HONG KONG (Dec 18): UK bank Standard Chartered (StanChart) could be acquired by a white knight as its recovery could prove to be "challenging", according to broker CLSA, which upgraded shares of the Asia-focused lender on that possibility.

Singapore's biggest lender DBS Group would be the most likely buyer, added CLSA in a note to clients dated Dec 17. StanChart has seen its shares fall below a forward price-to-book value of 0.5 times this week, making it an appealing target.

The lender, which is in the middle of a restructuring under new CEO Bill Winters, has announced a series of moves to restore its profitability, including axing 15,000 jobs and streamlining the bank's management structure.

"The bank's road to recovery will likely be a challenging multi-year journey. But the worse the situation gets for StanChart, we believe the more likely it is that a white knight will eventually emerge," CLSA analysts Asheefa Sarangi and Lester Lim wrote in the note.

StanChart declined to comment, while DBS said in a statement there was "no basis to the report, and it is not on our agenda". Singapore state investor Temasek Holdings, the biggest shareholder for both StanChart and DBS, also declined to comment.

CLSA revised its forecasts for StanChart's earnings in 2015, projecting a loss of US$142 million for the year, a first for the bank in at least 13 years.

The bank's shares dipped 0.5% in early London trading on Friday after soaring 7.3% on Thursday, their biggest one-day gain since March. StanChart's stock in Hong Kong closed 3.1% higher, compared with a 0.5% decline in the benchmark Hang Seng index. DBS lost 1.6% in Singapore.

The slump in StanChart's shares this year has pushed its market capitalization to US$27 billion, an affordable level for several banks with regional ambitions, the CLSA report added.