Sovereign Bancorp, Inc. 2005 Annual Meeting of Shareholders Thursday, April 21, 2005 Reading, PA

1
Sovereign Bancorp, Inc.2005 Annual Meeting of
ShareholdersThursday, April 21, 2005Reading,
PA
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Forward Looking Statement

• This presentation contains statements of
  Sovereigns 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 Sovereigns 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 Sovereigns 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 Sovereigns 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 Companys
  operations, pricing, products and services.

3
Non-GAAP Financial Measures

• This report contains Financial information
  determined by methods other than in accordance
  with U.S. Generally Accepted Accounting
  Principles (GAAP). Sovereigns management uses
  the non-GAAP measures of Operating 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 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 Sovereigns 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 Sovereigns
  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.

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Reconciliation of Operating Earnings to GAAP
Earnings
( in thousands, all numbers shown net of tax)
1 Net Income for EPS purposes
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Reconciliation of Operating Earnings to GAAP
Earnings
(Per Share)
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Overview of Sovereign
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An Exceptional Franchise Serving from South of
Philadelphia to Boston and Beyond

• 60 billion bank
• 665 branches
• 1,000 ATMs
• 19th largest bank in the U.S. ranked by assets
• Top 15 Small Business Lenders in the U.S.

ME
NH
VT
NY
MA
RI
CT
PA
Market Share Massachusetts 3 Rhode
Island 3 New Hampshire 5
Pennsylvania 5 New Jersey
7 Connecticut 11 Maryland
38
NJ
WV
Key Sovereign Branches
MD
DE
VA
Source SNL DataSource
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Strong Executive Management Team
Name Business Unit Years In
Banking Prior Institutions Jay Sidhu
Chairman, President 25
Chemical, CEO Bancorp
IndependenceJoe Campanelli President
CEO, 20 Shawmut, Fleet
Sovereign Bank New England
Division Jim Hogan, CPA CFO Bancorp
30 Firstar, U.S.
BancorpJim Lynch Chairman CEO,
30 Continental, Prime,
Sovereign Bank Summit, Fleet
Mid-Atlantic Division Larry Thompson CAO
of Bancorp, 25 Sovereign

COO of Bank Mark McCollom, CPA CFO of Bank
20 Meridian
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SovereignsGrowth Years
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A High Growth Company
Estimated 2005 Assets 63 billion Analyst Mean
Net Income 765 million
1990 Assets 1.3 billion Net Operating Income
5.5 million
Mean net income estimate for covering analysts
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Sovereigns Business Strategy 1996-1999

• In January 1996, Sovereign embarked on a
  super-community banking strategy
• Management and the Board believed this strategy
  was critical to improving Sovereigns performance
  over the next several years
• A goal of 2.00 by 2000 (1.32 split-adjusted)
  was the rallying cry
• Achieving a balanced loan mix and greater than
  50 core deposits/total deposits
• Key performance metrics at year-end 1995

Deposit Mix
Loan Mix
1
3
ROA .78 NIM 2.54 ROE
14.95 Fee Income/ Total Revenues
12.9 Efficiency Ratio 50.1 Tier 1 Leverage
3.98
13
41
56
86
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Sovereigns Business Strategy 1996-99 (cont.)

• Sovereign undertook a series of acquisitions in
  support of this previously announced strategy

Date Name Assets Deposits of Branches Transaction Multiple Book Value Earnings Transaction Multiple Book Value Earnings
5/31/96 West Jersey 100 MM 90 MM 2 212 BV 21.7x LTM
2/18/97 First State 630 MM 550 MM 14 141 BV 15.5x LTM
8/29/97 Bankers Corp 2.6 bn 1.7 bn 15 167 Tang 12.5x LTM
9/19/97 Fleet Auto Division 2.0 bn N/A N/A Purchased at Discount to Par Purchased at Discount to Par
2/27/98 MainLine Bancorp 2.4 bn 1.0 bn 29 215 Tang 17.4x 98EPS
7/31/98 Carnegie Bancorp 424 MM 323 MM 8 282 Tang 20.2x 98EPS
7/31/98 First Home Bancorp 523 MM 300 MM 10 238 Tang 17.9x LTM
9/4/98 CoreStates Branch Acquisition 800 MM 2.3 bn 93 14.8 deposit premium 14.8 deposit premium
6/15/99 Network Companies 50 MM N/A N/A
6/30/99 Peoples Bancorp 1.4 bn 500 MM 14 150 BV 21.9x LTM
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Sovereigns Business Strategy 1996-99 (cont.)

