Lehman Brothers Holdings has intensified
talks with Korea Development Bank (KDB) to raise as much as $6
billion in a share sale that could be concluded this week, the
Sunday Telegraph reported.
South Korea's KDB could buy up to 25 percent of the
struggling U.S. investment bank, the paper said, without
specifying sources. A spokesman for state-run KDB declined to
A senior source at the Financial Services Commission (FSC),
told Reuters South Korean authorities would not oppose or
support any deal until price details were known.
That appeared to mark a shift by the regulator, which
previously said KDB should let local private banks take the
lead in any international acquisitions, dashing hopes for a
direct deal with Lehman.
The source said the FSC had not been officially informed of
new talks between Lehman and KDB. He said, however, even if
there was deal it would be unlikely to be concluded within a
But FSC spokesman Yoo Hoon later said the regulator
remained uneasy about the state-run bank leading any deal with
"We have expressed our concern over KDB being the major
player in a deal ... we haven't changed our view," he said.
South Korea's Yonhap news agency said on Monday KDB was
seeking to buy Lehman with a private financial institution and
majority of funding would come from the private firm, citing a
unnamed senior FSC official.
Lehman, which has more than $60 billion of mortgage and
mortgage security exposure, is under pressure to raise capital
ahead of its results announcement this month. It may post a
loss in the third quarter on likely pre-tax writedowns of $3.5
billion, a Morgan Stanley analyst said last week.
Recent sharp falls in valuations at Western banks have
presented South Korean banks such as KDB with opportunities for
acquisitions that could support their ambitions of becoming
The Sunday Telegraph said if the talks with KDB fall
through, Lehman was lining up alternative investments from
others, such as China's CITIC Securities, or sovereign funds
from the Middle East.
But Lehman was likely to sell no more than 10 percent to
CITIC or Gulf investors if it reaches a deal with either, the
Earlier talks between KDB and Lehman had stalled because of
disagreement over pricing, sources have said.
"We haven't received any detailed report since, including
the price," said the FSC source, who declined to be identified
because of the sensitivity of the issue.
"KDB is supposed to inform us if it finds different
options. Everything depends on the price and terms, and the
government can comment only after receiving such information."
The source also said any deal would need time for a review.
"It can't be this week."
FSC Chairman Jun Kwang-woo said last week state-run
institutions taking a leading role in purchasing foreign firms
Chinese financial regulators have also repeatedly warned
domestic financial firms to be fully aware of investment risks
and weigh them against opportunities in the U.S. credit crunch.
China's top brokerage CITIC Securities, which backed out of
a proposed investment in troubled Wall Street firm Bear
Stearns, said last month it would focus on its domestic
business this year.
Lehman's shares have fallen 75 percent since the beginning
of the year, last trading at $16.09 per share to value the bank
at around $11 billion.
(Additional reporting by Jonathan Thatcher and Cheon
Jong-woo; Editing by Marie-France Han, Ken Wills and Lincoln
Many of the world's wealthiest people
have moved their money out of stocks and bonds and into cash,
the head of HSBC's (HSBA.L) Swiss private banking unit said on
"The first half of 2008 has seen a notable change in client
expectations and investment choices," said Peter Braunwalder,
chief executive of HSBC Private Bank (Suisse), the
British-based bank's main affiliate catering to the ultra-rich.
"Faced with inflation worries, volatile asset prices and
sudden changes in exchange rates, a majority of investors have
reduced their transaction volumes in equities, bonds, and
structured products," he told a news briefing in Geneva.
This was particularly true for clients from Asia, whose
demand for complex investment tools such as equity derivatives
has "drastically decreased" in response to recent financial
market upheaval, said Braunwalder.
"Concurrently, most clients increased their cash allocation
and, for some, their leverage," he added.
Investors worldwide have been scrambling to find a safe
place for their savings this year in the face of a global
economic slowdown, a credit crisis that has spooked markets,
and an energy price spike spurring concerns about inflation.
Alexandre Zeller, who will replace Braunwalder as HSBC
Private Bank (Suisse) chief on October 1, said that concerns
about inflation would dominate many investing decisions ahead.
"My worry is that a lot of liquidity has been injected in
the markets by central banks to solve the (credit) crisis," the
former head of Banque Cantonale Vaudoise said, raising concerns
about how that liquidity will be removed from the market, and
whether interest rates would have to rise as a result.
HSBC Private Bank (Suisse), rated AA by Standard and Poor's
and Aa3 by Moody's, has been more shielded from recent banking
sector woes than its larger Swiss rivals UBS (UBSN.VX) and
Credit Suisse (CSGN.VX).
But the Geneva-based bank said the first six months of 2008
were necessarily arduous in light of "the most difficult
financial markets for several decades."
"Record levels of volatility across asset classes and
markets have made clients more hesitant to move their assets
between financial institutions," it said.
Assets under management decreased by 13 percent to 23.8
billion Swiss francs ($21.7 billion) compared to December 2007,
due both to unfavorable markets and the drop of the U.S. dollar
against the Swiss franc.
Net new money flows were 6.9 billion francs in the first
half, with most funds coming from Europe, the Middle East, and
Asia, the HSBC unit reported. Zeller said he considered that
inflow "substantial" and stood by the bank's goal to grow
assets under management by 60 percent over the next three
"I think this is something that we can achieve," he said.
(Editing by Louise Ireland)