and vested stock options and restricted stock. See 2005 Proxy Statement for further details.

Insider Buys in Last Twelve Months (1)

Date of Purchase Insider

# of Shares

8/10/04 Lynch 5,000

4/25/05 Campanelli 10,000

5/12/05 Lynch 3,000

5/16/05 Sidhu 20,000

5/16/05 Sidhu 1,650

(1) As disclosed in accordance with Form 4 filings with the SEC

19

Strong Corporate Governance

Sovereign’s Corporate Governance Quotient* is better than 97.6% of bank companies as ranked by Institutional Shareholder Services

Goal is to always remain in top quartile of bank companies

Source: Yahoo Finance CGQ provided byInstitutional Shareholder Services (ISS) as of 7/1/05*ISS is currently in the process of revising their ratings methodology

Improving Performance and Strong Operating/Cash

Earnings Growth

21

Stronger Balance Sheet

2002 2003 2004 1Q05 2Q05

Residential Loans Consumer LoansCommercial Loans

2002 2003 2004 1Q05 2Q05

Checking SavingsMoney Market CD's

$36.7

$32.6

$27.3$26.9

$40.3

$36.6

$26.1

$23.2

25.6% CAGR

Diverse Loan Mix

12.4% CAGR

Attractive Low-Cost Deposit Base

$41.3

$36.1

Source: period-end balances presented in company financials

22

Improved Quality of Balance Sheet

28.7% 29.0%21.2% 19.6% 19.4%

11.0% 11.7%

15.6% 16.6% 16.7%

21.5% 23.0% 26.2% 25.8% 25.3%

26.1% 25.4% 25.5% 26.1% 27.0%

2002 2003 2004 1Q05 2Q05

Commercial

Consumer

ResidentialMortgageInvestments

Commercial and Consumer Loans are Increasing as a Percentage of Total Assets, Reducing Reliance on the Investment Portfolio

Comm’l & ConsumerLoan Yld: 5.61%NCO’s: .25%Net Loan Yld: 5.36%

Net Yld onInvestments: 5.06%Residential: 5.20%


23

Balance Sheet Has Been Gradually Delevered

29.0%

21.2%19.6%

28.7%

19.4%

2002 2003 2004 1Q05 2Q05

Significant Improvement Has Been Made in Reducing Investment Securities as a Percentage of Total Assets


24

Positive Operating Leverage

51.67%

49.22%

50.44%

48.36% 48.67%

50.10%

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Results in Continued Improvement in Efficiency Ratio

2Q05 2Q04 % Change

Total Revenue $562 $456 23%

G&A Expenses $273 $225 22%

Operating Leverage 1.1x

Efficiency ratio equals G&A expenses as a percentage of total revenue, defined as the sum of net interest income and total fees and other income before securities transactions

25

$0

$100

$200

$300

$400

$500

$600

$700

2002 2003 2004

Net

Incom

e

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

Earn

ings p

er

Share

Net Income Operating/Cash Net IncomeGAAP EPS Operating/Cash EPS

Consistent Growth in Operating/Cash Earnings

CAGR Total EPSGAAP Net Income – 15% 6%Operating/Cash Earnings - 21% 12%

Operating/cash earnings excludes most non-cash, non-operating charges. Please see appendix for reconciliation of net income to operating/cash earnings, as well as related per share amounts.

26

Improvement in Operating Metrics

Operating/Cash Return onAverage Equity

1.17%1.20%

1.17%

1.30% 1.31%

1.22%

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Improved Operating Returnon Average Assets

