Britain's HSBC Holdings is the frontrunner to buy the consumer finance unit of Japanese bank UFJ Holdings for close to $1 billion as it bids to gain a foothold in the lucrative market, a source close to the matter said.

The purchase of Aplus Co, Japan's fourth-ranked consumer finance firm, would mark HSBC's first foray into Japan's $96 billion consumer finance industry, where firms can lend money at interest rates as high as 29 percent after borrowing it at as low as two per cent.

Kyodo news agency said late yesterday that fourth-biggest bank UFJ had decided to sell the Osaka-based affiliate to HSBC, which had been vying with Japan's Shinsei Bank for the unit, for about 100 billion yen ($914 million).

A UFJ source, however, said the lender had yet to decide on the winning bid after delaying its decision on Tuesday. It was likely to make a decision by the end of the week, with a formal announcement in early September, the source said.

HSBC, the world's third largest bank by assets, was well placed to win, another source said.

"They're a good bet," he said.

UFJ, Aplus and HSBC all declined to comment. Shinsei said UFJ had not yet come to a decision.

HSBC, also the world's third largest bank by market value, has been widely seen as the most likely contender to win Aplus, which is 40 per cent owned by UFJ and its group companies.-Reuters