Riggs Bank NA, the old-line Washington-area financial institution that once billed itself as “the most important bank in the most important city in the world,” faces an uncertain future after confirming it is mired in a federal investigation into terrorist financing.
The bank’s announcement late Thursday that veteran industry executive Anthony P. Terracciano will join the board of holding company Riggs National Corp. fueled speculation yesterday that the Allbritton family, who have controlled the 168-year-old bank since 1981, plan to sell it.
Mr. Terracciano’s addition “doesn’t mean it’s sold in ’04, but it definitely increases the probability that something happens in ’05 or ’06,” said Henry J. Coffey, an analyst for Ferris Baker Watts Inc., a Baltimore brokerage and investment bank.
Representatives for Riggs declined comment.
In July 2000, Dime Bancorp, the parent of Dime Savings Bank, brought Mr. Terracciano on board as chairman to help shore up its operations and to find a buyer for the bank. He engineered its sale to Washington Mutual Inc. one year later.
Mr. Terracciano will join another industry veteran — William L. Walton, chairman and chief executive officer of Allied Capital Corp. — on the Riggs board.
“Now you have two people on the board with a track record for knowing how to run public companies and who understand the complexities of the industry,” Mr. Coffey said.
The Allbrittons retain about 50 percent of the bank.
“It would seem the Allbrittons are still firmly in control, so nothing gets done if they don’t want it done,” said Gary B. Townsend, an analyst for Friedman, Billings, Ramsey Group Inc., an Arlington investment brokerage.
Robert Allbritton will continue as chairman of the bank and its holding company.
His father, Joe L. Allbritton, who took control of the bank in 1981 and is the parent company’s largest shareholder, will not stand for re-election as vice chairman when the board votes May 27, Riggs spokesman Mark N. Hendrix said. Mr. Allbritton’s wife, Barbara, will leave the board of Riggs Bank.
In the statement it released late Thursday, Riggs said it will sell most of its international banking businesses and focus its embassy-banking relationships on a “more select client base.” Riggs plans to focus on its U.S. banking business, according to Mr. Hendrix.
When asked if customers will notice the changes within Riggs, Mr. Townsend — a Riggs customer — said, “… I hope so. Riggs has never done retail banking well.”
Investors on Wall Street applauded the changes at Riggs yesterday, lifting shares to their highest close since Aug. 17, 2001. Shares of Riggs traded for $18.09 when trading ended on the Nasdaq Stock Market yesterday, up 12.7 percent from Thursday’s closing price of $16.05 per share.
Riggs confirmed that the U.S. Office of the Comptroller of the Currency has formally advised the company that the bank will likely be fined for matters relating to the U.S. Bank Secrecy Act.
Federal investigators are probing the bank’s records with a particular interest in accounts opened by officials from the Saudi Arabia and Equatorial Guinea embassies in Washington, according to published reports yesterday.
Also, the Federal Reserve has informed Riggs that it will impose an enforcement order requiring the company to receive approval before paying dividends. The Office of the Comptroller of the Currency’s designation of Riggs as being in a “troubled condition” requires Riggs to get approval before naming a new director or executive, the company said.
The regulatory actions will boost the cost of doing business, and any fines, expected in the second quarter, may affect the company’s financial condition, Riggs said.
“They are a neighbor in town. It’s a storied institution. No one likes to see these types of problems experienced by a neighbor. It’s sad,” Mr. Townsend said.
• This article is based in part on wire service reports.
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