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Investors are betting that Jay Sidhu, chairman and CEO of

Sovereign Bancorp


, is on his way out at the Philadelphia lender.

Shares of Sovereign received a heaping boost Friday, after the

Wall Street Journal

reported that Sidhu could be fighting for his job when the bank's board meets on Tuesday. Shares were up $2.42, more than 11%, to $24.

Of the 12 directors, seven independent board members are unhappy with the performance of the bank's stock, say market sources. 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 potential removal of Jay Sidhu is being viewed positively by the Street," says Matt Kelley, an analyst at Sterne Agee & Leach. The dissension among board members "could lead to the opportunity for a third party to become involved and take advantage. The market is viewing Sovereign as potentially in play."

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

Banco Santander Central Hispano


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of Madrid 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 Franklin Resources, Inc. Report

, because among other things, it did not require a shareholder vote. As of June 30, Relational owned 6.67% of Sovereign's shares, and Franklin owned 3.72%.

The deal also was seen as making it difficult for another bank to acquire Sovereign, which is something that many on Wall Street would like to see. Sovereign is attractive because it has branches across Pennsylvania and New Jersey and in other parts of the Northeast.

The acquisitions were completed in June, but Relational did get one of its principals, Ralph Whitworth, on Sovereign's board.

"Clearly the independent board members feel pressured here to consider a situation, given that management has tried to insulate itself by blocking any sale of the company," says Tim Ghriskey, the chief investment officer of Solaris Asset Management, which doesn't own any shares of the bank.

Most suspect that any battle to oust Sidhu will be a close one. The conventional wisdom is that directors loyal to Santander will support Sidhu.

"Ultimately, it really comes down to Relational vs. Santander," says Anton Schutz, president of Mendon Capital Advisors and the fund manager to Burnham Financial Services, which owns shares of Sovereign. "Santander is obviously going to support Jay ...

but at some point in time they'd either like to own the company or they would like to realize a gain on their investment."

On Friday, Santander said it would name a third member to Sovereign's board, Gonzalo de las Heras, an executive vice president of the Spanish banking company, bringing the board total to 13 -- making this a very close race between the dissenters and executive management.

Still, other say Santander's backing of Sidhu could be waning. One source familiar with the situation says that Santander is not "in the business of protecting CEOs."

Sovereign, Relational and Franklin all declined to comment.