Sovereign Bancorp, Inc.

2007 Annual Meeting of Shareholders

Thursday, May 3, 2007Philadelphia, Pennsylvania

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Forward-Looking Statements

This presentation contains statements of Sovereign Bancorp, Inc.’s (the “Company”) strategies, plans and objectives, estimates of future operating results for Sovereign Bancorp, Inc. as well as estimates of financial condition, operating efficiencies, revenue creation and shareholder value

These statements and estimates constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) which involve significant risks and uncertainties. Actual results may differ materially from the results discussed in these forward-looking statements

Factors that might cause such a difference include, but are not limited to: general economic conditions, changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory, and other technological factors affecting the Company’s operations, pricing, products and services

Overview of Sovereign

Joe CampanelliPresident and

Chief Executive Officer

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An Exceptional Franchise Serving the Northeastern United States 18th largest bank in

U.S. with $82 billion in assets at March 31st,

2007

785 offices& over 2,000 ATM’s

Approx. 11,350 team members

Source: SNL DataSource

5 Largest MSA’s in Northeast U.S.No. of SOV Mkt SOVOffices Share Rank

New York 226 1.98% 10

Philadelphia 86 4.30% 7

Boston 173 6.65% 3

Providence 55 10.58% 3

Hartford 29 4.78% 6

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Sovereign’s Vision and Strategy

VisionTo be recognized by customers and prospects as a customer-centric local community bank with large bank capabilities

StrategyTo acquire and retain customers by: Demonstrating convenience through our locations,

technology and business approach Offering innovative and easy-to-use products and services Providing high-quality customer service that is both

responsive and flexible

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America’s Neighborhood Banksm

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Summary of Sovereign’s Business Model

Increased emphasis on core commercial and consumer, franchise based businesses; Sovereign does not have any lending units whose principal focus is on sub-prime lending

Core Commercial: Commercial Real Estate Mini Perm Conduit C&I Lending Business Banking

• Branch Business Banking• SBA

Centralized strategy with a de-centralized delivery structure Community Banking delivery model, each with a Market CEO Local decision making by experienced commercial/retail bankers

Core Consumer (within footprint): Home Equity Lending Residential Mortgage Retail Banking

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Specialty Businesses – Regional and National

Auto Finance Dealer Floor Plan Indirect Auto

Aviation Finance

Multi-Family/CRE

Health Care/Not-For-Profit

Asset Based Lending Business Alliance

Capital Corp.

Franchise Finance

Capital Markets

Cash Management

Equipment Finance/Leasing

Trade Finance

Retail Finance

Sports Lending

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Strategic Alliances

CVS/Cardtronics Over 1,000 ATMs installed to date

First Data Corp. Sovereign Merchant Services Dedicated sales force in excess of 100

ADP Sovereign Payroll Services Dedicated sales force of approximately 225

American Express – OPEN Customer Rewards Program Official card issuer

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Re-energize Emphasis on Convenience and Customer Service

Consumer banking emphasizes convenience and customer service

Many markets offer 7-day banking

Appointment banking

24/7/365 domestic call centers and internet availability

Developing comprehensive strategy to serve a variety of ethnic markets including Hispanic/Latino markets

Custom Switching Services

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Experienced Leadership TeamQuality and Depth

Name Business UnitYears of

Experience Prior Institutions

Joe Campanelli President & CEO 25+ Shawmut, Fleet

Brendan Dugan Metro New York/New Jersey 30+ EAB Bank, CitiBank

Steve Issa New England South & Precious Metals 25+ Bank of Rhode Island, Shawmut

Jim Lynch Chairman & CEO, Mid-Atlantic Division 30+ Continental, Prime, Summit, Fleet

