Rebel shareholders pushing for a change of strategy and governance at HSBC will renew their assault on the bank today with a much more hostile critique of its alleged failings.

In full-page advertisements in the national press, Knight Vinke, the activist fund manager leading the charge, accuses the bank of mis-allocating capital in retail banking and “massive value destruction” in investment banking and belittles its overall strategy and slogan as deluded.

“The Emperor needs to be told that he is not wearing any clothes: there are almost no synergies associated with being the ‘world’s local bank’,” it said.

Eric Knight, founder of Knight Vinke, told The Times last night that he was at the end of a self-imposed quiet period while seeing institutional investors and was now ready to go public on more of his concerns. “It’s only just starting,” he said, renewing his call for an independent review of strategy at Britain’s biggest bank.

Knight Vinke has approached 40 institutional investors since launching its campaign last month and said that their response had been “far more supportive than we had been led by HSBC to expect.

“For the record, only two shareholders refused to meet us. Most of the rest agreed that there are real areas of concern to be addressed by the board, concerning strategy, execution and/or governance.”

While Knight Vinke believes that it has uncovered a real groundswell of dissatisfaction, few shareholders have been prepared to support him publicly so far. Many have been reassured by a series of meetings with HSBC’s independent nonexecutive directors, led by Simon Robertson. While having some concerns with HSBC’s past performance, many have little appetite to support a full-scale and potentially disruptive revolt.

While stopping short of concrete proposals for reform at HSBC, Knight Vinke came closer to floating radical changes, including “liquidating the majority” of HSBC’s investment banking unit. Alternatively, it should consider a merger with a capital markets competitor to give it global scale in investment banking. The present strategy absorbed half the group balance sheet, yet had “little prospect of success,” it said.

Knight Vinke also tore into HSBC’s retail strategy of spreading itself relatively thinly worldwide instead of trying to build critical mass in selected markets. It attacked recent HSBC inititiatives in South Korea, Vietnam, Japan, Georgia, the Czech Republic and Peru as examples of the bank pushing into areas where it had no comparative advantage. “These initiatives simply add to the number of sub-scale businesses in the group,” it said, adding that HSBC was obsessed with diversification.

It concluded: “Although we have avoided being prescriptive to date, we believe that our analysis inescapably leads to the conclusion that, in order to unlock the very substantial value of the group, the board needs to consider some radical alternatives.”

Knight Vinke has the support of the influential Californian state employees pension funds CalPers and CalSters.

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