25.42%24.75%

26.96% 26.52%

29.09%

26.65%

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

Operating/Cash Return onAverage Tangible Equity

15.08% 14.87%

13.82%13.34%

13.84%13.61%

1Q04 2Q04 3Q04 4Q04 1Q05 2Q05

* See reconcilement in Appendix

27

High Cost Debt Has Been Paid Off

Amount(millions) Description

Maturity Date Date Paid Off

$200 10.25% Senior Notes 5/15/04 $162.4 on 3/7/03$37.6 on 5/15/04

$175 8 5/8% Senior Notes 3/15/04 $139.2 on 3/7/03$35.8 on 3/15/04

$500 10.50% Senior Notes 11/15/06 9/21/04

Current Debt Outstanding

Sovereign Bancorp outstanding debt

$300 million senior notes, Libor + 33 bps, due 8/25/06

Sovereign Bank outstanding debt

$300 million subordinated notes, 4 1/2%, due 8/1/13

$500 million subordinated notes, 5 ¼%, due 3/15/13

CapitalManagement

29

Strong Internal Generation of Capital

Average TCE generated per quarter in 2005 = ~ $200 million

Sovereign Bancorp 12/ 03 12/ 04 3/ 05 6/ 05Tier 1 Leverage 5.61% 7.05% 6.96% 6.86%TCE/TA 4.66% 5.00% 4.86% 4.88%

Sovereign BankTier 1 Leverage 6.66% 7.21% 7.44% 7.19%Risk Based Capital 12.12% 11.64% 11.55% 11.28%

30

Return of Net Income to Shareholders

Dividends Paid

Stock Repurchased Total

Net Income

% of Net Income

2002 $26 $0 $26 $342 7.7%2003 $28 $0 $28 $402 7.0%2004 $38 $0 $38 $454 8.3%

YTD '05 $26 $259 $285 $330 86.4%

(dollars in millions)

31

Capital Allocation Discipline

Investing in organic growth

Share repurchases

Cash dividend

Mergers and acquisitions Only if it meets our M&A criteria:

• Accretive to operating/cash earnings within the first year• Must not significantly deviate from capital goals• Should be consistent with or improve our operating/cash earnings

growth rate• Consistent with our critical success factors• Any acquisition will be compared to other alternative uses of capital

32

Capital Allocation Decisions

Current yield curve limits balance sheet growth

Repurchase program Previously authorized repurchase program of ~20 million shares Sovereign has repurchased 16 million shares through July 1, 2005

YTD Combined Payout Ratio of 86%

Cash dividend Increased annual cash dividend by $.04 during the first quarter of

2005, to $.16 per year Board of Directors has committed to revisit the dividend level

again during the second half of 2005 Current Dividend Yield of .8% Current Dividend Payout Ratio of 8.7%

At the current time, share repurchases are an optimal use for deploying excess capital

33

Sovereign’s Growth Compared to Eastern U.S. Banks and Thrifts

Growth 3-Year Historical CAGR

06 / 05 EPS LT IBES EPS GAAP EPS TBV/Share

Company Value Rank Value Rank Value Rank Value Rank Value Rank Value Rank

Sovereign 11.1 % 10.5 % 5.2 % 18.7 % 8.9 % 25.8 %

Large Cap Eastern Banks 2 1 3 1 5 2

Regional Eastern Banks 2 1 1 1 5 1

New York Area Thrifts 2 1 2 1 4 3

Large Cap Eastern Banks 11.08108 2 10.5 1 5.151845 3 18.74815 1 8.9096505 5 25.78274 2

SunTrust 8.7 % 5 9.0 % 5 5.5 % 2 (5.7)% 6 15.7 % 3 15.6 % 4

BB&T 8.9 4 10.0 3 1.5 5 (1.7) 5 13.2 4 13.0 5

North Fork 12.1 1 10.5 1 3.7 4 14.7 2 62.9 1 78.9 1

PNC Financial 8.1 6 8.0 6 0.7 6 (0.2) 4 6.1 6 10.7 6

M&T 9.1 3 10.0 3 12.0 1 3.5 3 24.7 2 22.2 3

Median 8.9 % 10.0 % 3.7 % (0.2)% 15.7 % 15.6 %

Regional Eastern Banks 11.08108 2 10.5 1 5.151845 1 18.74815 1 8.9096505 5 25.78274 1

