HSBC hopes to sign an agreement to buy a $4.5 billion (£2.26 billion) majority stake in South Korea’s sixth-largest bank within weeks, completing its first big acquisition in the country after eight years of fruitless attempts.

However, sources said that there were numerous obstacles to the deal, including the possibility that the South Korean Government could block the sale of a 51 per cent stake in Korea Exchange Bank (KEB).

Local financial groups, such as Kookmin Bank and Hana, are expected to cash in on anti-foreign investment sentiment and table rival offers for control of the $8.8 billion company.

Jin Sang Kim, a banking analyst at Nomura, said: “The uncertainty over whether government approval will be forthcoming still looms large. The Government may be reluctant to hand over KEB to a foreign bank, particularly considering KEB’s unique position.”

Han Jeong Tae, an analyst at Hana Daetoo Securities, said: “If KEB is sold to HSBC, it will make it the third major Korean bank bought by foreign players. The regulator won’t like it very much.”

KEB is Korea’s largest foreign exchange bank but its ownership by Lone Star, the Texan private equity firm, is in dispute. Lone Star snapped up a majority stake in KEB for $1.2 billion in 2003, when the Korean bank was teetering close to bankruptcy. The private equity firm spent almost $3 billion on recapitalising it and last year tried to sell its 65 per cent share to Kookmin for $7.3 billion.

Public outrage over Lone Star’s multibillion-dollar profit on the deal prompted the Government in Seoul to investigate the original sale. It accused Lone Star of colluding with a corrupt former official to inflate KEB’s losses, artificially depressing the bank’s value. The issue is still being decided in the Korean Supreme Court.

An official at South Korea’s financial regulator said yesterday: “There is no change in our stance that we will carry out a thorough screening on the eligibility of a new owner of KEB if its current owner Lone Star sells its controlling stake in the bank.”

Last year Lone Star sold just over 13 per cent of its KEB stake for almost $1.3 billion. Sources close to the deal said yesterday that there was a good chance that the firm’s argument with the Government could be settled within a few months. The source said that HSBC hoped to sign an agreement with Lone Star within weeks.

HSBC is Hong Kong’s biggest bank and is the largest foreign bank in China, Malaysia and Indonesia, but it has lacked a substantial presence in South Korea’s £25 billion banking market after missing out on a number of acquisitions in recent years, including deals with Korea First Bank, Seoulbank and LG Card.

HSBC has 11 own-branded branches in South Korea, but the acquisition of KEB’s 352 branches would immediately give it scale.

Roy Ramos, an analyst at Goldman Sachs, said that he was “roundly enthusiastic” about the acquisition. Simon Maughan, an analyst at MF Global Securities, said: “They’re doing what they said they’d do and buy during periods of turmoil, and secondly it solves a problem in Korea, where they were looking underrepresented.”

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