Funding arm says HSBC fought off pay backlash

By Steve Slater and Clara Ferreira-Marques

LONDON (Reuters) - Europe's biggest bank HSBC fought off an investor backlash over a multi-million pound executive pay plan on Friday and dismissed claims its troubled U.S. unit cannot finance itself and should be sold.

Several shareholders at the bank's annual general meeting criticised a new pay plan put forward by HSBC, but the plan was comfortably approved.

One investor, applauded by others, said the board should follow the example of British Airways Chief Executive Willie Walsh and give up their bonuses, but the bank said it was merely moving into line with pay levels at rivals.

Over 88 percent of investors approved the pay plan, but including abstentions the approval rate was just under 82 percent, well below traditionally overwhelming AGM votes.

The bank said a maximum payout of more than 120 million pounds for top executives over three years was based on hitting stretching targets, and pay for an average performance would be close to the average of its peer group.

Shareholder Brian Dodds said the plan would reward "moderate performance exceptionally well" and slammed the targets being used as "more and more divorced from the share price".

HSBC faced more intense criticism from many of the near-500 attendees about its losses and strategy on U.S. subprime mortgage lending. It was one of the first banks to flag problems in the market late in 2006 and since then has lost more than $10 billion from bad loans and almost $5 billion (2.5 million pounds) from writedowns.

Investment firm Knight Vinke renewed its fierce criticism of HSBC's U.S. involvement, saying the bank should either sell or ring-fence HSBC Finance (HFC) as it is spending billions of dollars financing the business.