HSBC Chair Said to Concur with Critique
The activist investor calling for a shake-up at HSBC is claiming the bank's chairman, Stephen Green, agreed with most of its criticisms.
Mr Green spoke to Eric Knight, the chief executive of Knight Vincke, by telephone on Thursday, after Knight Vincke said it had asked the bank to review its business because its shares had underperformed and its business was too concentrated in slow-growth markets.
"We had a call from Stephen Green last night in response to our announcement, and he said to Eric Knight that he didn't agree with everything but that we were mostly right," Glen Suarez, director of investments at Knight Vincke, said yesterday.
HSBC declined to comment on details of the call, but sources close to the company said Mr Suarez's account sounded unlikely.
Knight Vincke invests in large public companies it believes are underperforming and pushes for change. It said HSBC's shares had underperformed its peers for 15 years, its business was thinly spread, its profitability was poor, and management's compensation did not incentivise them to run the business effectively.
The US investor has called on Simon Robertson, the bank's senior independent non-executive director, to review HSBC's entire strategy. "Does it have such a surfeit of management resources and capital that it can afford to be in so many countries and products at the same time?" Mr Suarez said.
Activist investors have come to the fore in recent months. The Children's Investment Fund called on ABN Amro to break itself up, prompting a bidding war for the Dutch bank between Barclays and Royal Bank of Scotland.
HSBC, which is in 83 countries, said it had record first-half results, despite rising bad debts in the US, and had refocused on Asia.
"We have got a clear strategy which we are executing well," an HSBC spokesman said, pointing to growth in Asia, Latin America and investment banking. "We said they would perform and they are performing well."
The past year has been unusually troublesome for HSBC. Bad debts have rocketed at Household, the US sub-prime lender that was meant to transform the bank for the better when it was acquired in 2003. This year, investors started publicly questioning the bank's strategy, saying it had neglected Asia and emerging markets by building up in the US, France and other developed economies.
Mr Green and Michael Geoghegan, the chief executive, aim to expand in Asia and emerging markets and are trying to buy a bank in Korea to plug a gap in the bank's Asian presence.
Knight Vincke, which holds less than 1 per cent of HSBC's shares, will talk to other investors to seek support for its demands.
HSBC said: "We engage with investors all the time. They generally understand the strategy very well and are supportive of it."
A shareholder with a heavy weighting in HSBC's stock said Knight Vincke would have got a better reception at the start of the year before HSBC refocused on Asia and the credit markets collapsed. "Apart from stirring the pot every few months, I'm not sure what they can do to add value for other shareholders," the investor said.