bank official yesterday, telling shareholders he will be stepping down on October 29.

In his quarterly letter to shareholders, he also confirmed that president and chief executive officer John Tugwell -- who has been radically restructuring the bank's domestic and overseas operations -- will be leaving before the end of the current financial year on June 30, 1998.

Sir David said in an interview yesterday that he expects to be able to announce a successor to Mr. Tugwell either at the AGM or beforehand. Mr.

Tugwell initially gave three months notice when he announced his resignation.

His notice expires on October 30, although he has indicated he is prepared to stay on until his successor was found. No announcement was made on a successor to Sir David, who will step down at the bank's annual general meeting on October 29. The bank's board -- which will be elected at the AGM -- will vote on a new chairman after the meeting.

But Sir David said in an interview yesterday that a succession committee made up of members of the current board of directors had identified a successor and its recommendation had been accepted unanimously by the full board.

He refused to identify the successor pending the AGM.

It is believed there are two likely successors to Sir David: deputy chairman Dr. James King, who is also chairman of the Bermuda Telephone Company, and Shell Bermuda president Robert Stewart, a former member of the Bermuda Monetary Authority.

David Saul, like Sir David a former Premier and Finance Minister, who had been mentioned as a potential dark horse successor, has consistently ruled himself out of the running.

In his letter, Sir David said: "In accordance with bank policy, which calls for retirement from the board at age 70, I shall be stepping down as chairman following the annual general meeting. It has been my privilege to serve the bank, its clients and shareholders during two terms which ran from 1958 to 1975, then from 1986 to the present.

"I am gratified to be concluding my service at a time when one can so clearly take pride in the organisation and its prospects for the future.''