Sovereign Bancorp has just barely dipped its toe into the New England market and already the war of words and fight for customers with FleetBoston Financial Corp. has begun.

Since Monday, when Wyomissing, Pa.-based Sovereign first opened its doors in Connecticut and Rhode Island, the two banking companies have been sparring over Fleet's handling of a noncompete policy. Meanwhile, Sovereign's debut has been marred by technical glitches affecting customers of its automated teller machines and its New England-based call center.

The timing couldn't be worse for Sovereign, which last weekend completed the first of three phases of a massive divestiture of deposits and branches by Fleet as part of that company's merger with BankBoston Corp.

Sovereign had hoped to use the occasion to jumpstart a marketing and branding blitz to get name recognition in New England, a new territory. When the divestiture is completed at the end of July, Sovereign will be the third-largest banking company in the region, with $11.8 billion of assets, 285 branches, and about 700,000 individual and business customers.

But Sovereign's publicity effort was trumped when Fleet decided to institute a policy that prevented customers who were turned over to Sovereign in the divestitures from coming back to Fleet and opening accounts. The policy, which became known Monday when Fleet turned away some new Sovereign customers who wanted to stay with Fleet, became an immediate cause celebre.

A chorus of outraged consumer groups forced Fleet to reverse course by the end of Tuesday. "Our priority is to achieve a smooth transition of customers to Sovereign," Charles K. Gifford, president and chief operating officer of FleetBoston, said in a statement aimed at appeasing the angry masses. "We are doing everything we can to give them the opportunity to get their franchise off to a successful start."

But executives at Sovereign smelled a rat. "It was a brilliant PR ploy on their part," said Jay S. Sidhu, president of Sovereign, in a telephone interview Wednesday. "We were caught completely off guard. They got front-page news. We are starting a new bank, so we deserved the front page news."

Fleet executives were at pains to make amends Wednesday. The original policy "was a genuine effort to avoid disruptions caused by customers trying to circle back to Fleet," said a spokesman. He added that Fleet would not launch any special promotions to lure Sovereign customers.

At the same time, Sovereign had to contend with problems of its own. Call-center volume surged Monday, forcing 15-minute waits for customers at times. The voice response system was not up and running Tuesday until 10:30 a.m. Customers using ATMs in Connecticut - which used to be owned by BankBoston - found that their eight-digit codes didn't work in Sovereign's system because it only recognized four digits.

Sovereign contends the problems are fixed. "With any conversion there are snafus," a Boston-based spokeswoman for Sovereign said.

Mr. Sidhu also said Sovereign has opened an average of 325 new accounts a day in Connecticut and Rhode Island since the deal, more than the number of accounts closed.

For Fleet, there are also substantial risks if the divestiture goes poorly. The company could have problems with the Department of Justice, which made the sales a condition of its approval of the Fleet-BankBoston merger, which created New England's biggest commercial bank by far, with $170 billion of assets. The next closest competitor is Citizens Financial Group, a subsidiary of Royal Bank of Scotland, which has about $20 billion of assets in the region.

Fleet came under fire for choosing Sovereign as the winning bidder for the divestiture. Many observers said the Pennsylvania bank, with $25 billion of assets, had no chance of competing effectively with Fleet. Indeed, Sovereign, by its own admission, had to stagger its acquisition of divested branches and deposits so that it was financially viable.

Correspondence between Fleet and the Justice Department earlier this year, obtained under the Freedom of Information Act, shows how Fleet scrambled to preserve its deal with Sovereign. The Department granted Fleet an unusual extension of time - most divestitures need to be done within 180 days - to complete the sale, now until Aug. 4. Fleet also agreed to the appointment of a monitoring trustee, paid for by Fleet, whose task will be to ensure that the divested business stays intact.

Mr. Sidhu said the renegotiated agreement eliminates integration risk and makes the deal more financially viable for his company. In three stages, the acquisition will preserve Sovereign's Tier 1 capital ratio above 3%, a level that regulators consider to be adequate capitalization. If Sovereign were to absorb the Fleet divestiture all at once, Tier 1 would have fallen as low as 0.38%, Mr. Sidhu said.

He said Sovereign would keep a close eye on Fleet to make sure it doesn't try to steal customers and business. Indeed, Sovereign will withhold $340 million of its payment to Fleet until next year, payable so long as Fleet abides by the noncompete agreement.

"We are dead serious," Mr. Sidhu said. "There is no darn way we're going to lose any business."

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