The Aggressive Growth of Continental Illinois

Continental Illinois had a history of conservative lending, however in the mid-1970's its managementbegan implementing a growth strategy focused on commercial lending, explicitly setting out to become one of the nation's largest commercial lenders. By the year 1981, Continental Illinois had turned out to be the largest C&I lender in the United States. Between 1976 and 1981 Continental Illinois' C&I lending skyrocketed from around $5 billion to more than $14 billion, a jump of 180 percent. Meanwhile, its totals assets rose from $21.5 billion to $45 billion, about 110 percent. We can see the extent of this growth by comparing it to the rise in Citibank's lending, from $7.7 billion to $12.5 billion, while its total assets rose from $61.5 billion to $105 billion, a hike of 70 percent. Even as its share price was on the decline during late 1981 and early 1982, many stock analysts continued to recommend purchase of Continental shares. From 1977 to 1981, the bank's average return on equity(ROE) was 14.35 percent, second only to Morgan Guaranty's 14.83 percent. Over the same period, Citibank's return on equity was 13.46 percent, whereas FirstChicago, Continental Illinois' cross-town rival, had around 9.43 percent.