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HSBC has confirmed that it is in talks to buy a majority stake in South Korea's fifth-largest lender.

The UK-based bank revealed in a statement today that it is planning to purchase a 51 per cent stake in the Korea Exchange Bank (KEB).

Analysts claim that an initial agreement over the proposed deal, valued at $4.5 billion (£2.27 billion), is likely to be signed by HSBC and private equity fund Lone Star later this month.

Dallas-based Lone Star has been struggling to sell its stake in KEB due to a probe by Korean prosecutors into its 2003 purchase of the holding, amid claims that it snapped up the stock at an artificially-low price.

HSBC, the UK's largest bank, is now thought to be eyeing up the stake in order to expand its business outside the United States. Rising default levels in the US sub-prime mortgage market, which have sent the world's financial markets into turmoil in recent days, hit HSBC's first-half earnings in America.

Analysts say that gaining control of KEB would also allow HSBC to boost its operations in one of Asia's fastest-growing markets.

The banking group currently has 11 branches in South Korea, where it is struggling to compete with larger rivals such as New York-based Citigroup.

"HSBC does need a bigger network for its South Korean business," commented Han Jeong-tae, an analyst at Hana Daetoo Securities.

But while an initial agreement over HSBC's planned purchase of the KEB majority stake is expected before the month is out, any such deal would still need regulatory approval to succeed.