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But the bank said its profits for the first three months of this year were ahead of the same time last year.

Chief executive Michael Geoghegan warned: ‘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.’

He said that profits had increased in every emerging-market country in which HSBC operates, counterbalancing the writedowns in investment banking which were largely concentrated in the US and UK.

Geoghegan said: ‘Our results last year and the trading statement today show that the diverse flows of business is the right way to run a bank. We feel comfortable and so do our regulators that this is the right way to run the business.’

But North American profits ‘declined significantly’ largely because of toxicloan writedowns and a charge of $3.2bn against consumers’ bad loans. That was much higher than the $1.6bn charge in the first quarter of 2007 but lower than the $4.6bn in the final quarter of last year.

The scale of the problem remains enormous with one in 20 of HSBC’s mortgages in the US now two months or more behind on payments. At the end of 2007, the so-called delinquency ratio was 4.8%. Credit-card bad debts are also on the rise in the States.

However, the level of bad debts in HSBC’s personal finance business in the UK is actually down on a year ago. Pretax profits rose in Britain but much of this is because the bank, like its rivals, has stopped paying out to customers claiming unfair overdraft charges until the case between the banks and the Office of Fair Trading is finally resolved. Strong areas were savings and so called packaged accounts.

In investment banking, Geoghegan said pre-tax profits were down on a year ago but better than the third and final quarters of 2007. He added that there had been higher trading in the first quarter as institutions rebalanced their portfolios as a result of the credit crunch which, he added, could mean dealing volumes will be more subdued for the rest of the year.

The bank said it was still pursuing the purchase of Korea Exchange Bank, which has been held up by regulators. It expects to complete the sale of its French business in July, with a profit of $1.9bn. The shares rose 16p to 882p.

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Chief executive Rob Templeman said: ‘As the British Retail Consortium said this morning, this is the worst market for clothing sales for eight years.

‘Against that background we’ve gained market share against most of our competitors with our designer brands doing well. It is very difficult to predict the next year but I’m not in the camp which says this situation will last for two years.

‘This is not a recession problem but a financing problem. It came very fast and it could disappear equally fast.’

He even feels retailers might have a better summer than last year when sales were hit not just by bad weather but flooding, which closed some stores for weeks. Debenhams profits fell 12.4% to 84.1m in the 26 weeks to 1 March on sales down 0.7%.

However, in the past six weeks same-store sales are down 2.5%. But the profit margin improved slightly.

Net debt is down by 37m to 979m and Templeman said he aims to cut this significantly over the next few years in the light of the current retail environment and economic outlook.

The is being held at 2.5p a share.

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It is the opening gambit of a growing type of corporate battle that often leaves blood on the boardroom carpet.

In the past couple of years, activist investors have challenged and brought down 40bn Dutch banking giant ABN Amro - eventually taken over by a group including

Now events last week at football club - worth a mere 4m - could provide fresh ammunition for activists.

Millionaire property developer Graham Ferguson Lacey, the largest shareholder, tried to call an extraordinary general meeting at Millwall, where Heather Rabbatts is chief executive, over the club’s development plans.

But directors refused the meeting, invoking the 2006 Companies Act and saying that he intended to wrest control of the club.

However, legal experts believe the same law could soon be used by activists to hit back at directors.

Tim Stocks, partner at top City law firm Taylor Wessing, said refusing to hold an egm was a big risk. ‘The power to do this comes from the latest Companies Act, but it also gives very significant powers to shareholders,’ he said. ‘It is almost an activists’ charter.

‘The Act gives shareholders the right to sue directors personally. In the past, if an activist thought a board was acting against the interests of investors, he had to get the company itself to sue, which was obviously almost impossible.’

The Act could be the latest weapon for shareholder agitators, some of whom have been coming under pressure.

Reports last week suggested giant American pension fund Calpers was withdrawing cash from activist Knight Vinke, which has demanded change at Britain’s biggest bank, However, Calpers told Financial Mail it would continue to place funds with Knight Vinke, run by Eric Knight, despite its underperformance.

‘We don’t bale out just because of a bad year,’ Calpers said. ‘We are long-term investors and we give people the benefit of the doubt. I’m not sure how long we will maintain this placing if the numbers deteriorate. I guess it’s ‘’watch this space'’.’

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Glen Suarez, Eric Knight’s right-hand man, said activism was a vital part of keeping large companies in check. ‘It is shareholders who own the company and they ultimately take the risk,’ he said.

‘We should be able to question management on what they do. The only difference with activist funds is that we stand our ground and fight for our case.’ Research by the London Business School in 2006 suggested activist investors could help improve value at Millwall companies, but recent performances have been mixed. Shares in activist Brian Myerson’s Principle Capital Investment Trust have slumped 29% in the past six months, while hedge funds and SRM lostms on investments in Northern Rock.

