NEW YORK - Sovereign Bancorp said Monday it is in advanced discussions with Spain's Banco Santander regarding a possible buyout of the Philadelphia-based thrift.

Both banks said there can be no assurance that such a transaction would be completed. Sovereign said it does not intend to comment further until a deal is reached or negotiations are terminated.

Santander already owns a 25 percent stake in Sovereign, and speculation has mounted that the Spanish bank would seek to protect its investment by orchestrating a takeover of the U.S. company.

The Wall Street Journal reported Sunday that the two banks hope to have a deal in place by Monday, with Santander expected to pay around $3.81 per share, Friday's closing price for Sovereign shares on the New York Stock Exchange. The Journal cited people familiar with the matter.

Based on the number of shares outstanding as of July 21, such a deal would value Sovereign at about $2.53 billion.

"From a valuation perspective, it may be a little early in the game," said Matthew Schultheis, senior analyst at Boenning & Scattergood Inc. "If they (Sovereign) held off, they could probably get a better price. It may simply be an easier out for them."

Sovereign, which has a major presence in the Northeast, has been hit hard in the past year and a half by rising mortgage delinquencies. During the second quarter, Sovereign set aside $132 million for loan losses, compared with $51 million during the year-ago period. The rise in loan-loss reserves during the quarter led to a 14 percent decline in profit for Sovereign.

Shares of Sovereign have plummeted nearly 55 percent over the past two weeks and are down 67 percent for the year.

In a note to clients Monday, Friedman, Billings, Ramsey & Co. analyst James Abbott said Santander would not let Sovereign fail because it already owns a stake in the bank. A Sovereign failure would also open up the potential for other banks to bid for the banking assets of Sovereign through a sealed auction by the Federal Deposit Insurance Corp.

When a bank fails, the FDIC takes it over and auctions off the assets to recoup some of the money lost by the failure. Allowing Sovereign to fail could lead to a cheaper price for Santander, but it is likely too risky a move, Abbott wrote.

"Santander has invested too much time, effort, and money in Sovereign thus far to walk away with nothing," Abbott said.

In late September, Sovereign named former Chittenden Corp. chief executive Paul A. Perrault to replace Joseph P. Campanelli as CEO effective Jan. 3.

Campanelli served as president and CEO since taking over from his embattled predecessor Jay Sidhu in 2006.