HONG KONG, April 15 (Reuters) – Industrial Bank of Korea (024110.KS) is selling benchmark five-year dollar bonds, or typically meaning of at least $500 million, two sources familiar with the sale said on Wednesday.

IBK aimed to price the deal, which could raise as much as $1 billion, at around mid-500 basis points over midswaps, said one of the sources. No official guidance has been released, and the deal is expected to price by Thursday morning in New York hours.

The debt will not carry a government guarantee since IBK, which specialises in lending to small and medium-sized enterprises, is already majority owned by South Korea, the two sources said.

Both sources declined to be identified because they were not authorised to talk publicly about the sale.

Barclays Capital, Citigroup (C.N), Merrill Lynch, and Morgan Stanley will be the lead managers for the sale, the source said.

IBK follows on the footsteps of the South Korean government, which last week raised $3 billion in a two-tranche dollar bond deal, while others including Hana Bank and steelmaker POSCO (005490.KS) have also recently sold debt.

South Korea’s two other government-owned lenders, Korea Development Bank and Export-Import Bank of Korea, have already raised $2 billion each in overseas markets early this year.

South Korean issuers are expected to continue tapping global markets, driven by the need for dollars in a country that has about $194 billion in foreign debt falling due this year, compared with just over $200 billion in foreign reserves.

Banks in South Korea averted a cash crunch after the government made billions of dollars available to the sector and took other steps such as guaranteeing some types of overseas borrowing, although lenders are still encouraged to find their own foreign funding sources.

However, concerns about profitability remain. IBK’s profit last year declined 36 percent to 764.4 billion won ($579.3 million) from 2007.

IBK is rated A by Standard and Poor’s and A2 by Moody’s, or the sixth-highest investment-grade rating. The lender is rated one notch above that at A-plus by Fitch, but with a negative outlook. (Reporting by Rafael Nam; Editing by Chris Lewis)