PHILADELPHIA – Sovereign Bancorp Inc., the parent company of Sovereign Bank, today reported a second-quarter profit of $127.44 million, a decline of $20.01 million, or 13.57 percent, compared with the year-ago period’s $147.45 million.

The results for the most recent quarter included a loan-loss provision of $132 million, or 2.5 times the bank’s $51 million provision for losses in the 2007 second quarter.

Second-quarter earnings per diluted share were 22 cents, down 8 cents a share from a year earlier. But that still beat the 16-cent-per share consensus profit estimate of seven analysts who follow Sovereign, according to Yahoo! Finance.

Revenue for the quarter fell 9.08 percent compared with the 2007 second quarter to $1.21 billion, but there was some good news:

Sovereign’s interest-rate margin continued to improve, widening to 3.06 percent, from 2.88 percent in this year’s first quarter 2007 and 2.71 percent a year ago. And net interest income rose to $506.13 million in the most recent quarter, up from $453.38 million in the year-ago period.

“Sovereign is on solid financial footing as we manage through the current uncertain economic climate,” Joseph P. Campanelli, the company’s president and CEO, said in a statement today.

“Given the challenging operating environment, I am pleased with our results for the second quarter of 2008, which are consistent with our expectations,” Campanelli added. “They reflect the prudent and proactive strategies we employed in the last year and demonstrate progress in reducing our risk profile, improving the quality of our earnings and strengthening our operating metrics.”

The Philadelphia-based bank – hit hard by mortgage and other consumer credit losses – issued $1.39 billion of common stock in May. (READ MORE)

Sovereign, the third largest bank in Rhode Island in terms of deposits, reported total assets of $79.2 billion at the end of the second quarter, down from $82.73 billion a year ago. Deposits declined to $47.29 billion at the period’s end from $49.84 billion on June 30, 2007.

Return on average assets – the amount of money the bank earned for each $100 in assets – increased to 0.64 percent in the second quarter from the preceding quarter’s 0.50 percent, but remained below the year-ago 0.72 percent. Return on average equity increased to 6.73 percent from the first quarter’s 5.78 percent and 2007 second quarter’s 6.71 percent.

Commercial loans grew to $32.44 billion at quarter’s end, from $32.18 billion in the first quarter. But the net value of all loans declined to $56.6 million from $58 million on March 31.

While the $132 million loan-loss provision – money set aside in anticipation of bad loans – was a significant increase over the year-ago’s provision, it was smaller than the $135 million provision from previous quarter. The bank’s allowance for credit losses as a percent of total loans increased to 1.47 percent at June 30, up from 1.36 percent at March 31 and 0.92 percent a year ago.

Nonperforming assets increased to $553.9 million, or 0.70 percent of total assets at the end of the second quarter, from the first quarter’s $484.4 million, or 0.59 percent of total assets. A year earlier – at June 30, 2007 – nonperforming assets totaled $334 million, or 0.40 percent of total assets.

Sovereign Bancorp Inc. (NYSE: SOV), the parent company of Sovereign Bank, is an $85 billion financial institution with 750community banking offices, more than 2,300 ATMs and about 12,000 employees, mostly in the Northeast. For additional information, visit www.sovereignbank.com.