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Ahead of the Bell: Sovereign Bancorp upgraded

By Associated Press
June 2, 2008 | Comments (0)

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Sovereign Bancorp Inc.'s recent $1.9 billion capital raise led a Keefe, Bruyette & Woods analyst to raise his rating and price target Monday.

Analyst Robert Hughes upgraded the Philadelphia-based bank to "Outperform" from "Market Perform."

He raised his price target to $11 from $7, implying he expects the stock to rise 20 percent over Friday's $9.14 close.

Last month Sovereign, which lost more than $1 billion in 2007, sold stock and bonds worth about 27 percent of the overall company.

Capital raises like that tend to dilute existing shareholders' value, so Hughes cut his 2008 earnings estimate to 65 cents per share from 80 cents per share.

Analysts polled by Thomson Financial expect, on average, earnings of 67 cents per share for the year.

Hughes warned that "adverse movements" in interest rates or economic conditions have the potential to hurt earnings.

The stock is down 20 percent so far this year.

A Sovereign spokesman was not immediately available to comment.

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