ACTIVIST INVESTOR Eric Knight is to ramp up his campaign against HSBC with renewed calls for the troubled banking group to dump its struggling US loans business amid fears that write-downs for 2008 could balloon to $20 billion (€15.5 billion) or more.

Mr Knight, who has campaigned for sweeping changes at HSBC since 2007, is planning a fresh campaign to coincide with the banking group’s full-year earnings announcement scheduled for next Monday.

In the past Mr Knight has called for the removal of HSBC’s top executives and for the banking group to close Household, its struggling US home loans arm.

Mr Knight, who owns a swathe of HSBC shares through his Monaco-based Knight Vinke Asset Management, which has close connections to the California Public Employees Retirement System (Calpers), the world’s biggest pension fund, said: “There is a time to be quiet and a time to be active, and this is a time to be active.”

It is understood that Mr Knight wants HSBC to put Household into bankruptcy protection, a move he believes will end the erosion of HSBC’s capital position.

“It is getting worse every quarter,” he said.

Sources suggested HSBC will be forced to write down the value of troubled assets by substantially more than the $20 billion already predicted by analysts. One source said: “$25 billion would not be a surprise to anyone.”

Mr Knight, who is travelling in China, is expected to complete his latest analysis of HSBC’s performance by the end of this week.

A spokesman for HSBC declined to comment about Mr Knight’s plans, but indicated the bank had no plans to put Household into bankruptcy.

Speculation has mounted since the end of last year that HSBC might be forced to seek as much as $20 billion from investors through a rights issue or go to the British and US authorities for a cash injection to prop up its balance sheet.

The bank is one of the few in the world not to have sought capital from investors or governments since the credit crunch began.

HSBC’s shares plunged in London on Friday as rumours swirled that the bank is preparing to tap shareholders for as much as $15 billion.

An HSBC source said Mr Knight’s expected assault contains “nothing new”. The source added that Household is actively trying to help its subprime mortgage holders who cannot pay their debts by renegotiating terms.

However, Household debtors continue to default at a similar clip to other US mortgage companies.