Jay Sidhu, a banker of measured words and aristocratic bearing, is not easily perturbed.

But this year has not been a cakewalk for those who manage thrift holding companies like Sovereign Bancorp. Despite his best efforts to control his destiny, Mr. Sidhu is at the mercy of mysterious, unpredictable, and unresolved political processes.

"When you can make your way around the tunnel system that gets you from office to office" on Capitol Hill, "you know you've been spending too much time there," he said recently while sitting in Sovereign's glass-sheathed headquarters building in suburban Wyomissing, Pa.

"I have spent more time in Washington this year than I ever thought I would."

Mr. Sidhu has been riding the emotional roller coaster of the deposit insurance debate. With premiums for thrift deposits as high as 24 cents per $100, and with most commercial banks paying no more than a nominal subscription fee, Mr. Sidhu has been lobbying hard for a merger of the Bank Insurance Fund and the Savings Association Insurance Fund.

The $8.4 billion-asset Sovereign, he said, is losing up to $40 million a month in certificates of deposit to banks that can pay better rates because of their insurance advantage.

Only a month ago, Mr. Sidhu was convinced the matter would be put to rest when Congress finally passed a budget. But the fund-merger amendment was deleted at the last minute.

"I'm disgusted with everything in Washington," said the banker. "It appears some of our leaders understand our need to act, and others don't. Now I don't think anything will happen until after the elections."

But Mr. Sidhu is not one to stand pat and wait for the government to improve his operating environment. He has been doing what he can to turn Sovereign - which has focused on single-family home loans since Mr. Sidhu became chief executive officer, in 1989 - into a commercial bank.

One of his more controversial moves last year was to buy $45 million- asset Colonial State Bank of Freehold, N.J., now Sovereign Community Bank. He promised the Federal Deposit Insurance Corp. he wouldn't use it as a cheaper receptacle for thrift deposits. But he then set up a system to do exactly that.

Mr. Sidhu made the mistake of advertising the bank's Bank Insurance Fund coverage in a flier that eventually wound up in the hands of regulators. The FDIC put a stop to the deposit-shifting at Colonial, but Mr. Sidhu has just completed the purchase of another New Jersey commercial bank - West Jersey Bancshares, based in Fairfield - one that won't be so limited in its activities.

"We have a business plan at Sovereign Community Bank that has already been approved by the Office of Thrift Supervision," Mr. Sidhu said. The new bank "can go after the deposits of other banks, including those of Sovereign FSB," the thrift insured by the Thrift Fund.

"It's a growth plan," Mr. Sidhu said.

Sovereign is not alone in trying to circumvent regulatory will. Mr. Sidhu, 44, admits to being an admirer of Golden West Financial Corp. of Oakland, Calif., which through its World Savings Bank subsidiary has shifted as much as $2 billion of deposits from accounts insured by the thrift fund to recently purchased commercial banks.

When Mr. Sidhu arrived at Sovereign's predecessor, Penn Savings Bank, in 1986, he and then-CEO Paul Wieand visited Golden West's top executives, Herbert and Marion Sandler, for management advice.

"They've never had a loss year," Mr. Sidhu said. "They have a very consistent strategy: low cost, low risk, and highly focused."

Since then, Mr. Sidhu has strived to remake Sovereign in Golden West's image. And analysts have been more than satisfied with the results.

First-quarter earnings were up 29%, to $15.7 million. Return on average equity was 14.31%, while return on assets was 0.77%, seven basis points better than in the year-earlier quarter.

Striving to be more like a bank, Sovereign originated $48 million in consumer loans, 33% more than in the first quarter of 1995. Commercial loans totaled $15 million, up from zero in the prior period.

"Everything is going well at Sovereign," said Elizabeth Summers, an analyst with Ryan, Beck & Co. "They're smart marketers. They are using their mortgage customers to find small-business borrowers. These guys are very good at scanning the environment and adjusting for changes."

Nancy Hazelrigg, a thrift analyst at Merrill Lynch & Co., added, "These guys are very focused, more focused than any thrift company I cover. That comes straight from Jay."

Part of Mr. Sidhu's success can be credited to the devotion and loyalty of his work force. He has imbued Sovereign's culture with a distinctly new- age management style.

At a recent analyst presentation in New York, Mr. Sidhu described Sovereign's "people oriented" philosophy. A slide flashed up on a screen that had, minutes before, been filled with stock-price fever lines and nonperforming-asset figures. It listed Sovereign's cultural values: "know yourself; love & trust; care; support; appreciation; happiness & satisfaction."

Mr. Sidhu, who makes a point of meeting with all of Sovereign's 1,350 full-time employees at least twice a year, explained his credo this way: "If you expect total commitment from people, then you have to be totally committed to their growth. But there is no growth without self-awareness. So we help our people to recognize their own strengths, weaknesses, and desires for change.

"This will mean happier people in their personal lives, and more productive people on the job."

To put the philosophy into action, Mr. Sidhu encourages employees to watch "The Teacher Series," a set of videotapes of professors at prestigious universities exploring the meaning of life. His personal favorite is a Columbia University faculty member's lecture on the Socrates commandment "Know thyself."

Mr. Sidhu is also a big fan of Daniel Goleman's "Emotional Intelligence."

"The book is wonderful," he said. "It's all about what it means to be truly smart and what it means to achieve true success. It's absolutely required reading at Sovereign."

Mr. Sidhu's emphasis on values and human relationships appears to be more than just a superficial play to employees' morale. He acts as if he lives the philosophy. He sounded almost envious when he talked about his former boss, Mr. Wieand, who quit banking to start a management consulting firm.

Which may explain why Mr. Sidhu will now discuss selling the thrift in a more serious way than he has before. Although some analysts doubt that another management team could do a better job for shareholders, Thomas O'Donnell of Smith Barney said Mr. Sidhu would "do whatever to enhance shareholder value," even if it meant selling out to an acquisitive superregional like CoreStates Financial Corp. or Mellon Bank Corp.

"It's a very attractive franchise," Mr. O'Donnell said. "It will become even more attractive to somebody" once the BIF-SAIF issue is resolved, he added.

Mr. Sidhu was singing a different tune two years ago when Fred Jaindl, then Sovereign's chairman, was pushing to sell the company. Mr. Sidhu and Mr. Jaindl took each other to court in a bitter battle over Sovereign's future. The lawsuits were eventually dropped. Mr. Jaindl left the board and has since sold much of his stock.

Since the end of 1993, Sovereign's stock has fallen to TK ? at Monday's close, from $12. Still, Mr. Sidhu can claim that the value of 100 Sovereign shares climbed to $8,273 in 1995, from $1,200 in 1986.

Nevertheless, he said, "We will consider all strategic options, including the sale of the company."

A realistic price for Sovereign, according to Mr. Sidhu, would be 15 to 18 times next year's projected earnings, or $1.2 billion. That works out to $21 a share, a rich 2.6 times book value.

However, until Congress acts on insurance premiums, it is unlikely that any large regional - First Union Corp., PNC Financial Corp. and NationsBank are just a few of Sovereign's potential suitors - will truly be interested.

"One could say all SAIF-insured institutions should not sell as long as the market is discounting the sales," Mr. Sidhu said. "But as soon as this issue is resolved, it will add to the value of the institution."

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