HSBC rebuffs attempt by activist Knight Vinke to force shake-up

By Sean Farrell, Financial Editor

HSBC has rebuffed the attempt by Knight Vinke, an activist investor, to force a shake-up of its business.

Simon Robertson, HSBC's senior independent director, met Eric Knight, chief executive of Knight Vinke, yesterday. He turned down Mr Knight's demand for an independent review of the bank's strategy and governance.

Knight Vinke went public with its demands for change at Britain's biggest bank earlier this month. It accused HSBC of being too thinly spread, investing in low-growth economies and rewarding executives for underperformance. It called on the bank to replace Stephen Green, its executive chairman, with a non-executive by next year's annual general meeting.

Mr Robertson told Mr Knight that the bank's non-executive directors fully backed Mr Green as chairman and saw no need for a review of the business. The bank had already reviewed its business and had communicated its strategy to shareholders, Mr Robertson told Mr Knight.

Mr Knight was also told that at the last annual meeting Mr Green had said there would be a review of executives' long-term performance incentives.

Knight Vinke said it would not comment while it was discussing its proposals with investors in more than 30 meetings over the next few weeks.

Knight Vinke has accused HSBC of wasting money on acquisitions in France and the US, where it has been hit by sub-prime mortgage losses, at the expense of investment in its high-growth Asian heartland. Mr Knight has said the bank should consider moving its headquarters from London back to Hong Kong, where it was based before buying Midland Bank in 1992.

HSBC has said it is already refocusing on Asia and emerging economies and making its businesses in 83 markets work better together. The bank has recently agreed to buy a controlling stake in Korea Exchange Bank for $6.3bn (£3.1bn) to plug a gap in its Asian banking network and has bought 10 per cent of Bao Viet, Vietnam's biggest state-owned insurer, for $225m.

Mr Knight has attacked both deals as investments in sub-scale businesses. But Mr Green has hit back, telling investors these are the best deals available in two of Asia's most important markets.

Though investors agree with some of Mr Knight's criticisms, many think he has picked the wrong time. With HSBC refocused on Asia and the financial markets in turmoil, they said the bank does not need the distraction of a massive transformation.