Continental's Mea Culpa

One of the hardest-hit stocks on Wall Street recently has been that of Continental Illinois Corp., the parent of Continental Illinois National Bank and Trust Co., the nation's seventh largest commercial bank (1981 assets: $45 billion). In the wake of huge reported loan losses following the collapse of Penn Square Bank of Oklahoma City in June, Continental's stock has plunged to a mere 15%. Earlier this year the stock had traded at 36. Last week, in a public relations blitz designed to get the bad news behind him, Continental Chairman Roger Anderson took the highly unusual step of publicly discussing details of the bank's loans with investment analysts and journalists alike. Said he of the Penn Square fiasco, in which Continental has so far written off $45 million in risky loans that exceed $1 billion: "It has been a body blow to us. Our confidence and pride have been hurt but not gravely wounded."

The bank's loan-portfolio revelations were made first to analysts in New York and a day later to editors in Chicago, but the jet-about effort did little to boost the bank's image as a savvy lender. Continental has set aside a higher than normal loan-loss reserve of $474.6 million, or 1.3% of all loans. But the bank's megabuck borrowers include some of the most troubled credit risks in all of corporate America, Among the loans: $140 million to International Harvester, the deeply troubled Chicago farm-equipment manufacturer; $16 million to bankrupt Braniff Airways of Dallas; $57 million to Wickes Companies, Inc., a now bankrupt seller of lumber and furniture; $200 million to subsidiaries of Dome Petroleum, the struggling Canadian oil firm; and $80 million to American Invsco, a wavering condominium developer.

Continental Illinois' problem loans have multiplied as the economy has slumped. By offering the details to public scrutiny, the bank at least made it plain that it is not in any danger of collapse, or indeed of a serious cash squeeze. Losses on bad loans are expected to increase, but healthy loans will still enable the bank to turn a year-end profit that many analysts have been predicting will reach at least $125 million. That is far more in earnings than many of Continental's customers can count on.

This file is automatically generated by a robot program, so viewer discretion is required.