Sovereign spirits were lifted on Friday, even if it is only rumors that pushed the stock higher.

Sovereign Bancorp (nyse: SOV - news - people ) refused to comment on a published report that it will raise $1.0 billion to $2 .0 billion in capital from investors led by Banco Santander (nyse: STD - news - people ), the Spanish bank which currently has a 25.0% stake in it.

But investors seemed to think that a nondenial was as good as a confirmation. They also apparently figured that if Sovereign is good enough for heavily vested Santander, which ought to be privy to more information than the average investor, that it is good enough for them. Sovereign added 5.4% or 40 cents, to $7.86, Friday. Santander's American depositary receipts had the opposite reaction, falling 0.9%, or 19 cents, to $21.64.

Ed Schultz, a media representative at Sovereign, told Forbes.com Friday that the company would not confirm or deny reports of Soverign needing capital or raising some. The report of the Santander investment was carried in the Financial Times.

On Friday Keefe, Bruyette & Woods upgraded Sovereign to "market perform" from "underperform." "The combination of a meaningful capital raise, elimination of the common dividend, and further balance sheet deleveraging, via the runoff of noncore assets, should clearly help to bolster Sovereign's capital," KBW said.

Sovereign is not alone in looking for capital. So far this year, a plethora of financial-services firms, including Citigroup and Washington Mutual, raised capital as writedowns and losses wracked the companies.

The Philadelphia-based bank could use the money to offset growing credit losses. Sovereign reported a 43.0% decline in first-quarter earnings, not including a large charge in 2007.

Chief Executive Joseph Campanelli is trying to clean-up Sovereign's balance sheet by selling worrisome mortgages and auto loans and focusing on the company's core Northeast and mid-Atlantic businesses.

On Thursday, at Sovereign's annual shareholder meeting, executives from the Philadelphia bank and from Santander said the companies have not discussed boosting or reducing the Spanish bank's stake.

Santander initially paid $2.4 billion for a 20.0% holding in Sovereign in 2006. The Spanish bank as since increased its stake, and now has three seats on Sovereign's board. When the initial Santander investment was announced, Sovereign also paid $3.6 billion for Brooklyn-based Independence Community Bank, expanding its presence in the New York City area.

In early February, Sovereign said Chief Financial Officer Mark McCollom would step down effective March 3, to be replaced by Kirk Walters. Although the company's official announcement said McCollom's departure was "mutually agreed," his separation agreement states that he was terminated without cause. McCollom was paid $2.0 million in severance.

In January, Soverign announced $1.6 billion in writedowns due to market turbulence. (See "Soverign's $1.6 Billion Headache")