HSBC battles to clear its name as Geoghegan quits

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HSBC last night sought to draw a line under one of the most damaging episodes in its history by bringing forward the announcement that its chief executive, Michael Geoghegan, will leave at the end of the year after failing to secure the chairmanship of the bank.

HSBC, whose board had not been due to meet to agree the final detail of the shake-up of its senior management until Wednesday, was forced to act after days of in-fighting and jockeying for position between senior figures at the bank, much of it played out in public.

Britain's biggest bank confirmed last night that Stephen Green, its chairman, who said earlier this month he was stepping down in order to become a government minister, is to be replaced by Douglas Flint, currently HSBC's finance director. Mr Geoghegan, who is the first HSBC chief executive in two decades not to be offered the chairman's role as it has come up, will make way for Stuart Gulliver, currently HSBC's investment banking head. Iain Mackay will become finance director.

The announcement came at the end of a day of recriminations from shareholders and City analysts. "It's quite remarkable for a company that's renowned for its stewardship," said Chris Wheeler, a banking analyst at Mediobanca. "It's got to be bad news in the short term... It looks ugly for a bank that's come through this crisis looking very healthy".

HSBC last night insisted it had begun the search to identify Mr Green's replacement several months ago and that the appointment of Mr Flint had been unanimously agreed by its board. Mr Green said he was "dismayed" by the events of the past few days.

Mr Geoghegan, who received an £800,000 relocation package when the bank moved its chief executive's office to Hong Kong eight months ago, formally stands down as chief executive at the end of the year, but will continue to be employed by the bank, on his current pay package, until the end of March next year.

"I decided 10 to 12 days ago that it was time to hand over to the next generation," he said last night. "I didn't go out of my way to be chairman and the reality is I wasn't asked." Mr Geoghegan will receive a £1.4m payment in lieu of notice, plus a £200,000 fee for a further three months of consultancy work, although he has pledged to give this money to charity.

The payments will attract controversy in the current climate of anger about bankers' bonuses, as will the appointment of another investment banker at the head of a leading UK bank.

HSBC also faces criticism over the handling of the succession process. It said last night Sir Simon Robertson, the senior independent director who has been in charge of the process, would be deputy chairman under Mr Flint. Sir Simon described leaks from within the bank as "diabolical".

The bank has already begun investigating who is responsible for those leaks. In particular, it wants to know who suggested Mr Geoghegan had threatened to resign if he was not offered the chairman's job, a story it subsequently dismissed as "nonsense".

Leading shareholders are understood to be less than impressed with the way the battle has been played out so publicly, although some said the final outcome was actually a good one.

Jeremy Thomas, chief investment officer for UK equities at RCM, backed Mr Flint's appointment and questioned the strategy of the bank's existing management team in recent times. "I wouldn't have said that, really, any of the senior management, certainly the ex-chairman, Sir John Bond, or Mr Green or Mr Geoghegan had been particularly far-sighted," he said.