TD Banknorth 9.2 % 6 10.1 % 2 (6.2)% 8 4.4 % 3 11.4 % 4 14.7 % 6

Mercantile 10.4 3 9.0 3 2.7 3 (1.3) 5 15.0 1 18.6 3

Fulton Financial 9.1 7 9.0 3 4.2 2 (2.3) 6 12.4 3 20.0 2

Valley National 9.5 5 8.5 6 2.1 5 4.3 4 5.5 7 9.8 7

Hudson United 7.8 8 8.0 7 2.4 4 13.6 2 (2.1) 8 5.7 8

Susquehanna 14.9 1 8.0 7 1.6 7 (5.4) 7 13.8 2 17.1 5

Provident 9.6 4 9.0 3 1.8 6 (8.5) 8 8.3 6 17.8 4

Median 9.5 % 9.0 % 2.1 % (1.3)% 11.4 % 17.1 %

New York Area Thrifts 11.08108 2 10.5 1 5.151845 2 18.74815 1 8.9096505 4 25.78274 3

New York Community 14.2 % 1 10.0 % 2 3.2 % 3 11.0 % 2 42.9 % 1 56.4 % 1

Independence Community 9.8 4 10.0 2 12.6 1 (1.7) 5 36.0 2 38.6 2

Astoria Financial 8.5 5 9.0 5 2.6 4 5.1 3 2.6 5 4.7 5

Webster Financial 10.1 3 9.5 4 (2.6) 5 (1.0) 4 15.2 3 19.5 4

Median 10.0 % 9.8 % 2.9 % 2.0 % 25.6 % 29.1 %

Total LoansTotal Core Deposits1

Source: SNL DataSource

[1] Core deposits are total deposits excluding foreign deposits and jumbo time deposits.

34

Growth Driven in Part by Acquisitions1995 - 2005 YTD 2001 - 2005 YTD

Aggregate Value of Acquisitions Aggregate Value of Acquisitions

Number of Market Cap Assets Number of Market Cap Assets

Acquisitions Amount % of Growth Amount % of Growth Acquisitions Amount % of Growth Amount % of Growth

Sovereign 16 $ 5,968 73.5 % $ 33,804 64.6 % 4 $ 2,746 41.4 % $ 13,088 51.4 %

Large Cap Eastern BanksSunTrust 10 $ 16,884 80.9 % $ 55,329 45.3 % 3 $ 8,386 108.6 % $ 28,739 47.0 %BB&T 28 12,981 64.8 55,608 70.8 9 6,208 88.7 26,426 74.5PNC Financial 4 5,491 50.5 26,309 215.6 2 1,339 NM 9,104 46.1North Fork 11 9,629 74.7 41,690 73.8 3 7,394 79.8 31,457 68.5M&T Bank 10 5,765 51.4 33,781 77.9 1 2,984 51.8 18,319 73.5Median 10 64.8 % 73.8 % 3 84.3 % 68.5 %

Regional Eastern BanksTD Banknorth 10 $ 2,146 42.5 % $ 10,606 36.1 % 10 $ 2,146 88.3 % $ 10,606 76.3 %Mercantile Bankshares 9 939 29.1 3,724 38.3 2 768 69.9 3,037 45.1Fulton Financial 14 1,230 53.6 5,363 42.5 5 587 51.5 2,706 31.5Valley National 7 1,093 65.4 4,212 63.9 2 277 51.3 1,059 30.2Hudson United 21 1,501 108.3 8,906 146.5 1 (0) (0.1) 270 13.3Susquehanna 9 347 41.3 1,773 35.3 2 208 46.0 1,105 44.9Provident Bankshares 3 452 53.4 2,207 53.3 1 308 66.4 1,262 135.8Median 9 53.4 % 42.5 % 2 51.5 % 44.9 %

New York Area ThriftsNew York Community 2 $ 3,354 74.1 % $ 14,022 59.8 % 2 $ 3,354 92.7 % $ 14,022 70.5 %Independence Community 7 1,928 NM 10,110 NM 1 1,502 67.4 7,486 66.4Astoria Financial 2 1,640 58.8 9,061 48.7 0 0 0.0 0 0.0Webster Financial 17 1,729 70.9 10,610 73.9 6 576 49.8 3,122 50.7Median 5 70.9 % 59.8 % 2 58.6 % 58.5 %

($ in millions)

Source: SNL DataSource, Factset

*

* Excludes TD Banknorth/HU transaction

35

Prices Paid Have Been on Par With or Lower Than the Market ($ in millions)

