Knight Vinke, the activist investor, vowed to remain a thorn in HSBC's side for the next five years as it prepared to confront executives at the banking group's annual general meeting today with fresh demands for reforms of pay and strategy.

Eric Knight, Knight Vinke's chief executive, is expected to confront HSBC with questions about plans to deal with its troubled American business.

HFC has cost the banking group $60 billion (£30 billion) since its acquisition in 2002 and continues to haemorrhage cash on its loans to poor Americans.

Retail shareholders are likely to use today's meeting in London to barrack HSBC's top managers about a new £120 million executive pay scheme, which will be voted on by investors.

The bank has already been criticised by two influential investor bodies over its compensation plan, which would allow Michael Geoghegan, the bank's chief executive, a pay packet of up to £12 million a year.

Bank insiders were yesterday surprised that Knight Vinke had not pre-empted today's meeting with an aggressive advertising campaign or released any communications with HSBC's executives - a favourite method of attracting attention to its campaign - but were preparing for an onslaught from the fund manager at the meeting.

Yesterday, however, Mr Knight said that he was ready for a long haul on HSBC and would increase Knight Vinke's shareholding in the company, currently thought to be less than 0.3per cent, if necessary. “If it takes us three to five years, we'll do it,” he said.

The fund manager, which bought into HSBC at slightly above 800p a share, has already made a paper profit on its stake. Shares in the bank closed flat at 847p.

HSBC has so far rejected Knight Vinke's calls for it to cut off HFC; to simplify its executive pay scheme; to appoint an independent adviser to evaluate the business and to focus even more heavily on Asia.

However, Mr Knight said yesterday that he was confident of convincing the bank of his arguments.

He said: “We've never failed yet. The odds were against us on Shell and Suez [targets of previous activist campaigns] as well. On this one, we're on track.”

Mr Knight expects HSBC to tell shareholders today that problems in HFC have worsened since the first quarter. Mr Geoghegan hinted earlier this week that it was too early to call an end to the waves of writedowns taken in the US.

Knight Vinke has argued that HFC has a fundamental structural problem - it is hugely over-leveraged with a 95 per cent debt-to-equity ratio - that would remain even if the US credit market recovered.

However, HSBC maintains that it would be “unthinkable and irresponsible” to abandon HFC.

The bank is also expected to defend its pay scheme, to which it has made slight alterations after lobbying by Knight Vinke. The scheme could potentially pay the bank's top six executives £120 million.

However, sources in the bank said that to hit that payout, the bank would have to “at least double every analysts' forecast every year for three years”.

Instead, the bank expects to pay out 41 per cent of the maximum £120 million, as long as it hits the top end of existing analysts' expectations.

Moody's, the ratings agency, gives a gloomy outlook for UK banks in a report out today.

The agency said that the credit outlook for Britain's banks was negative because a downturn in the economy was likely to bring about an increase in bad debts, as well as eating away at lending and hitting profitability.

The agency added: “The global credit crisis continues to lead to significant writedowns of structured exposures for some of the larger UK banks and funding stresses for smaller institutions.

"Relatively lower capital levels at some of the UK banks have left them less well prepared to enter a more challenging operating environment.”

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