HSBC Holdings Plc, Europe's biggest bank by market value, said it is in talks to buy 51 percent of Korea Exchange Bank from Lone Star Funds, as it seeks to narrow a gap with international rivals in Asia's third-biggest economy.
The stake is valued at about 4.3 trillion won (US$4.5 billion), based on Friday's closing price.
Any acquisition of South Korea's fifth-largest bank would require regulatory approval, HSBC said in a statement yesterday.
HSBC said it wants to refocus on fast-growing Asian economies and away from the US, where first-half earnings slumped 35 percent because of loan defaults by subprime borrowers.
Dallas-based buyout firm Lone Star has struggled for more than two years to sell Korea Exchange after a probe by Korean prosecutors into its 2003 acquisition.
"If the deal is successful it would greatly increase HSBC's presence in Korea," said Yang Sung Ho, who helps oversee about US$2 billion at KB Asset Management Co in Seoul. "It won't be easy to obtain South Korean government approval before the ongoing legal battle over the bank is settled."
HSBC has 11 branches in South Korea and is struggling against bigger rivals. New York-based Citigroup Inc and London-based Standard Chartered Plc spent almost US$7 billion expanding through mergers in South Korea. Citigroup acquired Koram Bank, the sixth-largest lender, in 2004, and Standard Chartered bought Korea First Bank, the seventh-largest, in 2005.