Source: SNL DataSource

Bank & Thrift Acquisitions Greater than $100 millionCore

Date Assets Deal Price to Book Price to Earnings Deposit Premium to Market Acquirer Stock

Target Announced Acquired Value Stated Tangible Core LTM Forward Premium T-1 T-30 T-1 T-30 Charter

Waypoint Financial 3/8/2004 $ 5,352 $ 996 2.3 x 2.4 x 26.5 x 21.5 x 28.9 % 12.9 % 10.7 % 1.0 % (0.8)% Thrift

Seacoast Financial 1/26/2004 4,453 1,100 2.0 3.3 22.3 20.6 25.7 14.9 26.7 1.1 3.5 Thrift

First Essex Bancorp 6/13/2003 1,740 403 2.6 2.9 18.5 17.8 23.2 28.9 33.7 (0.7) 6.9 Thrift

Main Street Bancorp 7/17/2001 1,544 171 1.9 1.9 29.3 17.1 6.6 49.8 62.6 (2.3) 11.1 Bank

Peoples Bancorp 9/8/1998 1,444 379 1.1 1.2 NA 22.3 11.4 26.3 18.3 0.0 (15.3) Thrift

Carnegie Bancorp 12/15/1997 424 106 2.8 2.8 26.7 22.9 26.8 10.9 38.5 0.6 14.2 Bank

ML Bancorp 9/18/1997 2,424 400 2.0 2.0 24.2 16.3 35.5 18.3 34.2 0.4 10.1 Thrift

Bankers Corp. 2/6/1997 2,567 323 1.7 1.7 13.4 12.1 8.9 7.4 22.5 (1.8) 1.9 Thrift

Median 2.0 x 2.2 x 24.2 x 19.2 x 24.5 % 16.6 % 30.2 % 0.2 % 5.2 %

Avg. Differential of Each Deal Relative to Comparable Deals (0.2)x (0.3)x 2.9 x 0.4 x 0.6 % 0.7 % (2.7)% 0.2 % 2.0 %

Branch Acquisitions Greater than $100 millionFranchise

Date Assets Deposits DepositTarget Announced Acquired Premium Acquired Premium

Fleet Financial 9/7/1999 $ 10,560 $ 1,440 $ 12,000 12.0 %

CoreStates Financial 4/27/1998 1,875 325 2,200 14.8

Median 13.4 %

Avg. Differential of Each Deal Relative to Comparable Deals 5.3 %

Comparison toTop 50 Banks

37

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

WES

CBP

OP

WFC

ZIO

NSN

VBA

CBB

TCB

HJP

MFB

PUS

BCN

B HIB

NCC

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HCBK CM

ANY

BIC

BCW

BS FITB

SOV UB

ASO WB AF

PNC

NDE ST

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DW WM

DSL

NTRS BK ST

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Sovereign’s Total Loan Yield Compared to Top 50 National Banks

