HSBC may exit from Korea Exchange Bank deal-FT

SEOUL, May 26 (Reuters) - HSBC (HSBA.L) may drop out of the delayed deal to buy control of Korea Exchange Bank (KEB) (004940.KS) from U.S. private equity fund Lone Star [LS.UL] if no progress is made within weeks, the Financial Times reported.

The report carried on FT's Web site (www.ft.com) comes nearly a month after HSBC (0005.HK) extended the deadline on its $6.3 billion offer for a majority of KEB by three months to the end of July, as the deal still awaits South Korean regulatory approval.

"Sentiment is finely balanced but HSBC would likely look ... elsewhere if there is no movement," the newspaper quoted an unnamed person familiar with the UK bank's thinking as saying.

The report said HSBC was hoping this week's visit to the Britain by senior members of the recently elected government of President Lee Myung-bak will help break the logjam.

Chairman of the regulatory Financial Services Commission, Jun Kwang-woo, is meeting financial regulators and executives of European banks in trip to Paris and London this week.

He told news conferences in April that the government hoped for a smooth and quick resolution to the pending KEB deal.

Jun also had said the government was studying how to help seal the KEB sale but there was no change to its basic stance that it would hold off making any final decision until legal uncertainties were cleared.

The Lone Star-HSBC deal has been held up by legal disputes over the U.S. fund's 2002 KEB purchase and whether it was involved in controversial decisions made by the sixth-largest bank in South Korea.

Lone Star's PR agency and KEB declined to comment.

The deal has been in the spotlight as a litmus test of the South Korean government's commitment to becoming a financial centre in Asia.

KEB shares rose as much as 3 percent briefly, before trimming the gains to 0.3 percent to 15,050 won by 0033 GMT.

(Reporting by Kim Yeon-hee; Editing by Keiron Henderson)