Sept. 10 (Bloomberg) -- HSBC Holdings Plc is ``highly unlikely'' to buy an investment bank, its Asia chief executive officer said today, dousing speculation the bank may invest in Lehman Brothers Holdings Inc.

``Our approach, as we've said, is it's highly unlikely that we will take a major interest in an investment bank,'' Sandy Flockhart, CEO of HSBC's Asia-Pacific region, told Bloomberg Television when asked about speculation that London-based HSBC may invest in Lehman, the fourth-largest U.S. securities firm. He declined to comment on specific companies.

HSBC, Europe's largest bank by market value, is focusing on expanding in emerging markets after posting about $27 billion of writedowns in the past year, mainly linked to subprime mortgage losses at its U.S. Household International unit. Even so, the bank has posted smaller markdowns than competitors Merrill Lynch & Co., Citigroup Inc. and UBS AG over the year-old credit crisis.

Ladenburg Thalmann & Co. analyst Richard Bove identified HSBC as a potential buyer of the bank in a note to clients yesterday. Lehman, which slumped 45 percent in New York yesterday, will announce later today third-quarter results and ``key strategic initiatives.'' Analysts surveyed by Bloomberg expect the firm to report a $2.2 billion loss.

Household International

HSBC declined 0.7 percent to 900 pence as of 10:45 a.m. in London trading today. The stock has gained 7.4 percent this year, the best-performer in the eight-member FTSE All Share Banks index, which has declined 19 percent.

HSBC bought Prospect Heights, Illinois-based Household International for $15.5 billion in 2003 to become the biggest subprime lender in the U.S. The bank has closed down U.S. operations and tightened lending following the subprime mortgage collapse. Knight Vinke Asset Management LLC, a New York-based investment firm that owns less than 1 percent of HSBC, is pressing the bank to spin off the U.S. business.

``It's helpful to have the clarification,'' about HSBC's intentions with Lehman, said Glen Suarez, head of investments at Knight Vinke in Monaco. ``I don't believe HSBC can realistically have considered it.''

First-half profit at HSBC fell 29 percent to $7.7 billion, the steepest decline since 2001. Lehman, Merrill, Citigroup and UBS lost money in the most recent quarter. HSBC's $192 billion market value compares with $5.4 billion for Lehman, whose shares have slumped 88 percent this year.

`Middle Of This Storm'

Banks and brokerages have raised about $360 billion and slashed thousands of jobs as they reported more than $500 billion of writedowns and credit losses.

``We are still in the middle of this storm, and any move would be too early,'' said Winson Fong, who helps manage $3 billion at SG Asset Management Hong Kong Ltd. Fong said he doesn't hold any HSBC shares.

Deutsche Bank AG Chief Executive Officer Josef Ackermann said separately today he's not interested in buying Lehman Brothers Holdings Inc.

``We aren't interested in parts or all of Lehman,'' Ackermann said at a banking conference in Frankfurt today.

New York-based Lehman moved its third-quarter earnings announcement up a week to today, after talks with state-owned Korea Development Bank ended. Korea Development is seeking to invest about $6 billion in Lehman, Yonhap news reported today, citing an unidentified executive at the Korean lender. Korea Development subsequently said it had ended the talks, citing failure to agree on terms.

Mortgage Securities

Among blunders Fuld, 62, made was not getting out of mortgage securities fast enough when the U.S. housing market began to crumble and being too slow in finding a buyer, said Ladenburg Thalmann's Bove.

``The opportunity has been there, but the lack of willingness to deal on Fuld's part has been huge,'' Bove said.

Once the biggest U.S. underwriter of mortgage-backed securities, Lehman was stuck with the assets after two Bear Stearns Cos. hedge funds that invested in the instruments collapsed in July 2007, causing the market to freeze.

The ensuing credit contraction ultimately led to the takeover of Bear Stearns, once the fifth-biggest U.S. securities firm, by JPMorgan Chase & Co. in March for $10 a share in a deal backed by the U.S. Federal Reserve.

Flockhart, 56, is a member of the HSBC Group Management Board.

To contact the reporters on this story: Chia-Peck Wong in Hong Kong at cpwong@bloomberg.netBernard Lo in Hong Kong at blo2@bloomberg.net

Last Updated: September 10, 2008 05:53 EDT