• By year-end 1998, Sovereign had made significant
  progress on the goals it had previously
  articulated to the Street

Loan Mix
ROA .88 ROE 15.5 NIM
2.79 Fee Income/ Total Revenue
14.7 Efficiency Ratio 48.3 Annual
Operating EPS Growth 1995-98 17.1 Tier 1
Leverage 4.20
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46
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Deposit Mix
9
49
42
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1999 Fleet Acquisition Accelerates Goals

• New targets were established to be achieved over
  the next 3-4 years
• Core deposits to increase to 60 of total
  deposits
• Loan portfolio evenly balanced (1/3 Commercial,
  1/3 Consumer, 1/3 Residential)
• Borrowings decrease to 25 or less of liabilities
• Increase fee-based revenues to 25 of total
  revenues
• Net Interest Margin of 3.50
• Maintain top-quartile growth rate in operating
  earnings
• Fleet acquisition presented a unique opportunity
  to accelerate most of our publicly stated goals
  and acquire a dominant franchise for an
  incredibly inexpensive price

Acquired
Transaction
Comparable Deals (1b Assets) 1998-2000
Loans 8.1b Deposits 12.1b Branches 286
Deposit Premium 12 Premium, after-tax
7.8 Earnings Multiple 6.4x
Deposit Premium 19.4 Earnings Multiple 22.2x
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Fleet Acquisition (continued)

• Management and the board debated the risks and
  rewards of the Fleet transaction, ultimately
  viewing the opportunity as outweighing the risks
• By year-end 2002, with Fleet integrations behind
  us, Sovereigns balance sheet and business mix
  were where desired. A mild recession and the
  lingering effects of high-cost financing hindered
  net income and certain performance metrics

ROA 1.12 ROE 16.67 NIM 3.61 Fee
Income/Total Revenues 27.33 Efficiency Ratio
53.23 Borrowings/ Total Liabilities
24.5 Annual Operating EPS Growth 1998-2002
6.8 Tier 1 Leverage 5.00
Loan Mix
Deposit Mix
26
37
44
59
15
19
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Did the Fleet Deal Pay Off?
Since early 2000, Sovereign has significantly
outperformed the broader market
Stock Price Performance
Appreciated
3/28/05 closing price of 21.98
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Sovereigns Historical Performance
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Strong Operating Earnings Growth
5 year Operating Earnings CAGR of 21
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Non-Financial Highlights

• Ranked in the top 2 in the ISS Banks group
  regarding Corporate Governance
• We strengthened our market share through three
  key acquisitions First Essex, Seacoast, and
  Waypoint
• We unveiled 18 new Red Carpet Customer Service
  guarantees to complement the six guarantees we
  already had in place
• We introduced Milestone Banking, a portfolio of
  value packages that are designed to fit our
  customers current and ever-changing financial
  needs
• Our redesigned Internet website was voted by
  Forrester Research as an industry best practice
• For the third consecutive year, Sovereign was
  named one of the most admired financial industry
  companies in the nation by Fortune magazine

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Improving Capital Since 2000

• Sovereign Bancorp 9/00 12/01 12/02 12/03 12/04
• Tier 1 Leverage 3.00 4.21 5.01 5.61 7.05
• TCE/TA 1.36 2.59 3.61 4.66 5.00
• average TCE generated per quarter in 2005
  200 million
• Sovereign Bank
• ( in millions)
• Tier 1 Leverage 6.58 7.21 7.55 6.66 7.21
• Risk Based Capital 10.06 10.68 10.69
  12.12 11.55

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1-Year Stock Price Performance
Appreciated
3/28/05 closing price of 21.98
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3-Year Stock Price Performance
Appreciated
3/28/05 closing price of 21.98
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5-Year Stock Price Performance
Appreciated
3/28/05 closing price of 21.98
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10-Year Stock Price Performance
Appreciated
3/28/05 closing price of 21.98
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10-Year Shareholder Value

• If 10 years ago, you had invested 10,000.00 in
  Sovereign, KBW Bank Index, the Dow Jones
  Industrial Average (DJIA) or the SP 500. Today
  would be worth
• Sovereign 54,683
• KBW Bank Index 40,589
• DJIA 25,668
• SP 500 25,982

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Our Goals for 2005 and Beyond

• We will continue to strive for
• Double-digit average annual growth rate in
  operating earnings per share, striving to exceed
  2.00 in operating earnings for 2005
• Significant progress in our journey from Good to
  Great in all areas of the bank, including
  excellence in service and giving back to the
  community
• Executing our local community banking strategy,
  resulting in substantially improved sales and
  service performance and operating metrics
• Remain disciplined regarding capital allocation
  process

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Sovereigns Current Business Strategy
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Sovereigns Business Strategy

• Combining the best of a large bank with the best
  of a smaller community bank.

