KDB Financial Group has reportedly made a preliminary contract with HSBC to take over the U.K.-based bank’s retail operations in Seoul.

Group chairman Kang Man-soo told reporters Tuesday that the two parties have already concluded a memorandum of understanding.

Over the past few months, the state-run group’s flagship unit, Korea Development Bank, has been striving to acquire 11 retail branches of HSBC Korea.

Kang had vowed to buy a local bank as part of efforts to privatize the group and beef up its competitiveness.

“KDB Financial is ready to seek mergers and acquisitions at any time if there is a suitable target,” he said in an interview.

He said that as there is a counterparty in any takeover deal, it would be difficult for him to specify the name of a target bank, hinting that the group is pushing to buy a lender in Korea.

The Financial Services Commission scrapped a plan to sell Woori Finance to KDB Financial Group in mid-June, due to public criticism.

A takeover of a bank is critical for KDB Financial Group because the group needs to expand its deposit base before privatization.

The government, which owns 100 percent of the group, must start reducing its stake no later than May 2014 under the current blueprint for KDB’s privatization.

Kang, a former finance minister, has been strongly supportive of creating a gigantic financial firm or so-called mega financial institution through takeovers in a bid to secure the group’s competitiveness in the global market.

Since the third quarter of this year, speculation had it that HSBC would close down its retail business operations in Korea in the coming month.

By Kim Yon-se (kys@heraldcorp.com)