More successful activists include hedge fund Toscafund, which has a stake in housebuilder , whose shares jumped last week after a merger approach from rival .

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The group said advertising revenues had fallen sharply in recent weeks, and without the share issue it could have been in real danger of breaking the covenants on its bank loans.

The emergency rights issue will be accompanied by a placing of new shares and the sale of exitsing shares to Malaysian media business Usaha Tegas.

This is one of the operating businesses of Tamil billionaire Ananda Krishna who has interests stretching across media and telecoms.

Johnston chief executive Tim Bowdler said the company had looked at a whole range of alternatives to today’s issue but they were ‘not deemed to be appropriate or sufficient in the current circumstances’.

Johnston said advertising revenues had slumped in recent weeks with property ad revenues down 12.1% and motor ads down 16.4%. Circulation revenues were flat.

The new shares are being offered on a one-for-one basis at 53p, a 61% discount to last night’s closing price. The issue has been fully underwritten by investment bank Deutsche.

The shares fell 18p to 117p.

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The stock sank as low as 61.9p before recovering slightly to stand down 4.6p at 63.3p - nearly 7% - after UBS warned that the UK advertising market is deteriorating sharply. The shares were worth more than 120p just 11 months ago, and word in the City today was that the weakness makes ITV vulnerable to a predator.

‘This is getting dangerously low for ITV,’ said Justin Urquhart Stewart of Seven Investment Management. ‘They are a very realistic takeover target. Michael Grade should be looking over his shoulder.’

UBS analyst David Kerven warned that England’s failure to qualify for the Euro 2008 football championships means there will be no summer boost to advertising revenues.

‘Euro 2008 without England is unlikely to reignite the market and we would expect growth to slow in the second half,’ he said.

It was a turbulent day in the City with the FTSE 100 index overcoming early losses of more than 100 points to stand up just 9.22 at 5702.1 tonight.

Banking stocks led by , 20p higher at 560p, were back in favour and a steady start on Wall Street offered support. The Dow Jones Industrial Average hovered around its opening mark, down just 4.5 at 12,211.90.

, off 5p to 234p, was given a hammering as passengers faced further chaos at Heathrow’s Terminal-5. Goldman Sachs slashed its ratingon the stock from buy to sell and cut its price target from 330p to 200p. It is worried about a slowdown in business and consumer spending on both sides of Atlantic, increased competition from the Open Skies agreement, and the rising cost of oil.

The debacle at Terminal 5 has added to BA’s woes. Far from solving all of the f lag- carrier’s problems, the 4.3bn project has been nothing short of a disaster for both airline and airport.

warned the disruption could cost BA as much as 50m as it faces a tidal wave of compensation claims and is forced to put up stranded passengers in hotels. It is also desperately trying to reunite passengers with luggage which has gone missing at the airport.

Analyst Andrew Fitchie said it was ‘a disastrous start for T5′ and warned BA’s reputation has been severely damaged. and could benefit from any downturn in the airline industry, according to Credit Suisse. It expects easyJet, up 10p at 371p, to increase capacity by about 15% this year and said Ryanair, down 0.04 cents to €2.76, has the chance to add new routes to its network allowing it to grow faster than the rest of the market.

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Morgan Stanley downgraded Vodafone, arguing that the telecoms giant was heavily exposed to a likely decision by the European Commission to bring forward proposals to cut the amount mobile operators charge customers for receiving calls for landlines. The broker said this will cut Vodafone’s European earnings by 11% over the next three to four years. Vodafone fell 6.7p to 150.3p.

, down 11p to 379p, was under pressure after the supermarkets group put its Fresh & Easy store expansion on hold in the US, having opened 31 shops this year. Panmure Gordon said the decision to pause for breath ‘will not help sentiment’ towards the stock ‘but looks sensible’.

Dairy was down 9p at 469p after Dresdner Kleinwort lowered its rating from buy to add following Friday’s trading update. Dresdner says Dairy Crest is suffering from the rising price of raw materials.

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Tommorow’s Agenda

Harry Potter publisher delivers annual results. Pre-tax profits are expected to climb to 17.5m from 5.2m in the previous 12 months on the back of better-than-expected sales. Although the final instalment in JK Rowling’s series has been released, re-orders of the titles are proving lucrative.

The start of the tax year for companies will see the rate of corporation tax rise for small and medium-sized businesses alongside a shake-up of capital allowances, which will, broadly speaking, decrease.

How the manufacturing sector is faring will be revealed with the release of March’s purchasing managers’ index, which measures business activity. Growth picked up in February, according to the Chartered Institute of Purchasing & Supply’s survey, rising to 51.3, with a reading above 50 indicating expansion.

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