HSBC will have to respond to some of the demands of Knight Vinke, even if the activist investor does not get the full-scale shake-up it is pushing for, investors said yesterday.
The US investment company said last week that Britain's biggest bank should review its strategy and governance after getting distracted from its Asian heartland by expansion in the US and Europe. Knight Vinke is understood to have meetings set up with more than 20 major shareholders in HSBC as it sets out its case for change.
Guy de Blonay, who manages New Star's Global Financials Fund and is a substantial shareholder of HSBC, said: "I am inclined to believe we are at the beginning of something that could ultimately be good for shareholders. It is a healthy thing that shareholders from time to time express their concerns out loud and that management should find the time to respond."
Knight Vinke criticised the performance criteria HSBC uses to reward executives, saying the comparator group of banks does not include enough Asian lenders. It also says Stephen Green, the executive chairman, should be replaced by a non-executive by next year's annual meeting.
"The peer group they are using to price off stock options and bonuses is quite easy and I'm sure they will change that," one of HSBC's biggest shareholders said. "Green is definitely going to have to work for his job more aggressively than he has done until now, and there will be a large charm offensive around the City to tell shareholders they are listening."
HSBC has said it is already refocusing on Asia and emerging markets and making its businesses in 83 areas work better together. Operating in developed economies such as the US, as well as emerging markets, was part of the strategy that shareholders supported, the bank added.
But investors said that, when financial markets were calmer, the bank would have to justify why it should keep its sub-scale business in the US.
Though investors agree with many of the criticisms of HSBC, many think Knight Vinke has picked the wrong time for its attack. With HSBC refocused on Asia and the financial markets in turmoil, they said the bank does not need the distraction of a massive transformation, which Knight Vinke says could include relocating back to Hong Kong.
HSBC was founded in China in 1865 as Hongkong and Shanghai Banking Corp. It was based in Hong Kong until it bought Midland in Britain in 1992 and moved to London. Since 1992, its market value has grown from £4bn to £104bn. It is now the world's fourth-largest bank.Reuse content