Larry McAlee Internal Audit 20 Arthur Anderson, Sovereign

Mark McCollom, CPA Chief Financial Officer 20+ Meridian Bank

Thomas Nadeau Auto Finance/Consumer Lending 20+ Bay Bank

Salvatore Rinaldi Operations & Administration 30+ Fleet, Shawmut

M. Robert Rose Risk Management 30 Shawmut Bank, BankBoston, Fleet

Marshall Soura Global Solutions Group and Marketing 40+ BankBoston, Bank One, Bank of America

Patrick Sullivan New England North & Specialty Businesses

25 Shawmut, BankNorth, Bank of Ireland

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Objectives for 2007

Execute on four key initiatives to deliver improved quality of earnings, provide greater transparency and understanding of Sovereign’s businesses and strategy, and better position Sovereign for sustainable growth

The four initiatives are to:1. Improve productivity and expense management2. Improve the capital position and quality of earnings3. Improve the customer experience4. Improve communications with all stakeholders

Improving Productivity and Expense Management

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Expense Reduction Initiative Announced in December 2006

Primary focus on: Functional redundancies and operating inefficiencies Products/business lines not meeting profit or

strategic goals Leverage economies of scale with vendor supply

and service contracts Consolidations of departments Optimization of retail delivery channels

While minimizing impact on customer facing activities and organic revenue generation

Identified ~$100 million of expense reductionsIdentified ~$100 million of expense reductions

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Progress To Date

Over 200 cost savings initiatives identified for implementation – all on plan to meet projected savings

Targeted reduction in force in excess of 800 FTE positions or 7% reduction in staff 379 team member positions eliminated to date

145 positions open due to turnover have been closed

Approximately 400 positions to be eliminated primarily through attrition by Q3 2007

40 non-strategic community banking offices to be closed or consolidated in the 2nd and 3rd quarter

Initiatives have company-wide involvement Approved 135 of 339 team member suggestions, resulting in $5.0 million

of run-rate savings

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Anticipate 100% of cost reductions to be realized, on a run rate basis, by the end of 2007:

75% realized by the end of the second quarter of 2007 100% realized by the end of 2007

Over $80 million of expense reductions will be reflected in 2007 financial statements

Expense savings are a key component to achieving positive operating leverage in 2007

Expense Reduction Initiative Implementation

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Capital Re-investment in Core Businesses to Continue Sovereign will continue to invest in core commercial and

consumer businesses as well as targeted specialty businesses

Sovereign will continue to make investments to improve the customer experience Comprehensive review of all bank information systems currently

underway Reduction of account opening time More incentives focused on sales and service Revitalization of Community Banking Offices

Sovereign intends to direct greater marketing resources toward deposit products in 2007

Sovereign plans to open/relocate up to 40 new community banking offices over the next 2 years – up to 18 in 2007 and 22 in 2008

Improving Capital Position and Quality of Earnings

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Balance Sheet Restructuring – Reduced Reliance on Wholesale Assets and Wholesale Funding

Sold about $7.6 billion of assets during the fourth quarter of 2006 and first quarter of 2007:

$3.3 billion of correspondent home equity loans $2.5 billion of purchased residential mortgages $1.5 billion of investment securities sold and reinvested $300 million of FHLB stock sold

Reduced wholesale funding $9.1 billion during the first quarter of 2007:

Reduced higher cost wholesale deposits $1.2 billion Repaid $7.9 billion of short-term borrowings

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Commercial Real Estate

18%

C&I20%

Multi-family9%

Residential Mortgages

28%

Home Equity15%

Auto8%

Other Commercial

1%

Other Consumer

1%

Commercial Real Estate

21%

C&I22%Multi-family

9%Other

Commercial1%

Home Equity11%

Auto10%

OtherConsumer

1%

Residential Mortgages

25%

Improved Loan Mix – Result of Balance Sheet Restructuring

Period-end balances

December 31, 2006 March 31, 2007

1Q07 Loan Sales:$3.3 billion correspondent home equity loans$2.5 billion purchased residential mortgages

