Sovereign Bancorp soars as Perrault becomes CEO

As part of the shift, Sovereign's chief financial officer--and former Chittenden CFO--Kirk W. Walters will take the additional title of chief administrative officer. The 52-year-old Campanelli is stepping down immediately; Walters will also serve as interim president and chief executive until Perrault joins the company.

Campanelli, who the bank said is leaving to pursue other family and business interests, has served as president and CEO since he took over from embattled predecessor Jay Sidhu in 2006. Sidhu had made investors unhappy by negotiating the sale of a large stake in the bank to Spain's Banco Santander without asking for shareholder approval.

While Campanelli has been credited for improving transparency and disclosure with Wall Street, Sovereign's stock price has declined to record lows amid fears about instability in the banking sector. Earlier this month, the bank sold off its portfolio of collateralized debt obligations, complex investments backed by pools of mortgages or other assets that have plummeted in value since the start of the credit crisis.

Shares of the Philadelphia-based bank surged $1.62, or 69.5 percent, to close at $3.95 Tuesday. They rose as high as $5.25 earlier in the session.

Sovereign's stock plunged 72 percent on Monday after the failure of the government's proposed financial rescue package sparked one of the biggest market selloffs in years. But many regional bank stocks, which have been particularly battered in recent weeks, pared their losses on Tuesday as investors flooded the market in search of bargains.

From 1990 to 2007, Perrault, 57, served as CEO of Chittenden, a New England regional bank that was acquired by People's United Financial in January of this year. Walters, 53, who joined Sovereign in March, served as CFO under Perrault since 1996.

Anticipating the personnel change, Sandler O'Neill & Partners analyst Joseph Fenech removed his "Sell" rating from Sovereign shares Tuesday, upgrading them to "Hold." He said the personnel moves reunite "two well-respected managers from a very well-run regional bank."

In a note to investors, Fenech also said Walters has extensive experience in turnaround situations. But he cautioned that new management "must contend with inherited problems that continue to carry substantial risk."

With Banco Santander owning a roughly 25 percent stake in Sovereign, speculation has mounted that the Spanish bank would seek to protect its investment by orchestrating a takeover of the firm. While the hiring of such top-notch executives as Perrault and Walters would suggest Sovereign intends to remain independent, Fenech points out that the current economic environment has forced prominent executives--like Merrill Lynch & Co.'s John Thain--to do deals regardless of their desire to remain standalone organizations.