HSBC has admitted it will take up to three years to sort out the troubled US sub-prime mortgage business, which last month prompted Europe’s biggest bank to issue the first profit warning in its 142-year history.

On unveiling a record $10.6 billion (£5.51 billion) bad debt charge, $6.7 billion of which came from North America, Mike Geoghegan, HSBC’s chief executive, conceded: “It will probably take two to three years to work this out.”

The disclosure came as it emerged that Mr Geoghegan and Stephen Green, HSBC’s chairman, will pocket performance-related bonuses of £1.54 million and £1.75 million, taking their total remuneration for last year to £2.87 million and £2.93 million respectively. This is despite the fact that HSBC’s shares rose only 0.2 per cent in 2006, making it the worst performer of any British bank.

Mr Green defended the payments, stating that they had remained flat in the face of the 5 per cent rise in pretax profits to $22.1 billion, which the bank reported yesterday.

“In the context of the company producing growth in profits, the decision of the remuneration committee would not seem to be unreasonable,” he said.

Shares in HSBC rose 1.1 per cent, making it one of only six gainers in the FTSE 100, amid relief that HSBC had not used its full-year results to warn of a further deterioration of US bad debts. On current forecasts, analysts expect the bank’s US loan impairment charge to rise to $8.2 billion by 2009.

Yesterday, HSBC detailed eight measures it is taking to turn around the US division. They range from selling off loan books to stepping up credit collections. It has also stopped selling some forms of low-margin mortgages.

Simon Maughan, an analyst at Blue Oak Capital, said: “They have clearly had a nasty, nasty shock in the US, and sorting that out is going to take some time. This is more likely to be felt in lost revenues than in raising provisions beyond current expectations.”

Last year, HSBC Finance Corporation — effectively Household International, which it bought in 2003 for $14.5 billion — swung from a $800 million profit to a $1.2 billion loss.

HSBC also announced yesterday that Jose Francisco Gil Diaz, Mexico’s former Finance Minister, has resigned as a nonexecutive for “personal reasons” only two months after taking up the post.

The appointment stirred controversy in Mexico, where politicians claimed that it breached rules under which senior officials may not take up private sector posts in related areas within a year of leaving office. Mr Gil Diaz stepped down as Finance Minister on November 30.

Amicus, the union that represents bank workers, condemned the bonuses paid to HSBC’s management in the face of the 3 per cent pay rise awarded to its staff, which it claims is the lowest settlement in the bank sector.

“It is outrageous that an organisation which reports these profits insists on a pay rise that is below the inflation rate,” said John Nolan, an Amicus official.

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