The departure of two of Standard Chartered's most senior directors in a bloody reshuffle aimed at improving profits rocked the City yesterday, sending the bank's shares down to their lowest level for nearly two years.
In a move that stunned analysts and investors already reeling from a recent profit warning, Standard's chief executive, Peter Sands, said Richard Meddings, the finance director, will leave the bank in June, as will Steve Bertamini, the head of consumer banking, whose current job has been eliminated.
Instead, Mike Rees, the head of wholesale banking who is already the bank's highest-paid executive, having earned $52m (£31m) over the last four years, is to take on Mr Bertamini's division, as well as becoming deputy chief executive.
The 58-year-old ex-JP Morgan banker is to report directly to Mr Sands, who said the restructuring is a "critical next step" in Standard's efforts to improve trading because of problems in its South Korean business and weak trading.
Mr Rees's appointment was widely seen as being a clear sign that he was being lined up by the chairman, Sir John Peace, to succeed Mr Sands. However, some high-level bankers were dismissive: "No one believes that," said one. "The man everyone is watching is Naguib Keraj. He's the king-maker, if not the king." An adviser to the Aga Khan and former boss of JP Morgan Cazenove, Mr Keraj recently joined as a non-executive director.
Insiders say this is only the first round of the blood-letting. As The Independent disclosed last December, there is a long-running power struggle between Sir John and Mr Sands over who is to become the next chairman, as well as disagreements over whether the bank should raise more capital with a rights issue.
One senior banker yesterday described the reshuffle as "a botched compromise where there are no outright winners. Peter Sands got part of what he wanted – Richard Meddings out – and Sir John got part of what he wanted – Peter brought under control by having Mike Rees as deputy. But the question of who succeeds Peter and who succeeds Sir John is still up for grabs and will have to come to a head."
Mr Sands, however, said: "There is no change to my role."
Sources have said in the past that Mr Sands wanted eventually to take over the chairmanship from Sir John – an allegation he denies. The reshuffle makes that now extremely unlikely. Meanwhile, Mr Sands insisted yesterday: "Richard and I are great friends and colleagues... He felt this was an opportunity to step aside and do something different."
Mr Meddings said he had decided to quit during the Christmas holidays. In a statement he praised the bank and board. However, a source said: "Richard is actually furious. He believes he is being made a scapegoat for recent problems and has been used several times as the public face of things that have gone wrong – like sanction busting." That was a reference to the bank being fined in the US over its dealings with Iranian clients.
Shares in Standard fell by another 5 per cent to £12.40, valuing the bank at £30.4bn. They are at their lowest for two years, and a long way from the £18 peak when Mr Sands took over and the bank was making record profits.
Its biggest shareholder, Temasek, a past critic of Standard's board structure, did not comment.
Questions remain over whether Standard, which has robust Tier 1 capital ratios, will need a rights issue to bolster its balance sheet. A cash call has been discussed by the board informally and has been another source of disagreement between directors. Most lenders have shrunk their balance sheets, but Standard Chartered has expanded.