Reply #7: Activists might be too late to influence HSBC [View All]

At the beginning of the year, HSBC seemed a prime target for shareholder activism. The banking group, which had grown into the world's fourth-largest financial institution through a series of audacious acquisitions, seemed to have lost its way.

HSBC had just issued the first profits warning in its modern history, the result of a foolish bet on US sub-prime mortgages that had prompted investors to question the bank's strategy and its ability to manage far-flung operations.

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Its attempt to break into the bulge bracket of global investment banking also appeared to be an expensive mistake. HSBC's traditional share price premium over the UK banking sector had all but disappeared, as the markets questioned the effectiveness of large universal banks.

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Perhaps most importantly, the global liquidity crisis has given investors a new-found appreciation for HSBC's size, geographic spread and powerful balance sheet. Its shares, which had underperformed the rest of the sector for several years, have held up reasonably well in the market turmoil.

In this context Eric Knight, the activist shareholder who is due to call for a "fundamental review" of HSBC's strategy, would appear to have launched his campaign a few months too late.

http://news.yahoo.com/s/ft/20070906/bs_ft/fto090620071727202042