Hopes for Korean investment in Lehman take a hit

By Kim-Yeon Hee

SEOUL (Reuters) - A top regulator on Monday voiced concern about state-run Korea Development Bank's (KDB) interest in buying a global bank such as Lehman Brothers Holdings LEH.N, saying KDB should be just a "cheerleader" and let local private banks take the lead in any such purchase.

The comments threw more cold water on investor hopes that KDB could soon invest in Lehman, and sent the U.S. investment bank's shares down as much as 8 percent.

KDB said on Friday it was open to the acquisition of an overseas financial institution, naming Lehman as one of its options.

The comments lifted Lehman shares 5 percent on Friday, giving hope to investors about the investment bank's prospects for raising capital, a day after a press report said KDB and another Asian financial institution had walked away from a deal.

On Monday, Korean regulators said that to the extent KDB is potentially interested in Lehman, it is in the early stages of doing anything.

That's bad news for Lehman, which is looking to raise money and scale down its more than $60 billion (32.4 billion pounds) of mortgage-related assets amid investor fears it is undercapitalized.

On Monday, when asked about the status of KDB's possible interest in Lehman, South Korean Financial Services Commission Chairman Jun Kwang-woo told reporters, "That would be an international marriage. Would you get married just after one or two blind dates?"

Cross-border acquisitions by South Korean companies should be led by the private sector, and state-run institutions such as KDB should play a "cheerleader role," Jun said.