Roy Lever is grappling with a quandary rampant among bankers right now: trying to boost share of a crucial market while riding out the recession.

On the one hand, the head of retail banking at Sovereign Bancorp wants to use the momentum from the Wyomissing, Pa., company's recent sale to Banco Santander to make a bigger splash in the coveted New York market. To that end, he oversaw a ribbon-cutting for a new branch in Midtown Manhattan on Tuesday, with another new branch slated further downtown, near Penn Station, later this year.

On the other hand, his $78 billion-asset company is closely guarding its capital. Though it is looking to increase its deposits under its new owners, it has no plans to open any more branches in New York or anywhere else.

"Capital is precious, earnings are difficult," Lever said. "What we do going forward will be — you know — a function of how does this branch do? How does … [the other branch] do?"

That's the kind of one-brick-at-a-time approach the economic meltdown has bred at Sovereign and many of its rivals. While industry experts say it's wise to buckle down while keeping an eye on long-term goals, they warn against being too careful.

"I think it's probably the norm. But I wonder too if there isn't an opportunity for an organization that is well capitalized and that, perhaps, doesn't have too much in the way of problem assets [to expand] while everybody else is very inwardly focused right now," said Suzanne Moot, a banking consultant with M&M Associates.

"A new branch in this context is not much of a risk. They typically cost a couple million dollars. That's a rounding error on a balance sheet on the size of Sovereign's."

Sovereign, like many of its rival banking companies, has lost money as the recession deepened, complicating its growth plans. It lost $817.3 million in the first quarter after posting a profit of $100 million a year earlier, largely because of rising bad loans in its consumer and commercial lending books. Santander, which had previously owned about 25% of Sovereign, acquired the rest of it in January as part of a global expansion strategy. So far Santander seems to be taking a cautious approach with its new holding.

It has no hard timetable for rebranding Sovereign, though it expects to bring it under the Santander brand as the integration unfolds. Lever said getting a bigger profile in Manhattan is key in the company's retail banking strategy, since a large number of its customers in the outer boroughs, Long Island and New Jersey commute into the city. Sovereign has 76 branches in New York, 16 of them in Manhattan. The New York region — which includes portions of northern New Jersey and part of Pennsylvania — is among the company's weaker markets, ranked 13th in the area by deposit share, with about $1.78% of the market, according to the Federal Deposit Insurance Corp. In contrast, it is ranked fifth in deposit share in the Boston region, with 6.46% of the market.

But the global giant is being careful, and it remains to be seen whether such strategies will work.

Kenneth H. Thomas, a bank branching consultant, said Sovereign is on the right track to build share in that region by adding new branches in high-traffic areas. But he said it should consider being even more aggressive building up in New York now that the recession has brought down rents.

"If you are going to make your move into Manhattan this is the time to do it. This is a good time to come in," he said. "They are going to need several dozen" in the area "to be a serious player. That's a small number for a market like Manhattan."

However, Mark Fitzgibbon, the head of research at Sandler O'Neill & Partners, said a company does not have to be on every block to thrive. "You don't need a lot of physical locations to be successful in Manhattan," he said. "What you need to have is good locations that are strategically located and with first-class customer service."

Sovereign actually has an edge in service, Fitzgibbon said. It ranked No. 1 last year in his firm's annual poll of the 13 best retail bank operators in Manhattan. "They had the most capable people and most appealing branch sites," Fitzgibbon said.

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