Interview: Sovereign Bank---Sidhu, Jay---Chief Executive Officer
>> pennsylvania’s second largest bank, sovereign bancorp, saying it earned 42 cents a share, in line with analysts’ estimates. jay sidhu, chief executive officer of sovereign, joins us from philadelphia. we want to look at what happened in your third quarter and what’s ahead for your business. let’s start with the third quarter and say, what is it that drove your earnings, the fed raising interest rates?
>> yes, mike, that helped us but basically all the fundamentals were working really well. our deposits grew, our loans grew, our expenses were under control, our asset quality improved and we are continuing to win an extra share in markets , especially in the business lending area so all the sill cylinders are the cause of the company functioning well and things going well.
>> i want to get to what you’re doing in a moment. it sounds like you see the economy improving and that’s helping business.
>> we definitely see the economy improving. we are pretty much a small, medium-sized business lender with the average loan of a million dollars. so we make a lot of loans of $50,000 to $250,000 or $1 million. so we see a tremendous loan demand in this area and it’s a reflection of the economy improving at the same time we’re picking up market share. i’ll give you an idea. our line usage has increased. our pipeline, in june, on june 30, was approximately $2 billion and it’s approximately the same right now so we see continuing improvement in the economy.
>> you did have bank of america muscling into your territory, buying fleetboston a couple of months ago. how’s that affecting your business?
>> well, fleetboston is a pretty good bank and bank of america is also doing a good job in trying to retain businesses but our model is provide the best of a large bank with the best of a small bank so we are much more personally involved in local decision making and getting closer to the customers so we believe we are picking up market share and we believe we are a tremendous option to those customers who want to deal with a local bank compared to a national bank like bank of america. so that is helping fuel some of our growth, too.
>> you are well capitalized, though. are you planning on acquisitions of your own?
>> it’s much more important for us to improve the fundamentals of the company and improve shareholder value. as you know, over the last five years, we have really increased our earnings net income by about approximately 25% a year, e.p.s. by approximately 10% a year and still our stock is trading at about a 15% discount so we are totally committed to doing things to enhance shareholder value and in my opinion stock buyback and those kind of capital allocation decisions are more important than acquisition so we’ll be focusing on things which increase shareholder value rather than just go after size.
>> you did make some purchases in recent years―including wavepoint. how are those tracking?
>> seacoast financial, we did the systems integration this past weekend―flawless, absolutely great and that gave us a nice presence. wavepoint financial is another $5 billion company headquartered in harrisburg, pennsylvania. we will get that done in the first couple of weeks of january. there’s nothing in the works besides that and we are committed to organic growth, committed to doing things to enhance shareholder value and we believe we deserve a market p.e., maybe a premium p.e., definitely not a discount, so the company will do everything to continue to enhance shareholder value and i would not put a lot of focus on acquisitions at this time.
>> what are you seeing ahead for the fourth quarter?
>> for the fourth quarter, street estimates for us are somewhere in the 42 to 44-cent range. for the year, that would take us to $1.65 to $1.70, in that range. we are very comfortable with that and for next year we are comfortable in the double-digit growth in the earnings per share, in the 14% to 16% range, because the fundamentals of the company are doing really well so we’re focused on controlling expense, focused on growing revenues primarily through loan growth, deposit growth and serving our customers really well and becoming a better option to bank of america and bank north and other types of banks which are becoming part of national or international franchises. we are a darn good locally-focused, locally-driven, small to medium sized business and consumer bank, that’s it. and we think there’s a huge opportunity in there for us so the the street should expect us to outperform the rest of the banking market .
>> if you can tell me, you’re in a battleground state, which presidential candidate would be best for the banking industry?
>> i think president bush, is my personal opinion, and the reason for that is that i think right now we need a stronger economy and a consistency of war on terror which is good for business and good for america.
>> thank you very much, james sidhu, c.e.o. of sovereign bancorp. china’s national bureau of statistics says the country’s inflation rate has stabilized. we’ll have more on that story and a preview of pacific rim markets next.