• Best of a Large Bank
• Products
• Services
• Technology
• Brand
• Delivery channels / distribution system
• Talent
• Diversification
• Sophistication of risk management

• Best of a Small Bank
• Flatter structure
• Local decision making
• Active community involvement culture
• Cross functional lines to deliver bank to
  customer
• Treat customers as individuals

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Sovereigns Banking Structure
Market CEO
Commercial Real Estate Lenders
Commercial Lenders
Small Business Lenders
Cash Management Representatives
Financial Consultants
Retail Branches
10 Local Markets, each with a CEO responsible for
meeting profitability and revenue goals
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Local Markets are Focused on Five Areas of Growth

1. Achieving higher growth in loans, deposits and
   fees through local decision making and higher
   quality service
2. Improving margins and return on assets
3. Increasing fee income
4. Increasing the number of services being sold to
   or used by a customer
5. Expanding Sovereigns presence in the marketplace

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Outstanding Customer ServiceGuaranteed

• Red Carpet Service - we perform or pay our
  customers
• Wait no longer than five minutes in a teller line
• Customers have access to Sovereign
  representatives 24 hours a day, 7 days a week
• We will return customer telephone calls and
  emails the same business day, if received by 300
  PM EST
• We provide and mail accurate account statements
  within 7 days
• Our ATMs are always available
• We greet our customers and thank them for banking
  with us

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Sovereign Is Committed to the Following

• 1. Stick with our discipline of blocking
  tackling
• There are tremendous opportunities within our
  market for organic growth
• Strong management team in place and our structure
  and strategy is organized as such to seize those
  opportunities
• 2. Continue with our capital and MA discipline
• Any acquisition that we do must be accretive to
  earnings within the first year,
• not take us away materially from our capital
  goals,
• and must not be dilutive to our future growth
  prospects.
• Any acquisition opportunity, which requires
  capital allocation, will be analyzed against
  share repurchases or other uses of capital.
• 3. Improve our operating fundamentals including
  net interest margin, return on assets, return
  on equity, and dividends

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Strategy. With Clear Purpose and Direction.

• There is nothing complicated about our strategy
  for moving forward
• We are clear about our strategy, as well as our
  values, mission and goals
• 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

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2004 Financial ReportJames D. HoganChief
Financial Officer
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Operating Earnings

• Effective in the fourth quarter of 2004,
  Sovereign moved to one non-GAAP financial measure
• Provides greater financial transparency
• Provides useful supplemental information when
  evaluating Sovereigns core businesses
• Operating 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

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2004 Financial Highlights

• Net income of 454 million, after all
  non-recurring charges, or 1.36 per share
• Growth in operating earnings of 28 to 602
  million from 471 million in 2003, and growth in
  operating earnings per share of 14 to 1.84 from
  1.62 in 2003
• Organic consumer and commercial loan growth of
  28 and 10, respectively
• Core deposit growth of 19 and organic core
  deposit growth of 4.00
• Significant growth in capital ratios, ending the
  year with tangible equity ratio of 5.00 and Tier
  1 Leverage of 7.05
• Improvement in our efficiency ratio of
  approximately 100 basis points
• Improvement in the quality of the balance sheet
  as a result of reducing the investment portfolio
  to 21 of assets as compared to 29 a year ago,
  and removing 500 million of high-cost debt
  incurred in the Fleet branch acquisition

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First Quarter 2005 Financial Highlights

• Net income of 146 million, after all
  non-recurring charges, or .38 per share, up 15
  from a year ago
• Growth in operating earnings of 37 to 183
  million from 133 million a year ago, and
  operating earnings per share of .46 from .44 a
  year ago
• Net interest margin of 3.26 as compared to 3.29
  in the fourth quarter and 3.28 in the first
  quarter of 2004
• Efficiency ratio of 48.4, an improvement of 331
  basis points from the first quarter of 2004
• Annualized net charge-offs decreased to .20 of
  average loans compared to .28 in the fourth
  quarter and .51 in the first quarter of 2004
• Repurchased two million shares during the quarter
  through our previously announced repurchase
  program
• Increased cash dividend by 33, resulting in an
  annual cash dividend of .16

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Report Card Long-Term Critical Success Factors

• In March 2001, Sovereign set an EPS target of
  2.00 in operating earnings per diluted share by
  2005
• Outlined a 5-point strategy for achieving these
  results
• Increase fee revenues by 15 on average per year
• Increase core deposits by 7-10 on average per
  year
• Retire high-cost holding company debt by 2006
• Increase consumer and commercial loans by 8-10
  on average per year
• Limit Operating Expense growth to 6-7 on
  average per year grow revenue at least twice as
  fast as expenses

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How Have We Done So Far?

