Mr Pearse, 60, is to be succeeded by Keith Whitson, his deputy, who has spent most of his career abroad in the Hong Kong-based banking empire.
Plans for Mr Pearse to step into the chairmanship have been dropped. Sir William Purves, HSBC chairman, will succeed Sir Peter, who signalled his departure when he accepted the chairmanship of SmithKline Beecham.
Mr Pearse strongly denied his retirement was the result of any dispute with HSBC or Sir William. But it has been well known in the bank that Mr Pearse found the style of the Hong Kong management abrasive.
He said: 'It is not easy working with Willie. It is actually very challenging, but I have enjoyed it.' His departure was linked to Sir Peter's because 'it seemed elegant that we came together and we should go together'. The two were recruited three years ago at a low point in Midland's fortunes.
Mr Pearse said: 'The bank is in good shape. It is a good solution for Willie Purves to be chairman. It will cement Midland into the group and will get rid of the 'them and us' syndrome to the extent that it still exists.'
He said he would have plenty to do as chairman of Young Enterprise, treasurer of King's College, London, and a director of Smith & Nephew.
No pay-off was involved, Mr Pearse said. He sold his Midland share options more than a year ago at a profit thought to be around pounds 400,000.
Mr Pearse retired from Barclays to join Midland. An approach from Barclays to HSBC to see if it would release Mr Pearse this year to become Barclays' chief executive was rejected by Sir William, so no offer was put to Mr Pearse, whose friends say he was unlikely in any case to have accepted.
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