$1.3 billion multi-family loans

Total Commercial Loans 48.7%Total Consumer Loans 51.3%

Total Commercial Loans 53.2%Total Consumer Loans 46.8%

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Benefits of Restructuring

Repositions Sovereign for sustainable growth in core earnings long-term

Improves risk profile of balance sheet

Improves capital levels

Provides investment capital to support organic growth

Reduces reliance on purchased assets and wholesale funding, improving quality of balance sheet and income statement

Enables management to fully focus attention on building core competencies

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Improvement In Core Operating Metrics

Net interest margin – pro forma annualized benefit of approximately 20 to 25 basis points

Net interest margin expanded 10 basis points during the first quarter of 2007

Because of timing of sales, benefit is expected to be fully reflected in 2Q07, partial benefit in 1Q07

Loan to deposit ratio improved to 107% in March 2007 from 119% in December 2006

Improved capital ratios Sovereign Bancorp’s Tier 1 Leverage ratio increased

approximately 50 basis points at March 31, 2007 Sovereign Bank’s Total Risk-Based Capital ratio increased

approximately 40 basis points at March 31, 2007

Improving The Customer Experience

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Tactical Plans To Improving Customer Experience Improve quality of service

Migrated back to domestically based customer service functions Refresher service training for all customer service personnel is

underway and will be completed during the second quarter Realign consumer and commercial infrastructure

Consolidation of commercial and retail on-line banking• Economies of development• Better customer experience - easier to use, more functionality

Rationalize product set

Franchise wide roll-out of customer switching services

Optimize sales process

Increase online usage Expand ATM network

Developed partnership with CVS to provide ATM banking services at over 1,000 locations

Align advertising and promotion with market needs

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Core Deposit Growth Strategy Strategy to improve core deposit growth goals:

Marketing/Sales• Focus sales force on core deposit acquisition• Implement coordinated, aggressive balance-building campaigns• Align advertising, incentives and communication in support of the core

deposit growth goals• Optimize effectiveness of the advertising spend by re-allocating across

geographies• Integrate Small Business into marketing plan

Products• During the first quarter we streamlined our retail product set by half –

10 checking products to 5• Increase balance retention by addressing grandfather accounts• Establish standard “everyday good rate” pricing for money market

accounts Capabilities

• Develop and introduce Partnership Banking Program• Upgrade online account marketing and acquisition capabilities• Seek to leverage “Switch” program

Improving Communications with all Stakeholders

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Improving Communication

Management’s responsibility is to share with all key constituents information that is timely, accurate, consistent and concise

Key constituents include: Team Members Shareholders Analysts Customers

Changes to date – Financial Disclosures: Operating earnings definition Capital ratios streamlined More credit quality detail (C&I, CRE) More deposit detail (wholesale vs. core)

Community leaders Advisory groups Regulators Rating agencies

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What to Expect in 2007

Disciplined and focused approach to increasing the value of our core franchise Increase the rate of household and enterprise acquisition Increase the rate of cross selling and share of wallet

Continued formation of a solid capital position

Company-wide program to improve our sales culture

Continued focus on operational excellence Better, faster and cheaper

Continue to increase communications and transparency Both internally and externally

Financial Review

Mark McCollomChief Financial Officer

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2006 Financial Highlights

Net income of $137 million or $.30 per share as compared to $676 million or $1.69 per diluted share in 2005

Operating/cash earnings for EPS purposes of $692 million or $1.48 per share as compared to $716 million or $1.72 per diluted share in 2005

Deposit growth of 40%, including acquisitions; organic deposit growth of 7%

Loan growth of 47%, including acquisitions; organic loan growth of 16%

Annualized net loan charge-offs of .25%, which excludes .71% of net charge-offs related to the fourth quarter balance sheet restructuring, as compared to .20% in 2005

Announced balance sheet restructuring and expense management initiatives during the fourth quarter of 2006

