Report: Sovereign CEO to Leave

Jay Sidhu reportedly agrees to step down from the bank
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Jay Sidhu's ouster as the top honcho at

Sovereign Bancorp

(SOV)

appears to be a done deal.

The Wall Street Journal

reports that Sidhu has agreed to step down as chairman and chief executive officer of the Philadelphia-based bank in the face of a boardroom putsch to remove him.

Last week, Sovereign's outside directors called a board meeting for today to discuss Sidhu's fate. The unhappy directors want the bank's controversial chief ousted because Sidhu has failed to make good on promises to boost the valuation of the lender, which has $89 billion in assets.

The

Journal

says that Sovereign will promote vice chairman Joseph Campanelli to president and CEO. Michael Ehlerman, a Sovereign board member, will replace Sidhu as chairman.

Sidhu reportedly agreed to resign after losing the support of Spain's

Banco Santander Central Hispano

(STD)

, which owns a 20% stake in Sovereign.

Ever since the news that Sidhu could be on his way out, shares of Sovereign have rallied.

Sovereign has been in the limelight for more than a year, after one of its largest shareholders, Relational Investors, called attention to the bank's lagging stock. Last October, the San Diego asset-management firm increased its stake and vowed to add more independent directors on Sovereign's board by nominating two of its own principals.

But just a few days after Relational began agitating for change at the bank, Sovereign announced that it was entering into a three-way deal to sell a 19.8% stake of itself to Santander, and in turn use those proceeds to purchase Independence Community Bank of Brooklyn, N.Y.

The deal sparked outrage from many of Sovereign's shareholders, including Relational and Franklin Mutual Advisers, a unit of

Franklin Resources

(BEN) - Get Report

, because, among other things, it did not require a shareholder vote. As of June 30, Relational owned 6.67% of Sovereign's shares.