Sovereign Bancorp, Inc. said Monday that it will take an eye-popping total of $1.58 billion in fourth-quarter charges, citing “continued volatility in the financial markets and deterioration in the credit environment.” The bulk of the charges will come in the form of goodwill impairments at the nation’s 18th largest bank, with Sovereign recording a $600 million charge related to automobile financing and an $800 million charge related to one of the company’s banking subsidiaries. From the press statement:

A combination of a weakening consumer credit market, lower valuations for banking companies, and Sovereign’s decision to stop originating automobile loans in the Southeast and Southwest resulted in the goodwill impairment for the Consumer segment. The New York Metro segment’s goodwill relates primarily to Sovereign’s June 2006 acquisition of Independence Community Bancorp. Earnings for this segment have been negatively impacted by the current operating environment. Consequently, revenue and deposit growth have been less than expected.

But perhaps the most interesting tidbit here is a disclosure that the bank will write off $180 million of its $950 million portfolio of Fannie Mae and Freddie Mac preferred stock. Citing widening credit spreads, Sovereign said that it recorded the loss because it “cannot predict whether the market value of the securities will recover in the near-term from recent significant value impairment.” That’s eye-opening. Or, at least, it should be. Other write-offs Sovereign also said that it expected to boost its loan loss provision to $148 million, while writing off $27 million in what it called “financings” provided to two unnamed mortgage companies. I’m assuming “financings” refers to losses in either warehouse or correspondent funding, although the company didn’t specify. Both losses are, of course, being attributed to “adverse developments in the real estate market.” “Given industry conditions, Sovereign is rigorously reviewing its business lines to ensure their contributions to our profitability and strategic goals,” said president and CEO Joseph Campanelli. “As a result, we have discontinued our automobile lending originations in the Southeast and Southwest. We do not expect further actions within our core business and are comfortable with the composition of our platform and franchise.” Sovereign Bank operates primarily in the Northeastern U.S., and boasts $87 billion in assets. For more information, visit http://www.sovereignbank.com. Disclosure: When this post was published, the author held no positions in SOV.