Sept. 30 (Bloomberg) -- Sovereign Bancorp Inc., the second- largest U.S. savings and loan, rose the most in 22 years in New York trading as the bank said its chief executive officer will be replaced and analysts raised their stock recommendations.

Sovereign, based in Philadelphia, soared 70 percent, or $1.62, to $3.95 at 4:15 p.m. in New York Stock Exchange composite trading, its biggest increase since August 1986, and almost reversing the 72 percent drop yesterday.

Sovereign said in a statement today Paul Perrault will replace Joseph Campanelli as CEO. Perrault, 57, will start in January and Campanelli, 52, will leave immediately and be replaced by Chief Financial Officer Kirk Walters on an interim basis.

``The proposed change would reunite two well-respected managers from a very well-run regional bank, which we consider to be a strong positive,'' Joseph Fenech and Casey Orr, analysts with Sandler O'Neill & Partners, wrote in a report today. They raised the stock to ``hold'' from ``sell.'' ``With the recent decline in the stock, we think the risk/reward tradeoff no longer favors selling the stock at the current level.''

Albert Savastano, an analyst with Fox-Pitt Kelton Cochran Caronia Waller, raised the stock to ``outperform'' from ``in- line'' today. Matthew Kelley at Sterne, Agee & Leach raised it to ``buy'' from ``hold,'' while Matthew Schultheis at Boenning & Scattergood Inc. raised it to ``market outperform'' from ``market perform.''

Perrault was previously CEO of Chittenden Corp., Vermont's biggest bank where Walters worked as chief financial officer. Sovereign named Campanelli CEO in October 2006, replacing Jay Sidhu.

Banco Santander

Sovereign said in a regulatory filing after the end of regular U.S. trading that Perrault will be paid an annual salary of $800,000, a minimum bonus of $600,000 for 2009, along with a one-time award of 200,000 restricted shares and options to buy 1 million in common stock.

Sovereign, whose largest shareholder is Spain's Banco Santander SA, curtailed lending and is shrinking its balance sheet as defaults increase after posting a $1.3 billion 2007 loss. This month the lender said it was selling its portfolio of collateralized debt obligations after revealing it may take ``significant'' charges on its holdings of Fannie Mae and Freddie Mac, the nationalized mortgage-finance companies.

Santander spent $2.9 billion in 2005 and 2006 to buy about 24.9 percent of Sovereign, paying an average $24.83 a share. Sovereign plunged 72 percent yesterday to $2.33.

To contact the reporter on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Telma Marotto in New York at tmarotto1@bloomberg.net

Last Updated: September 30, 2008 17:04 EDT