Funds plan to join Knight Vinke lobbying against HSBC

PUBLISHED : Monday, 01 October, 2007, 12:00am
UPDATED : Monday, 01 October, 2007, 12:00am


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Six of HSBC Holdings' largest institutional shareholders are set to publicly declare their support for a campaign launched by shareholder activist Knight Vinke Asset Management that calls for a management shake-up and strategy review at Europe's largest bank.

Citing unnamed sources, Britain's Observer newspaper reported yesterday that British and foreign funds holding significant stakes in HSBC will in the next few weeks send letters to the bank's senior independent director Simon Robertson supporting 'all or some' of Knight Vinke's demands, which include strengthening its focus on Asia and demoting executive chairman Stephen Green to a non-executive role.

The report of a brewing shareholder mutiny against HSBC management runs contrary to recent statements by the bank that its current strategy enjoys support from the 'vast majority' of its institutional shareholders.

Knight Vinke, an activist investment firm that counts California state pension fund Calpers among its key financial backers and that has previously locked horns with management at Royal Dutch Shell and Dutch media firm VNU, has spent the past month meeting other HSBC shareholders in an attempt to build consensus and push for strategic changes.

On September 4, it sent a letter to Mr Green expressing dissatisfaction at the lacklustre performance of the bank's share price.

It blamed management for poor returns on the bank's acquisitions in the US home mortgage market and the French commercial banking sector, leading to missed opportunities in high-growth Asia.

HSBC has countered that it remains committed to the Asia market. The London-based lender last month paid US$6.3 billion for a controlling stake in Korea Exchange Bank and announced a US$225 million deal for a 10 per cent interest in state-owned Bao Viet, Vietnam's largest insurer.

However, Knight Vinke has criticised the deals as lacking synergy and failing to create shareholder value.

Shares in London and Hong Kong-listed HSBC have fallen 2.85 per cent so far this year on the London market against a 3.95 per cent rise in the FTSE-100 index. They closed down 0.93 per cent on Friday at #9.045 (HK$143.95).

The bank's Hong Kong-traded shares have slipped 0.28 per cent in the year to date, compared to a 35.9 per cent rise in the Hang Seng Index. They fell 0.84 per cent on Friday to end the week at HK$142.20.

Meanwhile, HSBC said yesterday it became the first foreign bank to win a brokerage licence in the United Arab Emirates. The company's 49 per cent-owned HSBC Middle East Securities will begin transacting share trades on the Dubai and Abu Dhabi stock exchanges later this year.

'The Middle East is high on the radar of institutional investors around the world,' HSBC's head of global markets for the Middle East, Neil Foster, was quoted by Bloomberg as saying.