Abigail Hofman: Rarely have so many waited with anticipation for so few

It is always unnerving to open the Financial Times and see a large photograph of a former colleague glaring back at you. In this case, the former colleague was wreathed in smiles, which made the experience more galling. Eric Knight, chairman and chief investment officer of activist fund Knight Vinke Asset Management, was a ubiquitous press presence after calling for a strategic review of HSBC in early September.

I’ve done some savaging of HSBC myself so should have some sympathy, if not empathy, for Knight. In January, I wrote: "A break-up of HSBC is certainly an interesting idea for 2007." Great minds think alike. I worked with Eric when I was a pert young analyst at Merrill Lynch in the 1980s. Pert is perhaps not the appropriate adjective to describe Eric in those days. Although I do remember he was always perfectly attired. And as he has aged – dare I say it – hasn’t the resemblance to Miss Piggy grown? Although personally, I think all women should strive for fat faces. The sunken, starved look is so ageing.

On September 4, Eric wrote a letter to Stephen Green that I’m sure caused the HSBC chairman to fling his arms in the air and wail (think Victor Meldrew in One Foot in the Grave): "I don’t believe it." The letter is pompous, patronizing and punchy. Unfortunately, it is also systematic, rational and lengthy. I commend it as an example of how to vanquish an enemy with weasel words. Eric wrote: "The fact which troubled us most following KVAM’s meeting in June [with HSBC] was our feeling that there appeared to be little sense of concern within management about the performance of the Group – almost to the point of complacency – and a fundamental lack of ambition." Although Knight Vinke has status in the field of shareholder activism, it is a minnow in terms of money management. Sources whisper that Knight has some $1.5 billion under management. However, Calpers, the muscular California pension fund, co-signed the letter, which lent the attack added acidity.

If you want to humiliate and irritate someone, ignore them. Eric essentially argues that Stephen should get lost or at least become non-executive (which is probably the same thing) and that a strategic review of the group should be conducted by Simon Robertson, the senior non-executive member of the HSBC board. Robertson, a highly respected former Goldman Sachs banker and the present chairman of Rolls-Royce, can’t be happy. The 66-year-old has a busy life. Apart from being the founder of Simon Robertson Associates (his own corporate finance boutique, which sounds very impressive, if not hubristic), he is a non-executive director of wine-merchant Berry Brothers & Rudd, the Economist and the Royal Opera House. In other words, Simon is a member of the great and the good. It is rumoured that he skis with the royal family in Klosters. A former colleague talks admiringly of the "Robertson aura". I wonder how much patience the robust Robertson will have for erudite Eric’s antics?

Nevertheless, the predator makes two killer points. First, that "the world’s local bank" is a pseudonym for a motley collection of middling to minor operations: "With the exception of retail banking in Hong Kong, HSBC has failed to achieve a position of true leadership in any of its core markets or businesses despite having spent about $40 billion on acquisitions in Europe and North America over the past 15 years."

And secondly, that HSBC should have focused on consolidating and expanding its Asian business. "HSBC’s rush for ‘diversification’ may have damaged its core franchise in Hong Kong and compromised its opportunity of being the leading player in China," scolds Knight with some justification. He also points out that "Despite having the largest branch network in China amongst the foreign banks, [HSBC] is not even among the top 10 lead managers of IPOs for mainland Chinese companies." HSBC argues that it ranks seventh, year to date, for Chinese IPOs. Last year it was poorly ranked because there was a plethora of Chinese bank IPOs and these banks viewed HSBC as a competitor.

Timing is everything in finance as it is in life, and angry Eric’s timing is askew. In February, when HSBC issued its first ever profit warning because of US subsidiary Household’s sub-prime lending, the bank looked a buffoon. Commentators and shareholders waded in to pummel the wounded boxer as he crouched off-balance in the ring. Now, though, that everyone else is grappling with demons that come garbed in acronyms such as CDOs, SIVs and LBOs, HSBC seems a bastion of purity in an impure world. At least we know they’re not going under. I’ve lost count of the number of people who have rung me and said that they are going to transfer their savings from other banks to HSBC.

Perhaps sensing this change of mood, Robertson has told Knight that HSBC’s non-executive directors unanimously support Stephen Green as executive chairman and believe there is no need for a strategy review. Nevertheless, a cursory scan of the non-executive directors caused me to shake my head sorrowfully. The board is unwieldy (17 people) and is packed with 60-something white males to whom the application of the word conservative would be progressive. My heart goes out to lovely Rona Fairhead, chief executive of the Financial Times Group, who is one of two female non-executive directors of HSBC. And all I can say to Eric Knight, my former comrade-in-arms, is: "Good luck, mate, you’ve got a long campaign ahead of you."

"It’s third-quarter results time and, once again, Goldman Sachs proved itself to be a class act. Investors should kiss the ground that Lloyd Blankfein walks upon. Goldman’s third-quarter net income rose by 80% as it bet against sub-prime mortgages"