Source: SNL Datasource as of 1Q05Data not available for DRL, MEL, & WHI

Green = Top quartileRed = Bottom quartile

Sovereign’s Total Loan Yield is in the Third Quartile

5.40%

Median

5.67%

38Source: SNL Datasource as of 1Q05Data not available for C, DRL & NDE

0.00

0.50

1.00

1.50

2.00

2.50

3.00

UB

BN

KW

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US

BZ

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CM

AC

BS

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PB

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LH

BA

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FH

CB

KF

BP

GD

WW

HI

WE

S

Sovereign’s Total Deposit Cost Compared to Top 50 National Banks


Sovereign’s Total Deposit Cost is in the Second Quartile

1.33%

Median1.43%

39

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

WH

IH

CB

KN

YB

GD

WW

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NF

BU

SB

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LA

FIC

BC

FB

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AS

BC

BA

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BT

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BM

TB

BN

KA

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CN

BN

DE

WB

SC

BS

SH

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WF

CW

BR

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UB

BP

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MI

KE

YN

TR

SH

BA

NJP

MB

KC

BH

PN

CF

HN

SN

VM

EL

ST

T

Sovereign’s Efficiency Ratio Compared to Top 50 National Banks

Source: SNL Datasource as of 1Q05Data not available for DRL


Sovereign’s Efficiency Ratio is in the First Quartile

48.4%Median

55.8%

40

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

CM

AS

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NFB A

FJP

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HH

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KW

BB

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TT C

Sovereign’s Tier 1 Leverage Compared to Top 50 National Banks

Source: Data as of 1Q05Data not available for DRL & WM

Green = Top quartileRed = Bottom quartile 6.96%

Median7.19%

Sovereign’s Tier 1 Leverage Ratio is in the Third Quartile

41

Management’s Priorities

Continue to increase loan yields by gradually changing mix

Continue to focus efforts on core deposit growth

Maintain solid capital position and capital allocation discipline

Remain focused on four critical success factors

Summary

43

Earnings Goals 2005 through 2007

2004 $1.84 A 14% $1.66 -

2005 $2.00 9% $1.85 11.4%

2006 $2.20 - $2.30 10% $2.04 10.3%

2007 $2.40 – $2.50 10% N/A N/A

Management’s Stretch

Operating/Cash Goal (1)

Implied Annual Growth

(1) Please see appendix for reconcilement of GAAP to Operating/Cash Earnings. Operating/cash earnings per share excludes $.04 of merger and integration charges in 2005 and amortization of intangibles of $.12, $.10, and $.09 for 2005, 2006 and 2007, respectively.Management’s earnings goals are not to be construed as guidance.

(2) Analyst mean estimate includes amortization of intangibles and excludes certain one-time charges. Management’s definition of operating/cash earnings excludes both of these items.

Analyst’sMean

Estimate (2)

Implied Annual Growth

44

Above Average Shareholder Value Creation Potential

2004A $1.84 12.3x $22.55 N/A

2005E $2.00 13x $26.00 15%

2006E $2.20 - $2.30 13x $29.25 14%

2007E $2.40 - $2.50 13x $31.85 12%

Management’s Stretch

Operating/Cash Goal (1)

P/E

* From year-end 2004 stock price of $22.55 to the date indicated(1) Please see appendix for reconcilement of GAAP to Operating/Cash

Earnings

CAGR*Implied Stock Price

45

Analyst Opinions Relative to Eastern U.S. Banks/Rating Agency Actions

Source: Thomson Financial

As ofJune 15, 2005

Strong Buy / Buy Hold

Under- perform /

Sell

Sovereign 53% 47% 0%

Large Cap

SunTrust 15% 69% 15%

BB&T 4% 72% 24%

PNC 15% 70% 15%

North Fork 72% 24% 4%

M&T Bank 14% 86% 0%

Average 24% 61% 12%

Regional

TD Banknorth 12% 82% 6%

Mercantile 37% 58% 5%

Fulton Financial 17% 58% 25%

Valley National 0% 88% 13%

Hudson United 0% 73% 27%

Susquehanna 0% 90% 10%

Provident 0% 55% 9%

Average 15% 72% 14%

As ofJune 15, 2005

Strong Buy / Buy Hold

Under-perform /

Sell

Sovereign 53% 47% 0%

New York Area Thrifts

New York Community 41% 41% 18%

Independence Community 33% 67% 0%

Astoria Financial 8% 92% 0%

Webster Financial 20% 60% 20%

Average 26% 65% 9%

Rating Agency Actions

Received upgrade from Moody’s in January 2004

Placed on positive outlook by Moody’s inMarch 2005

Placed on positive outlook by S&P and Fitch in April 2005

46

Clear and Consistent Strategy and Tactics for the Future

Strong, experienced and deep management team in place

Structure and strategy are organized to seize superior growth opportunities, while maintaining our capital allocation and M&A discipline

Focus is on tactics and superior execution

As we execute, we will remain committed to our critical success factors of: Superior asset quality Superior risk management Strong sales and service culture that aligns team member

performance with a recognition and rewards system High level of productivity through revenue growth and efficient

expense control

Above average earnings and shareholder value growth and consistent improvement in operating metrics expected over the coming few years

Appendix

48

One Non-GAAP Financial Measure

Effective in the fourth quarter of 2004, Sovereign moved to one non-GAAP financial measure – Operating/Cash Earnings Provides greater financial transparency

