Sovereign shares plummet amid concerns in banking

Shares dropped $6.04, or 72 percent, to close at $2.33 in the regular session after bottoming at $2.20, its lowest price in almost 22 years.

The free fall came amid a sharp sell-off in the broader markets after the House rejected an unpopular $700 billion rescue plan for troubled financial companies. The Dow Jones industrials hurtled down nearly 780 points in their largest one-day point drop ever.

The rescue plan's failure means no one knows how the financial sector will recover from hundreds of billions of dollars in bad mortgage bets.

Further stoking jitters about weakness in the financial services sector, the Federal Deposit Insurance Corp. said Monday that Citigroup Inc. will acquire Wachovia's banking operations. Investors had been worried about Wachovia's stability as it grappled with mounting losses over souring mortgage debt.

The plunge in Sovereign shares came despite a note from a Janney Montgomery Scott LLC analyst upgrading the company's rating to "Buy" from "Neutral."

Sovereign, the 18th largest banking institution in the nation, has more than 785 community banking offices in the mid-Atlantic region and New England.

"We're not aware of anything specific in Sovereign's business that would justify the volatility. Sovereign is fundamentally sound and well capitalized," said Ellen Molle, a spokeswoman for Sovereign.

Molle noted the regional bank has plenty on untapped liquidity, including $6.2 billion from the Federal Home Loan Bank of Pittsburgh, $4 billion from the Federal Reserve and another $1.8 billion in "unencumbered assets."

In upgrading Sovereign's rating to "Buy," analyst Richard Weiss noted that the company's capital should be sufficient to allow it to survive. The Philadelphia-based bank's deposit base and lending footprint will also facilitate better operating results when the economy improves, Weiss wrote.