First Chicago Corp. announced an ambitious plan yesterday to put the problems of bad real estate loans behind it by selling them and covering some of the resulting losses with previously unreported profits from various investments.
Although the plan will cause a large loss in the current quarter, First Chicago officials decided that was preferable to accumulating smaller losses for several years.
Investors and traders seemed to agree, sending First Chicago stock up $2.375, to $33, on the New York Stock Exchange.
About 18 percent of First Chicago's $4.3 billion in real estate loans are badly delinquent or foreclosed.
To help soften the blow of the real estate loan losses, First Chicago expects a gain of at least $300 million by carrying $1.1 billion of venture capital investments in other companies at their market value, rather than the far lower initial cost of the investment, and selling some of those investments more quickly than it had previously planned.
Besides selling all $300 million of its badly delinquent real estate loans and $400 million of real estate acquired through foreclosure, First Chicago plans to sell about $1.4 billion in loans that are not yet delinquent, but which the bank is worried about.