Continental Illinois to Sell Banks, Overseas Offices

Continental Illinois Corp., moving out of the mass-market retail banking business, will sell a string of suburban banks and overseas offices, close its municipal bond unit and refocus its resources on corporate financing, Chairman Thomas C. Theobald said Wednesday.

The shift signals Theobald’s intention to reposition the nation’s 14th-largest bank holding company as a wholesale lender combining the activities of a commercial and investment bank.

The announcement came as Continental was reeling from a $90-million jolt resulting from its involvement in the options business, but spokesman Ted McDougall said the timing of the statement on the new strategic plan was unrelated.

“Since Mr. Theobald arrived, he said he would make Continental’s direction clear, and that he would do so as soon as possible,” McDougall said.

5 Banks to Be Sold

Estimates are not yet available on the number of employees that might be affected by the shift, he said.

The municipal bond unit and the four overseas offices--in Brussels; Madrid; Seoul, South Korea, and Taipei, Taiwan--were “profitable in the aggregate, but did not fit into the new strategic plan,” McDougall said.

“As some functions shrink, we expect others to expand,” he said.

The five Illinois banks to be shed by Continental include First National Bank of Deerfield, First Suburban Bank of Olympia Fields and First National Bank of Western Springs, whose purchase last year for $21.5 million drew heavy criticism from smaller competitors.

They contended that Continental--bailed out by industrywide insurance premiums paid to the Federal Deposit Insurance Corp.--shouldn’t be allowed to gobble up other banks until it can stand on its own two feet.

When Theobald, a former Citicorp vice chairman, took over Continental’s reins last August, he promised a new strategic plan for the troubled institution, the beneficiary of a $4.5-billion bailout by the federal government in 1984.

Theobald said Continental would seek to play a larger role in market-making, cash management and risk management for corporate customers, investors and individuals.

“The new strategy will offer Continental greater revenue potential, a stronger asset-liability structure and the means to improve upon our already strong capital base,” Theobald said Wednesday.

He said Continental was redirecting its resources “with the goals of maximizing earnings for our stockholders and ensuring broad public ownership of our stock in the future.”

That stock has not fared well lately.

On Monday, Continental Illinois Corp., parent company of Continental Illinois National Bank & Trust Co., announced that it may post a “moderate” loss in the fourth quarter because of a $90-million charge against earnings at its First Options of Chicago Inc. subsidiary.

Continental posted earnings of $60.1 million, or 24 cents a share, in the third quarter.