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All change at the top for UK banks Barclays, HSBC

LONDON (Reuters) – Change swept through the top of Britain's banks on Tuesday with Barclays (BARC.L) appointing its investment banking supremo Bob Diamond as chief executive and HSBC (HSBA.L) announcing its chairman is to go into government.

HSBC, Europe's biggest bank, said Stephen Green would step down to become trade and investment minister in Britain's coalition government. A successor was not named.

HSBC said it had started a search for a replacement and expects to approve one by the end of the year. The bank prides itself on its succession strategy, but Tuesday's statement was forced by reports that Green was set to leave.

Green, 62, joined HSBC in 1992 and was appointed chief executive in 2003 before taking up the role of chairman in 2006. Another former banker, Mervyn Davies, was trade minister under the Labour government which lost power in May, and the new government has had difficulty replacing him.

Barclays, located a stone's throw away from HSBC in London's Canary Wharf financial district, said Diamond will become chief executive when John Varley steps down at the end of March.

Diamond has been credited with rebuilding its investment bank since joining 14 years ago, earning headline-making bonuses in the process.

Varley said he wanted to move on when he turned 55, which happens the day after his planned departure.

The handover to Diamond, who is 59 and missed out on the top job when Varley took the helm six years ago, comes as no surprise to industry analysts, who said it could increase its focus on its investment banking arm, Barclays Capital, the group's main source of profits in recent years.

Although the appointment puts the retail banking business in the shade, there is unlikely to be any change in strategy away from its universal banking model, the bank and analysts said.

"He's absolutely committed to making Barclays Capital the world's number one investment bank. The unique selling point for Barclays is that they are a universal bank and they will lend and finance and source funding for your deal, and Bob has been the champion of that model," said Simon Maughan, analyst at MF Global.

HSBC SUCCESSOR?

Green's departure prompted speculation on who will replace him.

Chief Executive Michael Geoghegan, who this year moved his office from London to Hong Kong, is a candidate. So too are board members John Thornton and Simon Robertson.

Geoghegan said in a statement: "For HSBC it is business as usual; I continue to run the company."

Media speculation swirled in May that Green would leave, but he said at the time he was planning to stay at the helm for at least another year.

But the bank said on Tuesday Prime Minister David Cameron had invited Green to join his government. He will not be paid but will become a Lord.

Barclays' Varley has also been tipped in media reports for a government job. But he said on Tuesday he had nothing new lined up and planned to spend more time on his charitable work.

He will remain as a senior advisor on regulatory matters at Barclays until October 2011.

BANK BREAK-UPS?

A UK Independent Commission on Banking is considering whether Barclays, HSBC and the other big UK banks should be split up, to separate their riskier investment banking businesses from retail lending.

If it forces a change after it reports back to the UK government in a year's time, then Diamond could move the bank's domicile or move out with the investment bank, analysts said.

Barclays, HSBC and Standard Chartered (STAN.L) have all threatened to leave Britain should a break-up be ordered.

Barclays shares closed down 2.7 percent at 314 pence, valuing it at 39 billion pounds, as dealers cited worries that the bank will shift its emphasis even further toward investment banking. HSBC's shares dipped 0.1 percent to 662.4p.

CHALLENGE

Diamond said there would be no change for strategy at Britain's third biggest bank, which avoided taking taxpayer bailout cash during the financial crisis and has emerged as one of the relative winners.

"The biggest challenge is around execution, not strategy," he told Reuters. "We know we have the right strategy and business model and that's incredibly important for the next five to 10 years. There was a period leading up to the crisis when many bad models were making money, but that's not going to be the case going forward.

Affable and charismatic, the Concord, Massachusetts-born son of two teachers has built BarCap into one of the leading banks in debt markets and is attempting to take on Wall Street powerhouses such as Goldman Sachs (GS.N) by expanding into equities and advisory, boosted by the takeover of the U.S. operations of Lehman Brothers two years ago.

Diamond will move back to London after spending most of his time in New York after the Lehman deal. He will become deputy CEO for a handover period from October.

Barclays said it took external help to look at other candidates. "We did a thorough process and at the end of it Bob was the standout candidate," Agius said.

Diamond's long-time lieutenants Jerry del Missier and Rich Ricci will take over as co-chief executives of BarCap from October. Del Missier, who joined BarCap soon after Diamond, will be based in New York, while Ricci who joined in 1994, will be based in London. They were already co-chief executives for investment and corporate banking.

Part of the reason Diamond moved to New York is said to have been because of the intense scrutiny on his pay.

He has not taken a bonus in the last two years, but he was paid 21 million pounds in 2007 and received 26 million pounds last year for shares from the sale of asset management arm.

As CEO his base salary will rise to 1.35 million pounds, topped up by an annual bonus of up to 3.4 million pounds and an annual long-term share incentive scheme worth 6.8 million in 2011.

(Additional reporting by Myles Neligan, Karolina Tagaris, Keith Weir and Sudip Kar-Gupta; Editing by Greg Mahlich)