Ever since Mellon Bank Corp. of Pittsburgh announced plans last December to buy mutual fund giant Dreyfus Corp., speculation has abounded over how Mellon's crosstown rival, PNC Bank Corp., would respond.

After all, PNC had been the biggest mutual fund manager among banks, until Mellon completed the Dreyfus deal this summer.

Market experts long have expected that PNC would come back with a similar acquisition, not so much to top Mellon as to build scale in a business the bank covets.

Now, some experts say that PNC has a fund company in its sights - Federated Investors, a leader in mutual funds, which is also based in Pittsburgh.

PNC officials have made no secret of their intention to make acquisitions. But they, like Federated officials, declined to comment on announced deals.

Nonetheless, a source close to PNC officials, who asked not to be named, said the bank "is interested" in Federated.

Such comments jibe with the prognostications of mutual fund experts like Geoffrey H. Bobroff of East Greenwich, R.I. Mr. Bobroff said a PNC acquisition of Federated "would make eminent sense." Other market experts agreed.

Of course, acquisition rumors are not unusual in the mutual fund business these days, as fund managers desperately search for deals to build scale before the market shakeout that many believe is coming.

Signals from the companies themselves are somewhat mixed. Richard C. Caldwell, PNC's executive vice president for investment management and trust, gave the talk a bit of credence in a recent interview.

Questioned at the investment unit's head office in Philadelphia, he said that "it was not an unreasonable statement" to say Federated could be an attractive acquisition for PNC.

Such a deal would certainly fit into PNC's strategic plans. Chairman and chief executive Thomas H. O'Brien has said that acquisitions of companies in specific business lines has become a focus for the bank.

Indeed, Mr. O'Brien has already put the bank's money where his mouth is, through an acquisition last year of Sears Mortgage Corp., and an agreement this year to buy New York institutional money manager BlackRock.

Mr. Caldwell acknowledged that the unit he oversees was interested in further acquisitions, either of money managers, mutual fund companies, or administrators of mutual funds.

But he also sought to put the speculation in perspective.

"There have been hundreds and hundreds of deals that have never seen the light of day that we've done a lot of work on," Mr. Caldwell said.

Furthermore, a source close to Federated, who asked not to be named, said it would be "way off base" to say PNC had an offer on the table to buy Federated.

Certainly, a deal between PNC and Federated would build scale for PNC. The Investment Company Institute, a Washington-based trade group for mutual fund companies, ranks Federated as the country's seventh-largest fund manager, after Dreyfus.

Federated has reported it was managing $50 billion of fund assets at the end of July, more than twice the $20 billion in PNC's proprietary funds. Federated also administers an additional $20 billion in fund assets.

A match with Federated could help PNC expand its retail mutual fund distribution, a high priority for the investment unit.

Federated sells its mutual funds to retail investors primarily through bank trust and brokerage departments; it counts nearly all of the 100 largest banks in the country as customers.

Federated is also growing its distribution through brokerage firms.

And Federated boasts a good reputation. In a survey published last week by Boston-based Dalbar Publishing, Federated was the most highly rated supplier of mutual funds to banks in overall quality and marketing support.

Both PNC's and Federated's fund assets are heavily weighted toward money market and bond funds, which could allow for some cost savings in research, back-office support, and staff consolidation.

Also, both companies are leaders in the administration of mutual funds for banks, a business in which size can boost efficiency.

Furthermore, both companies have made a strong commitment to an asset-allocation model of investing, in which mutual fund investors are steered into a mix of funds adjusted for risk. Federated's asset-allocation product is one of the most popular among bank trust departments, experts said.

PNC is planning to launch a similar asset-allocation product this fall.

From the perspective of Federated's owners, now could be the best time to sell, given that mutual fund companies are in demand and are commanding high prices.

Indeed, the $1.85 billion of stock Dreyfus received from Mellon could be a rough benchmark of what Federated would be worth, experts said.

Furthermore, John F. Donahue, Federated's publicity-shy founder and chairman, is now 70. Though most day-to-day management duties have been shifted to his son, J. Christopher Donahue, who is 45 and holds the title of president, some observers said it would be logical to assume the elder Mr. Donahue may be interested in a sale to cash out his stake.

Moreover, management of Federated and PNC are very familiar with one another.

Partly by virtue of their location within a few blocks of each other, PNC has become Federated's lead bank, Federated spokesman J.T. Tuskan said. He added that Federated and PNC deal with each other in investments.

Mr. Tuskan also said Federated is in negotiations for a "significant" loan from PNC to finance broker sales commissions.

But Mr. Tuskan added that the Donahues want to continue as Federated's owners.

He also said Federated wasn't under any financial pressure, though the company,s fund assets have dropped by $5 billion in the past year because of tagging performance in bond funds.

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