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Shares of

Sovereign Bank

(SOV)

, the Philadelphia-area regional lender, jumped 9% Monday on talk of a potential buyout.

Fueling the speculation were several news stories in the British press that

Royal Bank of Scotland

, Britian's second-largest bank, may be interested in Sovereign, which has branches in Pennsylvania and New Jersey.

Both banks declined to comment on the reports. But some British newspapers reported that Royal Bank of Scotland might be willing to pay up to $26 a share for Sovereign.

In midday trading, shares of Sovereign were trading at $22.86, up $2.05, or 9.9%.

Talk on Wall Street about a new wave of bank mergers is beginning to sizzle following last week's news that

Bank of America

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intends to buy

FleetBoston Financial

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for about $47 billion. Sovereign, the second-largest bank in Pennsylvania, is an oft-mentioned potential buyout candidate.

However, one money manager, who didn't want to be identified but who said he owns shares of Sovereign, doesn't believe management will sell for anything less than $30 a share. The manager said Sovereign's management is holding out for a higher price, in light of the rich 43% premium BofA is paying for shares of Fleet.

One investment banker said the big premium being paid BofA actually could chill some potential bank deals. Like many on Wall Street, the dealmaker said the purchase price for Fleet is excessive.

Still, the investment banker, who also didn't want to be named, said he expects the BofA-Fleet merger to lead to a number of other deals over the next few months. He said potential acquirers, such as

Bank One

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and

Wells Fargo

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, need to strengthen their retail banking business.