Knight Vinke, the activist shareholder laying siege to HSBC, today accused the bank of massively understating its probable losses on US subprime debt, suggesting it should have written off another $25 billion or more to be as prudent as its biggest rivals.

The shareholder activist, which has made renewed attacks on HSBC's strategy since last year, accused the bank of failing to apply the same conservative accounting standards to measuring sub-prime debt as rivals.

Knight Vinke said: "If HSBC's accounting for its sub-prime assets had been as conservative as that of other banks its cumulative write down for sub-prime and related losses would now stand at approximately $50 billion in total rather than $25 billion - which makes HSBC the biggest causality of the sub-prime crisis so far."

HSBC took a $3.2 billion impairment charge from its US consumer finance business and an additional $2.6 billion from its US global banking and markets, during the first quarter of the year.

The bank said: "It seems likely that the deterioration in the US housing market will extend into 2009: it is also clear that US economic growth has slowed and there is an increased likelihood of a recession this year."

HSBC revealed that mortgage and credit card delinquencies, otherwise known as late payments, were still rising in the US due to both the slowing economy and the bank tightening up its lending criteria.

The bank ramped up its exposure to the US sub-prime lending market when it acquired Household International in 2003 for £9 billion. HSBC recently revealed when it announced its full-year results that it was writing off $51 million in loans to Americans and currently has $150 billion in outstanding loans to 55 million people.

Knight Vinke has consistently argued that HSBC should jettison HFC, its American banking business, and it said today: "There can be little doubt that if the board had separated HFC, the share price would be at least 300p higher than where it is today."

HSBC today predicted that there will be no recovery in the US housing market until at least 2009, as its chairman, Stephen Green, admitted: "The outlook for the rest of the year remains unusually difficult to foresee in the current environment."

Mr Green said: "The timing of any recovery in the US housing market, which is likely to be the primary stimulus in restoring confidence to the US economy, is also unclear.

"A housing market upturn will itself depend on liquidity returning to credit markets and a resumption of securitisation activity. While illiquidity in financial markets remains of continuing concern, the major economic risks facing the global economy now include inflationary pressures, particularly from rises in food and energy prices.

"We remain alert to the risks but also see opportunity ahead. HSBC will continue to position itself in those markets and businesses where we expect sustainable long-term growth, in line with our strategy."

The bank also admitted it is now "increasingly likely" that the US will fall into recession this year, but said total profits from January to March were ahead of the first quarter of 2007.

The bank said that it had increased profits across its emerging markets business, spanning Asia Pacific, the Middle East and Latin America. It also said that in the UK, its retail operations increased pre-tax profits.

In commercial banking, HSBC reached "record profits" during the first quarter "despite a reduction in earnings from deposit products as a consequence of lower interest rates in the US". It said: "During the period, we continued to restrict our commercial real estate exposure, particularly in North America and, latterly in the UK in response to market conditions."

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