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Total Revenue Growth

$1,160 $1,205$1,405

$1,632 $1,822

$379 $456$468

$591$598

2002 2003 2004 2005 2006

Revenue Growth12% Annual Growth

Total revenue is defined as net interest income plus total fees and other income before securities transactions

$1,661$1,539

$1,873

$2,223$2,420

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Total Expense Growth

$814 $852 $943$1,089

$1,290

$163 $158$236

$163

$314

$146 $162$127 $90

$189

2002 2003 2004 2005 2006

Total Expense Growth12% Annual Growth

Total expenses includes provision for credit losses , G&A expense and other expense . 2006 provision excludes $296 million related to the fourth quarter balance sheet restructuring.

$1,172$1,123

$1,306 $1,342

$1,792

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First Quarter of 2007 Highlights Net income of $48 million or $.09 per share, including charges, as

compared to $141 million or $.36 per diluted share a year ago

Operating/cash earnings for EPS purposes of $180 million or $.35 per share as compared to $155 million or $.38 per diluted share a year ago

Balance sheet restructuring completed during first quarter of 2007

Strong loan growth in core commercial and consumer portfolios offset by loan sales as part of balance sheet restructuring

Average deposits declined $988 million during the quarter; of this $734 million was planned runoff in higher cost wholesale deposits as we reduced our reliance on these wholesale deposit sources

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First Quarter of 2007 Highlights

Net interest margin expanded 10 basis points from fourth quarter levels to 2.70%

G&A expenses declined $25 million or 7% from fourth quarter levels

Credit quality continues to meet our expectations

Capital ratios expanded within expectations, with most of the ratios expanding in excess of 40 basis points Tier 1 Leverage was 6.25% vs. 5.73% at year-end Tangible equity was 4.2%, up from 3.73% at year-end

Received credit rating upgrade from Moody’s to A3 from Baa1

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Operating Metrics

3.00%2.86%

2.64%2.70%

2.60%

1Q06 2Q06 3Q06 4Q06 1Q07

Net Interest Margin

1.8%

1.7%

1.6% 1.5%1.6%

1Q06 2Q06 3Q06 4Q06 1Q07

G&A Expense to Average Assets

0.98% 0.89% 0.91% 0.83%0.73%

1Q06 2Q06 3Q06 4Q06 1Q07

Operating Return on Average Assets

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What To Expect In 2007

Upper-single digit year-over-year growth in core commercial and consumer loan categories

Reductions in correspondent home equity and residential mortgage lending

Mid-single digit year-over-year growth from in-market deposits, offset by declines in wholesale deposits

$80 million decline in G&A expenses from fourth quarter levels offset by investment in core franchise

Improvement in net charge-offs over last year as result of correspondent home equity portfolio sale, partially offset by anticipated weakening of credit

Sovereign Bancorp, Inc.

2007 Annual Meeting of Shareholders

Thursday, May 3, 2007Philadelphia, Pennsylvania

Appendix

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Operating Earnings Per Share

This presentation contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”)

Sovereign’s management uses the non-GAAP measures of Operating Earnings in its analysis of the company’s performance. These measures typically adjust net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature or are associated with acquiring and integrating businesses, and certain non-cash charges

Since certain of these items and their impact on Sovereign’s performance are difficult to predict, management believes presentations of financial measures excluding the impact of these items provide useful supplemental information in evaluating the operating results of Sovereign’s core businesses

These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies

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One Non-GAAP Financial Measure

Sovereign’s management used the non-GAAP measure of Operating Earnings, and that related per share amounts on their analysis of the company: Provides greater financial transparency

Provides useful supplemental information when evaluating Sovereign’s core businesses

Operating Earnings represent net income adjusted for after-tax effects of merger-related and integration charges and any other non-recurring charges

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Reconciliation of Operating Earnings to Reported GAAP Earnings

