A source familiar with the matter said late on Sunday the Spanish bank was in advanced talks to acquire full control of Sovereign, in which it already holds a 24.9 percent stake.
The source said Santander was expected to pay about $3.81 a share, Sovereign's closing price on Friday on the New York Stock Exchange, valuing the company at about $2.53 billion based on shares outstanding as of July 21.
The deal would be the latest in Santander's acquisition drive. Last month it bought UK mortgage lender Bradford & Bingley's deposits and branches.
"Despite the fact the amount is not significant, we would not value the acquisition positively, given that the capacity to generate synergies and the lack of critical mass in the U.S. would reduce the capacity to generate value," an analyst in Madrid said.