SAN FRANCISCO - As second-quarter earnings were released this month, bank executives offered reassurances that their diversified loan portfolios were unlikely to be subject to the kind of single-sector blowup that the stricken health-care industry produced last year.
But several of the biggest U.S. banking companies are sitting on credits to an industry that is showing signs of massive strain, according to analysts. Movie theater operators, including well-known names like New York-based Loews Cineplex Entertainment Corp. and AMC Entertainment Inc., are under severe pressure after years of rapid expansion - using leveraged bond and bank debt - that failed to generate the expected returns. Rosalind F. Looby, a regional banking analyst at Donaldson, Lufkin & Jenrette Inc., estimates that banks have about $5.1 billion in current loan commitments to the movie theater industry outstanding. While less than banks' exposure to health-care companies when they started to falter in 1998 after Congress passed changes to Medicare reimbursement laws, it's close enough for discomfort. Banks made a total of $7.8 billion in loans to health-care companies that year, according Portfolio Management Data, a unit of Standard & Poor's.