Banking and financial services giant HSBC Holdings is effectively cutting ties with the most senior-level management from its 2003 acquisition of U.S. subprime lender Household International.
The decision by the London company to hand a bank veteran responsibility for its increasingly troubled U.S. subprime mortgage business underscored that headquarters has taken control of its U.S. business.
HSBC tapped Brendan McDonagh, 48, who typifies old-school HSBC Holdings. Born in Dublin, he has been with the bank since 1979 and was trained in HSBC's legendary management program, which sends executives all over the world. McDonagh had stops in Oman, Japan, Hong Kong and, most recently, the United States, where he had been a senior executive at HSBC's retail U.S. bank.
His new role is chief executive of HSBC Finance, which oversees such consumer-finance businesses as credit cards, auto loans and the mortgage business. The bank is struggling to contain its portfolio of bad mortgages, which it acquired in the secondary market in 2005 and 2006, while the housing market was still strong.
But as the U.S. housing industry began to cool, beset by increasing interest rates and slow growth in home prices, borrowers were unable to make their mortgage payments, pressuring HSBC and other large subprime lenders.
McDonagh succeeds Bobby Mehta, who left a week ago, according to a statement. Mehta's future at HSBC had been in question since HSBC disclosed this month that the subprime-mortgage loans had forced the bank to set nearly an additional $2 billion aside for 2006 to cover bad debts, including soured mortgages -- on top of the $8.8 billion that analysts had already expected.
At the time, HSBC said McDonagh was being moved to a new role, as chief operating officer of HSBC Finance.
Sandy Derickson, president and chief executive of HSBC Bank USA, is also departing.
Derickson will be succeeded by Paul Lawrence, currently the head of HSBC's investment bank and capital-markets operations for the United States and North America, a role he will keep.
The company did not name a replacement for Mehta as chief executive of HSBC North America, HSBC's top U.S. official.
Mehta declined to comment when reached at his home. Derickson was not available. An HSBC spokesman said McDonagh also was not available.
Both Mehta and Derickson had been senior executives at Household International, which HSBC acquired in 2003 for $14.8 billion. Tom Detelich, another former Household executive, is helping spearhead the effort to clean up the mortgage portfolio.