Newspaper article THE JOURNAL RECORD

Continental Illinois Shows Signs of Turnaround

Newspaper article THE JOURNAL RECORD

Continental Illinois Shows Signs of Turnaround

Article excerpt

Ever since the Federal Deposit Insurance Corp.'s $4.5 billion bailout of the Continental Illinois Corp. in 1984, investors have been skeptical of the stock of this Chicago-based bank holding company.

But there are signs that Continental may be turning around.

Revenues and net income rose smartly in the first six months of this year and the bank's percentage of nonperforming loans has fallen below that of several competitors.

In addition, a corporate banking strategy initiated last fall by Continental's new chairman, Thomas C. Theobald, has lowered operating expenses.

As a result, some investors have shown renewed faith in the nation's 13th-largest bank.

Continental's stock has risen from its 52-week low of $2.25 in mid-December to $5.75.

Analysts have noted that Continental has been among the top-performing bank stocks this year.

The promise of a further rise in the stock has been clouded, however, by the impending sale of the FDIC's 69 percent stake in the bank, which was disclosed last month.

Some investors have expressed concern that such a sale might dilute the stock and lower its price, although analysts said that the FDIC's stake had already been added into the bank's per share calculations, and thus would not dilute the stock.

Other investors have wondered about the identity of a possible buyer, and what effect such a sale might have on Theobald's ability to carry out his strategy.

There have been rumors that the First Chicago Corp., Continental's chief rival in the Midwest, and the financier Jay Pritzker might be interested in a joint purchase of the bank.

Representatives of both parties declined to comment.

Some analysts say the acquisition of Continental might be valuable for a foreign bank.

``I can't imagine many domestic banks that could buy Continental,'' said Richard A. Mueller, a banking analyst at Duff & Phelps Inc. in Chicago.

``Those outside of the surrounding states can't legally buy Illinois banks, and those that could probably wouldn't because of Continental's size, with the one exception of First Chicago.''

Although Mueller said the FDIC would probably prefer to sell to a private buyer in hopes of getting a higher price, there were several reasons why it might not do so.

Some analysts have suggested, for example, that the federal agency might be reluctant to sell its 147-million-share stake to a foreign buyer, particularly in an election year. …

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