Quest for Fun Led Theobald to Continental
Thomas C. Theobald got his job in a funny way.
First, he refused to help bail out Continental Illinois National Bank. After the rescue went ahead, he turned down a chance to run the crippled bank because the work would be dull and long.
Four years later, Theobald is chairman and chief executive of the Chicago banking company and he says he is having more fun than at any time in his career. Part of the reason is that Continental is projecting a record profit for 1988 and part is reshaping the bank.
“It’s a question of timing,” he said last week over breakfast at the Regency Club in Westwood, smiling as he added: “If your timing is right, you’re a genius.”
When Continental swerved to the edge in 1984, Theobald was a vice chairman at Citibank and its parent, Citicorp, in New York. He refused to join 28 other banks in providing a safety net of credit to Continental because he opposed the bailout.
Then the Federal Deposit Insurance Corp. propped up Continental with $4.5 billion, still the nation’s biggest bank bailout. The FDIC also became Continental’s largest shareholder and the FDIC chairman at the time, William M. Isaac, asked Theobald to take the bank’s helm. Again, he declined, partly because the job did not sound like fun and partly because he was a candidate for the chairman’s post at Citicorp.
In 1985, Theobald lost the top spot at Citicorp to John S. Reed. Two years after that, at age 50, he was was ready to leave Citicorp, where he had spent 27 years and built its worldwide investment banking operation. He planned to open a business in architectural specialty items in California.
In a stroke of good timing, John Swearingen, the retired Standard Oil of Indiana executive who had taken over at Continental, asked Theobald to replace him. And on July 27, 1987, he took the job.
Instead of trading their Manhattan apartment for a Malibu beach house, Theobald and his wife, author Gigi Mahon, wound up owning the top floor of a building overlooking Lake Michigan.
The worst of the salvage work at Continental had been done by then. The loan portfolio, which had dragged the bank down, had been cleaned up and small profits had been posted in 1985 and 1986 with the help of tax advantages left over from 1984.
“I guessed that all of the dull work had been done, and people were ready for a change,” Theobald said. “If you’re driven into the wall, you’re prepared for change.”
The first big change was with drawing Continental from consumer banking. His predecessors had been building consumer deposits and acquiring suburban banks. But Theobald said it cost too much, and he sold the retail business for what he says was a substantial profit.
He then set about transforming Continental into a business bank in the image of Morgan Guaranty or Bankers Trust in New York. The bank is going after corporate customers, ranging in size from $200 million to $3 billion in sales, by combining traditional commercial banking with investment activities such as market making and risk management. He is also wooing large institutional investors with sophisticated services and loan participations.
Only a third of Continental’s business is now in the Midwest, and the company has offices in major 14 major U.S. cities, including a 50-person operation in downtown Los Angeles, as well as 14 overseas offices.
A national advertising campaign starts in September, aimed partly at shedding the lingering image of Continental as a troubled bank.
But the shadow cast by its near failure will not go away finally until Continental escapes the stigma of being the only “nationalized bank” in the United States. As part of the bailout, the FDIC acquired a two-thirds stake in the bank.
No date has been set for the FDIC to sell its stock, but the regulators are known to be anxious to get out of the business of holding a controlling interest in the nation’s 13th-largest banking company.
The new emphasis on investment banking promises a new future for Continental, but also puts the bank in competition with the major brokerages as well as Bankers Trust and Morgan, tough turf for a financial institution.
“The chances are reasonably good that they will succeed,” said Lawrence W. Cohn, an analyst at the investment firm of Merrill Lynch in New York. “The greatest strength the company has is Tom Theobald. He’s already done it at Citicorp, and he’s a man of acknowledged stature in the industry.”
Theobald is confident. After all, he said, the timing is right.
