Moody's affirms PNC, Riggs on review

Moody's Investors Service affirmed the ratings of PNC Financial Services Group (issuer at A2) and placed the ratings of Riggs National Corp. (subordinated debt at Ba2) on review for upgrade following the announcement that a definitive agreement had been signed for PNC to acquire Riggs for about $779 million through a 55% stock and 45% cash transaction.

Moody's said that PNC's proposed acquisition of Riggs fits with its strategy of extending its community and regional banking franchise, and that the expansion into the Washington, D.C. metropolitan market should create favorable growth conditions given the affluent nature of this market.

The rating agency did however note that the acquisition is highly priced, and although the acquisition is expected to become earnings accretive by the third year, it is at a cost for creditors because PNC becomes more leveraged.

Moody's placed on review for upgrade Riggs National Corp.'s Ba2 subordinated long-term debt rating, Riggs Bank's Baa2 long-term bank deposit rating, Baa3 issuer rating and other senior obligations ratings, P-2 short-term bank deposit and other senior obligations ratings and D+ bank financial strength rating and Riggs Capital and Riggs Capital II's Ba2 preferred stock ratings.

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