Shares of Sovereign Bancorp Inc. have fallen 6.9% in the last few days as rumors intensify that the $25 billion-asset thrift will buy as many as 300 branches that are expected to be divested in the pending merger of Fleet Financial Group Inc. and BankBoston Corp.

Some analysts fear that Sovereign's earnings per share would be hurt if the unconfirmed reports prove true. Sovereign declined to comment.

"There is no question that the rumors are hurting the stock," said Edward R. Najarian, a bank analyst at First Union Capital Markets. Mr. Najarian fired off a warning to investors in late July that the Wyomissing, Pa., thrift would have to issue new stock to finance the takeover. This "would dilute the earnings-per-share growth" and delay the company's share buyback program.

"We think that Sovereign should use its excess capital to repurchase its own stock and not buy additional deposits," Mr. Najarian said. "I think the market believes the same thing."

The thrift's shares have declined 17.9% since mid-July, when rumors that it was a bidder emerged and began to affect the market. The Boston Herald reported last Thursday that Sovereign intended to buy most of the branches. The company's stock fell to a 10-month low of $10.0625 on Monday.

Fleet, which said in March that it would merge with BankBoston Corp., must divest about $12 billion in deposits -- or more than 300 branches in Connecticut, Rhode Island, and Massachusetts -- to comply with antitrust restrictions. The entire package is said to be going for at least a 10% premium, or $1.2 billion.

"It makes sense strategically for Sovereign to bid on some of the branches -- particularly those in Connecticut, where it already has presence," said Salvatore J. DiMartino, a bank analyst at Advest Inc. "But I don't know if it makes sense for them to go after all 300 branches. The Street is still unclear about how they would pay for such a transaction."

On the positive side, such an acquisition could fit neatly with Sovereign's strategy to move into commercial banking. Since late 1997, the company has gone after more commercial and consumer loans as opposed to mortgage loans, which dominate most thrifts' balance sheets, analysts said. The commercial loan portfolio has more than doubled in the past year, to $3.1 billion. Consumer loans have risen to $4.2 billion, from $3.2 billion.

In 1998, Sovereign bought 93 branches, with $2.1 billion of deposits and $800 million in loans, from First Union Corp. of Charlotte, N.C., which had to divest branches after its acquisition of CoreStates Financial Corp.

Analysts said they are wary about additional acquisitions by Sovereign after an 18-month spree.

During that time, the thrift announced plans to buy Peoples Bancorp, a $1.4 billion-asset bank holding company in Lawrenceville, N.J., First Home Bancorp, a $523 million-asset bank in Pennsville, N.J., and Carnegie Bancorp, a $424 million-asset bank in Princeton, N.J.

"They already have quite a bit to digest," said Lawrence Cohn, a bank analyst with Ryan, Beck & Co., Livingston, N.J.

Mr. Cohn said he is skeptical about the latest speculation about Sovereign because "it just does not make sense."

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