Provides useful supplemental information when evaluating Sovereign’s core businesses

Consistent with SEC’s publicly stated desire for fewer non-GAAP disclosures

Operating/Cash Earnings represent net income adjusted for after-tax effects of merger-related and integration charges, any other non-recurring charges and the amortization of intangible assets

49

Reconciliation of Operating/Cash Earnings to GAAP Earnings - Actual

Year Ended December 31,

2004 2003 2002 2005 1 2004

Net Income/(loss) as reported 453,552$ 401,851$ 341,985$ 189,805$ 131,354$

Merger-related and integration costs 30,134 10,316 (5,490)

Provision for Loan Loss 3,900 3,900

Loss on Debt Extinguishment 42,605 18,838

Impairment Charge for FNMA and FHLMC Preferred Stock 20,891

Amoritzation of Intangibles 51,186 50,100 54,121 12,229 12,047

Operating/Cash Earnings 602,268$ 470,789$ 410,322$ 196,544$ 143,401$

Note: Further details are available on our web site at www.sovereignbank.com and in our Annual Reports to Shareholders

Qtr Ended June 30,($ in thousands, all numbers shown net of tax)

1 Net Income for EPS purposes

50

Reconciliation of Operating/Cash EPS to GAAP EPS - Actual

Year Ended December 31,

2004 2003 2002 2005 2004

Diluted Earnings per Share 1.38$ 1.38$ 1.23$ 0.47$ 0.42$

Merger-related and integration costs 0.10$ 0.04$ (0.01)$

Provision for Loan Loss 0.01$ 0.01$

Loss on Debt Extinguishment 0.13$ 0.07$

Impairment Charge for FNMA and FHLMC Preferred Stock 0.06$

Amoritzation of Intangibles 0.16$ 0.17$ 0.19$ 0.03$ 0.04$

Operating/Cash Earnings per Share 1.84$ 1.62$ 1.47$ 0.49$ 0.46$

Note: Further details are available on our web site at www.sovereignbank.com and in our Annual Reports to Shareholders

Qtr Ended June 30,

51

Reconciliation of Operating/Cash EPS to GAAP EPS – Forward Looking Stretch Goals

2005 2006 2007

Diluted earnings per share (GAAP) $1.84 $2.10 - $2.20 $2.31 - $2.41

Merger-related and integration costs $0.04

Amoritzation of Intangibles $0.12 $0.10 $0.09

Operating/Cash Earnings per Share ~$2.00 $2.20 - $2.30 $2.40 - $2.50

Note: 2005 analyst mean estimate is $1.85, which excludes merger-related charges. This compares to management’s stretch goal for 2005 GAAP EPS of $1.84 plus $.04 in merger-related charges, or $1.88.

52

Reconciliation of Equity to Tangible Equity and Operating/Cash Return on Equity to Operating/Cash Return on Tangible Equity - Actual

June 30 Mar. 31 Dec. 31 Sept. 30 June 30 March 312005 2005 2004 2004 2004 2004

Average Equity 5,697,656$ $5,588,703 $4,898,154 $4,544,175 3,879,403 3,559,930 Average Goodwill 2,725,526 2,507,849 2,118,673 1,941,306 1,289,409 1,179,731Average CDI 261,854 270,193 278,319 272,861 259,762 268,364Average Tangible Equity 2,710,276 2,810,661 2,501,162 2,330,008 2,330,232 2,111,835

Operating Return on Average Equity 13.84% 13.30% 13.61% 13.82% 14.87% 15.08%Effect of Goodwill 13.91% 11.87% 11.53% 11.52% 8.23% 8.43%Effect of CDI 1.34% 1.28% 1.51% 1.62% 1.66% 1.92%

Tangible Return on Average Equity 29.09% 26.45% 26.65% 26.96% 24.75% 25.42%

Quarter Ended

sovereign bancorp, inc. analyst presentation july 19, 2005

Documents

technological changes

impact of changes

sovereigns acquisitions

sovereign slide

financial services policies

sovereigns operations

related systems

acquired assets