US greenmailer holds HSBC to account

For HSBC, a very bad year just got a whole lot worse. The bank has become the latest target of activist fund manager Knight Vinke Asset Management, providing its board with yet another headache.

Last Updated: 31 Aug 2010

KVAM is not the biggest fund in the world – its flagship fund ‘only’ has assets of about $1.5bn, and it is thought to own less than 1% of HSBC. But it’s certainly one of the noisiest, and has a good track record at punching above its weight. Ask Shell, which was forced to abandon its dual UK-Dutch listing after a KVAM campaign, or the private equity firms whose €9bn bid for Dutch publisher VNU almost fell through for the same reason.

In some ways it’s not surprising that HSBC is coming under pressure from shareholders. It’s had a rotten year – it issued its first profits warning in years after stumping up £1.75bn to cover losses on US sub-prime mortgages, while its attempts to join the top table of investment banking still look doomed to failure. Recently it was even forced by a Facebook campaign to reverse a decision to scrap interest-free overdrafts for graduates.

It has also come under fire for its unusual governance structure, with executive chairman Stephen Green calling the shots – an area that KVAM is likely to target, judging by yesterday’s statement.

However, the banking behemoth does seem to be getting back on an even keel. Last month it moved to plug a big gap in its emerging markets coverage with a $6.3bn offer to buy Korea Exchange Bank from US fund Lone Star – although the deal has been held up by Korean regulators, who are still determined to prove that Lone Star bought the bank at a knock-down price.

But one thing’s for sure – HSBC won’t be able to ignore this latest headache. Judging by its previous skirmishes, Knight Vinke is not easily fobbed off. And as Vodafone found out in a similar skirmish with Efficient Capital earlier this year, even little shareholders can cause a lot of disruption…

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