SEOUL/HONG KONG (Reuters) -– It's early days, but speculation is already building that HSBC may participate in the auction for a $3.9 billion stake in Korea Exchange Bank, South Korea's sixth-largest lender.

Domestic lender Kookmin and fourth-ranked Hana Financial Group are widely expected to place bids for the 51 percent stake that U.S. private equity firm Lone Star officially put back on the block last week. State-run Korea Development Bank may also bid, according to investment bankers and analysts.
What would make the auction interesting, however, is if a foreign bank took part in the process, adding a cross-border element and possibly bidding up the asking price along the way.
At the moment, the bank most likely to fill that role appears to be HSBC, which announced a deal, that eventually failed, to buy the Lone Star stake in September 2007. Local media reports have said HSBC was courting KEB even in 2005, when Kookmin was working on a deal to buy KEB, which also failed.
While HSBC, Europe's biggest bank, may be tempted to fill a gap in its Asian holdings by pursuing KEB once again, Basel III capital reform and other regulatory changes could deter it from big deals and instead force it keep its powder dry until the landscape is clearer.