($ in thousands) Year Ended December 31,

2006 2005 2004 2003 2002Net Income as reported 136,911$ 676,160$ 453,552$ 401,851$ 341,985$ Dividends on preferred stock (7,908) - - - - Net Income available to common shareholders 129,003$ 676,160$ 453,552$ 401,851$ 341,985$

Net Income available to common shareholders 129,003 Contingently convertible trust preferred interest expense, net of tax 25,360 25,427 21,212

Net Income for EPS purposes 154,363$ 0.30$ 701,587$ 1.69$ 474,764$ 1.29 401,851$ 1.32 341,985$ 1.17

Net income for Operating earnings EPS purposes 154,363$ 0.33$ 701,587$ 1.69$ 453,552$ 1.31 401,851$ 1.32 341,985$ 1.17 Merger-related and integration costs 27,574 0.06 8,284 0.02 30,134 0.09 10,316 0.04 Provision for loan loss 200,499 0.43 3,900 0.01 3,900 0.01 Loss on economic hedge 7,402 0.02 Restructuring of balance sheet 197,799 0.42 42,605 0.12 18,838 0.06 Restructuring charges 51,134 0.11 2,589 0.01 Impairment charge for FNMA and FHLMC preferred stock 43,875 0.09 20,891 0.06 Proxy and professional fees 9,319 0.02 3,788 0.01 Non-solicitation expenseOperating earnings for EPS purposes 691,965$ 1.48$ 716,248$ 1.72$ 551,082$ 1.59$ 420,689$ 1.38$ 356,201$ 1.22$

Weighted average diluted shares for GAAP EPS 433,908 415,996 367,811 305,001 292,991 Add back of diluted shares for Operating EPS not factored into GAAP diluted shares due to antidilution 33,840 - (22,823) - - Adjusted weighted average diluted shares for Operating EPS 467,748 415,996 344,988 305,001 292,991

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Mar. 31 Mar. 312007 2006

Net income/ (loss) as reported 48,059$ 141,398$

Dividends on preferred stock (3,650) -

Net income available to common shareholders 44,409 141,398

Contingently convertible trust preferred interest expense, net of tax - 6,327 Net income/ (loss) for EPS purposes 44,409$ 0.09$ 147,725$ 0.36$

Non GAAP adjustments to adjust antidilutive EPS

Net income available to common shareholders 44,409$

Trust IV expense, net of tax 6,412

Antidilutive net income/ (loss) for operating EPS calculation 50,821$

Reconciliation to Operating earnings EPS

Net income/ (loss) for Operating earnings EPS purposes 50,821$ 0.10$ 147,725$ 0.36$

Merger related and integration costs 1,323 0.00 (1,819) (0.00)

Loss on restructuring, other employee severance and debt repurchase charges 12,771 0.02 - -

ESOP expense related to freezing of plan 43,385 0.09 - -

Hedge loss on sale of multifamily loans (3,860) (0.01) - -

Gain on redemption of FNMA and FHLMC preferred stock (953) (0.00) - -

Writedown on correspondent home equity loans 76,394 0.15 - -

Proxy and related professional fees (249) (0.00) 9,319 0.02

Operating earnings for EPS purposes 179,632$ 0.35$ 155,225$ 0.38$

Weighted average diluted shares for GAAP EPS 475,115 410,366 Add back of diluted shares for operating EPS not factored into GAAP diluted shares due to antidilution (1) 34,353 - Adjusted weighted average diluted shares for Operating EPS 509,468 410,366

(1) The conversion of warrants and equity awards and the after-tax add back of Sovereign's contingently convertible trust preferred interest expense was excluded from Sovereign's GAAP diluted earnings per share calculation for the first quarter of 2007 since the result would have been anti-dilutive. However, for operating earning purposes these items are dilutive and as a result they have been added back for operating earnings and operating earnings

Reconciliation of Operating Earnings to Reported GAAP Earnings

($ in thousands)

Quarter Ended

Sovereign Bancorp, Inc.