HSBC and China bank seen interested in Lehman

SEOUL (Reuters) - Europe's biggest bank HSBC Holdings and an unidentified Chinese bank are among potential buyers of Lehman Brothers, South Korea's Chosun Ilbo newspaper reported on Wednesday, citing a financial industry source.

HSBC and the Chinese bank, along with top U.S. hedge funds, are competing with Korea Development Bank (KDB), which has proposed to buy 25 percent stake in Lehman for 5 trillion-6 trillion won (2.4-2.9 billion pounds), the newspaper said.

An HSBC spokeswoman in Seoul could immediately be reached for comment.

State-owned KDB confirmed on Tuesday it was in talks with Lehman over a possible joint investment in the U.S. bank with other Korean banks, but declined to give details of its negotiations

Lehman, which has more than $60 billion (33.6 billion pounds) of mortgage and mortgage security exposure, is under pressure to raise capital as Wall Street firms continue to reel from the fallout of the subprime mortgage crisis.

The fourth-largest U.S. investment bank is looking for buyers for some $40 billion of commercial mortgages and property on its balance sheet.

KDB's proposal also includes a clause which allows the South Korean bank to increase its ownership to 40-50 percent at a later stage, according to Chosun.

Lehman prefers KDB over other contenders as KDB plans to keep its current management after an acquisition, but the bid price is considered low, the South Korean daily said.

(Reporting by Rhee So-eui; Editing by Keiron Henderson)