HSBC may pull out of South Korean bank deal

HSBC had extended an April deadline to buy the stake. (SATISH KUMAR)

HSBC said yesterday it might consider pulling out of a $6.3 billion (Dh23bn) deal to buy Korea Exchange Bank (KEB), a move analysts say would heap more pressure on South Korean regulators.

The comments were the second time in as many weeks that Europe's biggest bank has warned it would not wait forever for South Korean authorities to decide on the deal, which is seen as a major test of the country's openness to foreign investors. "The comment is seen intended to pressure regulatory authorities," said Lee Byung-gun at Shinyoung Securities.

"HSBC cannot drag its feet on the deal indefinitely, which will increase uncertainties for the bank. Now we cannot rule out HSBC scrapping the deal, based on today's comment."

HSBC had already extended an April deadline on its offer to buy a majority stake in the sixth-largest bank in South Korea from US investment fund Lone Star by three months to the end of July.

The deal has been held up by lengthy legal wrangling over Lone Star's purchase of KEB in 2003 and its involvement in controversial decisions by the South Korean bank. "It's an acquisition we would like to complete, but it's up to regulatory approval," Sandy Flockhart, chief executive for HSBC Asia Pacific, told foreign media in Taipei yesterday.

"If nothing happens, we'll find ourselves in a position to pull out. The board will have to consider that position," Flockhart said.

Flockhart's comments come about two weeks after similar remarks by the bank's head of South Korean operations.

"We have been in this Korean deal for a long time. We are patient," said Flockhart.

Seoul's High Court is due to give a verdict to Lone Star and the head of its South Korean operations next Tuesday, after a lower court found both guilty in February of manipulating the stock price of a credit card unit of KEB so it could buy it cheaply.

South Korean analysts speculate the appeal court ruling might clear the way for either regulators or Lone Star to make a final decision.

The number

$6.3bn: The deal through which HSBC was planning to buy Korea Exchange Bank, the sixth largest bank in South Korea.