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RESEARCH ALERT-Sovereign at market perform

NEW YORK, Oct 12 (Reuters) - JP Morgan & Co Inc (NYSE:JPM - news) said on Tuesday it started coverage of Sovereign Bancorp (NasdaqNM:SVRN - news) at market performer.

-- Sovereign's deal to acquire Fleet's branch network would dilute its EPS, Vivek Juneja, JP Morgan's analyst said in a report.

-- Sovereign has a string of acquisitions and has purchased wholesale mortgage-backed securities, making it unattractive as a takeover candidate for the intermediate term.

-- Sovereign management will be busy integrating the large acquisition of deposits and branches in a new market.

-- The company plans to acquire $11.8 billion deposits and 268 branches from Fleet.

-- JP Morgan's base case reflects management's assumptions for financing mix at the deal announcement: $2 billion comprising, $700 million of common equity and $1.25 billion of debt, Juneja said.

-- Target price is set at $10.

-- Sovereign is increasing its commercial and consumer loans and core deposits in its current franchise.

-- Sovereign is setting up affinity-based Web banks with tracking stock possible, the analyst said.

-- Senior managers and directors are required to buy SVRN stock.

-- Sovereign shares closed Monday at 9-23/64 on Nasdaq.