Analysts yesterday continued to criticize PNC Financial Services Group's deal to buy embattled Riggs Bank in Washington, D.C., saying PNC made a poor choice by picking up a troubled bank in a weak position in a highly competitive market.

	Ron Edmonds, Associated Press Critics say PNC probably will have a difficult time reinvigorating Riggs' ailing franchise. Click photo for larger image. Previous articles PNC buying Riggs bank (7/17/04) Scandals beset D.C.'s 'bank of presidents' (7/17/04)

PNC announced Friday that it had agreed to buy Riggs, a 168-year-old institution known as the bank of the presidents but most recently in the headlines for a money-laundering scandal, for $779 million in cash and stock.

While PNC touted the acquisition as a way to expand into one of the nation's most affluent markets, some analysts expressed doubts. They said PNC likely would have a difficult time reinvigorating Riggs' ailing franchise, particularly as it competes against bigger players there including Wachovia, Bank of America and SunTrust, the top three deposit-holders in that region.

"PNC just bought a franchise in complete disarray in a market dominated by much more competent banks," said Arnie Danielson, a veteran banking consultant based in the D.C. region. "It's a recipe for disaster."

Hoefer & Arnett analyst Dick Bove echoed Danielson's observations. "I don't think that PNC has demonstrated the strength in the retail banking sector that other banks have demonstrated," he said, calling the deal "highly questionable."

Danielson noted that Riggs' branches were concentrated in the relatively stagnant D.C. area rather than the faster-growing suburban areas. Riggs already has been experiencing a steep run-off in business, and he thinks the trend will continue when PNC drops the Riggs name.

Not everyone was down on the deal.

"Riggs was an underperforming institution," said John McDonald, who follows PNC for Banc of America Securities, which does investment banking for PNC. "There is some low-hanging fruit for PNC to pluck because it has a broader set of products to offer Riggs customers," he said.

PNC spokesman Brian Goerke said top executives were still in Washington yesterday and didn't expect to make any further comments about the acquisition until tomorrow's scheduled conference call discussing earnings results for the second quarter.

Although Danielson believed that PNC stumbled with Riggs, he said the deal wasn't large enough to cause too much damage to the company's bottom line.

PNC, the nation's 17th-largest bank with about $74 billion in assets, expects to pick up about $3 billion in assets when the takeover is completed in the first quarter next year. By that time, Riggs will have divested itself of its international and embassy services arms, the source of its regulatory troubles. PNC officials have said the acquisition would be a drag on profits in 2005 and 2006 and start adding to earnings in 2007.

PNC expects to go forward with Riggs' plan to open 30 more branches over the next three years, mainly in affluent areas of Maryland and Northern Virginia. Riggs currently has about 50 branches, concentrated in D.C.

Bove of Hoefer & Arnett in Florida said he was concerned about potential liabilities PNC could face stemming from Riggs' money-laundering debacle.

"Even though [PNC Chief Executive Officer James] Rohr said he expected that anyone who's going to sue Riggs would sue it before the acquisition was completed, I think that's the opposite of what will happen," Bove said.

"I think that everyone will wait until PNC picks them up and then sue, because there will be some deep pockets at that point."

In May, Riggs was fined a record $25 million by regulators for failing to report large cash transactions and suspicious activity as required under federal anti-money laundering laws. A scathing Senate report released last week accused the bank of ignoring evidence of widespread money laundering and corruption involving U.S. oil companies and foreign authorities.

PNC, which itself was fined by the Justice Department and spent time under federal supervision for accounting maneuvers that artificially inflated profits in 2001, said it conducted extensive due diligence to ensure it wouldn't inherit Riggs' troubles. The company also noted that it had the right to pay a $30 million termination fee and bow out if big surprises pop up before the deal closes.

For now, analysts said, the acquisition indicates that PNC, long considered ripe for takeover, intends to remain independent. The deal comes on the heels of PNC's $638 million takeover of UnitedTrust Bank in New Jersey in January.

"It does signal that PNC doesn't view itself as a seller right now," Banc of America's McDonald said.

Investors appeared to react cautiously to the acquisition, with PNC shares falling another 31 cents yesterday, to close at $50.25, after dropping 67 cents Friday, the day the deal was announced.