HSBC may consider dropping Korea bank takeover deal

By Faith Hung and Kim Yeon-hee

TAIPEI/SEOUL (Reuters) - HSBC (HSBA.L) said on Wednesday it might consider pulling out of a $6.3 billion (3.2 billion pounds) 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 (0005.HK) had already extended an April deadline on its offer to buy a majority stake in the sixth-largest bank in South Korea (004940.KS) from U.S. investment fund Lone Star LS.UL 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 on Wednesday.

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