40

Financial Goals Wed Like to Achieve Over Next 1
to 2 Years

• Continued core deposit growth
• Consumer and Commercial loan growth
• Continued growth in fee income
• Reduce net charge-offs
• Expand Commercial and Consumer net interest
  margins
• Control expense growth through productivity
  improvement
• Continue to look for good acquisition or other
  growth opportunities, if available at reasonable
  prices

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Earnings Goals 2005 through 2007
Managements Operating Goal
Operating EPS Growth

• 2004 1.84 A
  14
• 2005 ? 2.00
  11 ?
• 2006 ? 2.25
  10 ?
• 2007 ? 2.47
  10 ?

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Reading, Berks County Sovereign BankA
Community Partnership
Dick Ehst, Regional President, Berks County and
Executive Vice President Managing Director,
Corporate Communications
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Community Involvement
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Sovereign Bank is a committed corporate citizen,
supporting non-profit community organizations

• Sovereign provides direct financial support to
  more than 65 local organizations and events in
  Berks County
• Direct human services for persons in need
• Supporting youth and education
• Promoting arts and culture
• Promoting a healthy community
• Sovereign actively promotes team member
  involvement in our community
• Serving as leaders of 40 organizations
• Contributed about 11,000 volunteer hours last
  year

45
Sovereign Bank actively supports economic
development community improvement initiatives

• Sovereign took the lead in bringing Cabelas to
  Berks County
• Secured Sales Tax Increment Financing for the
  Project
• Negotiated with Tilden Township
• Local Cabelas is 1 store in the franchise and
  is the 1 travel destination in all of
  Pennsylvania (8 million visitors)
• Sovereign is taking a lead role with Our City
  Reading
• Provided 5 million in mortgages to first-time
  home-buyers through Our City Reading

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• Sovereign has played a major role in efforts to
  help revitalize downtown Reading
• Sovereign Performing Arts Center
• Sovereign Center
• Sovereign Plaza (5th Penn Streets)
• Over 1000 employees in downtown Reading
• Sovereign is involved in other important
  initiatives to help revitalize our community
• The Initiative for a Competitive Greater Reading
• RiverPlace Development Corporation
• GoggleWorks

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We see positive momentum for our community!

• Focused economic development initiatives
• Improved cooperation between the City of Reading
  and Berks County
• Pending Expansion of DID
• Continuing focus on improved law enforcement
• A confluence of redevelopment initiatives
• Sovereign Plaza
• Goggle Works
• Reading Area Community College
• RiverPlace

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Berks Market Profile
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Sovereign Bank is 1 in Berks County

• 15 branch offices in Berks County
• At March 31, total deposits of 923 million, up
  4.5 from December 31
• 414 million in mortgages in Berks County
• 124 million in consumer loans

50
Sovereign Bank is 1 in Berks County

• 2,892 small business customers
• Commercial loan commitments of 392 million
• Commercial real estate commitments of 25.6
  million
• Business deposit relationships total 117 million
• Continued focus on superior customer service

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Berks County Deposit Mix

• 18 time deposits
• 82 core deposits
• Blended cost of funds 1.49

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Looking Ahead
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Key 2005 Goals for Berks County

• Increase core deposits by 10
• Increase loan outstandings by 12
• Increase government banking portfolio by 10
• Greater focus on small business segment
• Well positioned to leverage Sovereigns superior
  products and services
• Pennsylvania Small Business Growth initiative
• Expand business relationships with the non-profit
  sector
• Institutions of higher learning
• Health services providers
• Larger community organizations

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Growing Big By Staying Small

• Leverage local decision-making and community
  involvement to gain market share
• A focused business-calling strategy
• Localized marketing tailored to the community
• Customer appreciation events
• Neighborhood-level marketing efforts
• Superior products and customer service
• Sophisticated array of products to meet needs
• Absolute commitment to superior customer service

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Berks County Bottom Line

• Sovereign in Berks County A strong and growing
  franchise and leading corporate citizen

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Thank You
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Sovereign Bancorp, Inc.2005 Annual Meeting of
ShareholdersThursday, April 21, 2005Reading,
PA