Statement from Knight Vinke concerning HSBC

New York, NY, 14 November 2007. HSBC's announcement today of further substantial provisions for losses in U.S. sub-prime and debt trading (CIBM) underscores the risks associated with not focusing sufficiently on businesses where HSBC has comparative advantage and of building a group that may have become too large and too complex to be controlled effectively.

To place this into perspective, HSBC's $3.4 billion of additional provisions this quarter in its US consumer finance business and $0.9 billion of write-downs in debt trading exceed the sum of all emerging markets' retail banking profits for the past 4.5 years (excluding one-off items).

HSBC's relentless drive for diversification continues unabated despite the fact that the Group suffers from sub-optimal performance in its core retail and commercial banking divisions, particularly in the United Kingdom, the United States and France, which, together with Hong Kong, account for almost 80% of HSBC's operating profits in these divisions.

We continue to believe that shareholders would benefit from greater focus, a more independent board and a truly impartial strategic review.

A reminder of Knight Vinke's six key points on HSBC:

  1. Perennial stock market underperformance compared to peers
  2. Pursuit of geographic diversification instead of comparative advantage
  3. Underperformance in most key retail markets except Hong Kong -- UK, France, USA
  4. Lack of credible China strategy -- places Hong Kong franchise at risk
  5. Lack of credible CIBM strategy ­ trading assets now tie up a third of the balance sheet
  6. Strategy unchallenged due to poor Board structure and lack of economic incentives for senior management to do so

About Knight Vinke Asset Management
Knight Vinke Asset Management is an institutional fund manager which specialises in the linkage between value creation and better governance in large cap public companies. Its clients include some of the world's largest public pension funds and institutional investors.
This announcement is not intended, and shall not be construed, as an offer, solicitation, invitation or inducement to buy or sel securities or interests therein or other investments.

For further information, please contact:
Martin Forrest, Director of Communications David Trenchard/John Sunnucks
Knight Vinke Asset Management

Tulchan Communications
T: +377 93 30 06 36
T: +44 20 7353 4200
forrest@kvamllc.com
knightvinke@tulchangroup.com

Knight Vinke Asset Management LLC - Press Release ­ November 14, 2007