Struggling to build its banking business in a highly competitive market, Keystone Financial Inc. is shaking up its management and beefing up its brokerage and investment services unit.

The Harrisburg, Pa., company said late Monday that Mark Pulaski, president and chief operating officer of its Keystone Bank subsidiary, will be reassigned to the newly created wealth management division and that chairman and chief executive officer Carl L. Campbell will temporarily assume the duties of bank president. The $6.9 billion-asset company said it is seeking a new president but has no plan to name a new chief operating officer.

"We strongly believe that wealth management activities will be a high-growth, major driver in the success of Keystone in 2000 and beyond," Mr. Campbell said in a statement. "For this reason, both Mark and I believe that it is in the best interest of Keystone that he lead this new initiative."

The shake-up comes as Keystone's traditional banking business struggles. The company is consolidating its seven bank charters in three states under one name, a move that will save an estimated $20 million a year but also, Keystone officials admit, has confused and turned away some customers. Keystone is also facing stiff competition in its markets from similar-size companies, such as $4.3 billion-asset Susquehanna Bancshares in Lititz, Pa., and Fulton Financial Corp., a $6 billion-asset company in nearby Lancaster, Pa.

Through the first nine months of 1999, Keystone's loan volume was down 4%, to $4.4 billion, from the first three quarters of 1998, and net income fell more than 7%, to $69.6 million. Meanwhile, Susquehanna's loan portfolio grew nearly 7%, to $3 billion, and Fulton's climbed almost 8%, to $4.2 billion.

Keystone officials did not return telephone calls, but investors and analysts seemed less than enthused about its latest move.

"The only shift in focus that management should take is to sell the bank," said Seymour Holtzman, a Wilkes-Barre, Pa., investor. Mr. He has been sharply critical of Keystone's management in recent months and even introduced a petition at Keystone's annual meeting last spring that called for the company to put itself up for sale. Though he would not comment directly on Keystone's decision to focus on wealth management, Mr. Holtzman said shareholders are growing impatient waiting for Keystone to turn itself around.

Collyn Bement, an analyst at Ferris, Baker, Watts Inc. in Baltimore, questioned whether the shift in strategy would boost Keystone's revenues and said she has no plan to adjust her 1999 earnings estimate of $1.85 per share or her 2000 estimate of $1.94 per share. She also urged shareholders to hang on to their Keystone stock, which she believes would fetch $38 per share -- 31% above its current price -- if the company were sold.

Keystone's stock hit a 52-week low of $22.50 Monday. It was trading at $23.375 at midday Tuesday.

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