For years, Michael E. O'Neill has worked behind the scenes at Chicago's Continental Bank Corp. on projects that have been key to its continuing rehabilitation. Now, he is taking a front-line position.

Mr. O'Neill, 46 will become chief financial officer of the $22 billion-asset company in September, picking up the reins from Hollis Rademacher, who is retiring.

Despite a conventional banker's pedigree that includes an MBA from the University of Virginia, stints overseas for Continental and First Interstate Bancorp, and a period as a consultant, Mr. O'Neill is cut from a different mold than most CFOs.

A professed skeptic when it comes to strict corporate hierarchies, the executive describes himself as "unstructured -- someone who is comfortable dealing with a somewhat uncertain environment, trying to craft solutions that may not be perfect but that are improvements."

That should stant him in good stead at a company whose chief financial goal remains the improvement of credit quality.

Continental has endured $1.7 billion of chargeoffs since the beginning of 1988. Though it has rebounded from a third-quarter 1991 loss of $185 million with seven consecutive quarters of solid profits, lingering performance issues have caused rating agencies to withhold full endorsements.

A |Need to Improve'

When Duff & Phelps Credit Rating Co. recently raised ratings on Continental's long-term certificates of deposit to BB-plus, for instance, it simultaneously granted an A-plus rating to Bank of New York Co., a rival for the business customers that Continental cultivates.

"We need to improve our credit ratings to compete in our chosen markets," said Mr. O'Neill.

The former Marine Corps lieutenant has a strong record of making good on his goals. He steered the 1991 divestiture of First Options, a limping options and futures clearing and finance subsidiary, and was a guiding force in Continental's pioneering shift of data processing and legal functions to outside vendors.

Mr. O'Neill said the greatest single issue confronting the company today in its $500 million portfolio of California home loans, 74% of which are nonperforming. Continental will need up to a year to resolve remaining credit-quality issues, he said.

Like any good CFO, Mr. O'Neill also keeps a steady eye on what pleases the rating agencies and investors. He said he must manage the delicate task of maintaining the bank's earnings momentum while building loss reserves to levels that satisfy the market.

"It is hard to build capital while taking higher-than-normal loss provisions," he said.

Corporate Lending Strategy

The key to it all, he said, is disciplined expansion. He believes the bank can build revenue by booking more corporate loans -- if it uses its loan syndication department to limit exposure on any one credit.

"What we increasingly like to do is underwrite relatively large amounts of credit, but retain relatively small amounts of that underwriting," he said. "We really have learned our lesson on overconcentration."

The executive has a long history at the bank. He joined Continental in 1974, fresh from graduate school, stayed for 10 years, and then joined First Interstate Capital Markets for one year.

He spent most of that time wandering through London, Hong Kong, Brussels, and Antwerp, first as a business development man, then building his skills in capital markets and workouts. He rejoined Continental at its Chicago headquarters in 1989, following a stint as a consultant.

Throughout his journeys, Mr. O'Neill cultivated his cosmopolitan interests. A graduate of Princeton University, where he majored in the study of European civilization, the executive continues to travel for leisure and admits to a weakness for art and antiques.

He recently finished reading "The Civilization of the Renaissance in Italy," by Jacob Burckhardt.

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