Shares in Sovereign lost $3.34 each in the final quarter of the year, with operating profit falling by 44 per cent on the same time the previous year to $94 million.
Last year the bank only lost $129 million in the fourth quarter and its profit excluding charges was $167 million, or 33 cents per share.
Sovereign is scrapping its eight cents per share quarterly dividend for the present "to help bolster capital and mitigate risk during the ongoing challenges in the financial services industry", chief executive Joseph Campanelli said in a statement.
As much as $1.58 billion of goodwill, or $3.08 per share, was written down by Sovereign, exceeding its earlier estimates by $180 million.
However the $180 million charge for mortgage investments that the bank took was as predicted and it cut earnings by 23 cents per share.
Despite the news, Sovereign shares closed up $1.03, or 10.2 percent, at $11.15 on the New York Stock Exchange on Wednesday.