Sovereign Bancorp 2Q earnings fall 14 percent

Net income fell to $127.4 million, or 22 cents per share, from $147.5 million, or 29 cents per share, during the same quarter the previous year.

Analysts polled by Thomson Financial, on average, forecast earnings of 16 cents per share.

Like nearly all other banks, Sovereign has faced mounting losses from rising loan defaults, forcing it to set aside more cash to cover the troubled loans. During the second quarter, Sovereign set aside $132 million for loan losses, compared with $51 million during the year-ago period.

Net charge-offs rose to $86.9 million from $25.7 million during the year-ago period. Charge-offs are loans written off as not being repaid. Loan-loss provisions help to cover charge-offs each quarter.

Because of rising losses, Sovereign raised $1.39 billion in capital during the quarter through the issuance of common stock. Many banks during the second quarter issued new stock to add cash to their balance sheets to offset the mounting loan losses.

Net interest income, the difference between how much it costs a bank to borrow money and how much it receives from making loans, rose to $506.1 million from $453.4 million.

Non-interest income, money derived from fees and other charges, increased to $207.1 million from $190.3 million during the year-ago period. Non-interest income rose, in part, as consumer and commercial banking fees increased with growing sales of annuity products and higher deposit fees.

Shares of Sovereign rose 61 cents, or 7 percent, to $9.33 in morning trading. The stock has ranged from $5.58 to $21.34 over the past year.