JPMorgan Chase will no longer manage China Everbright Bank's $2bn (£1.2bn, €1.5bn) Hong Kong IPO.
JPMorgan's exit, just weeks before the Chinese lender's expected debut on the Hong Kong bourse, comes as US authorities probe the Wall Street firm's hiring practices in China.
JPMorgan will not be able to underwrite the bank's share sale, which could be the largest public offering by a Chinese lender in Hong Kong since 2009, as ongoing investigations have delayed an internal approval process, reported Bloomberg.
The other underwriters - China International Capital, Morgan Stanley and UBS - remain on the deal.
The New York-based firm is being investigated by the US Justice Department and Securities and Exchange Commission.
The investigations aim to ascertain whether JPMorgan violated anti-bribery laws when it hired relatives of influential politicians and clients in China.
Regulatory enquiries into JPMorgan are centered on the US Foreign Corrupt Practices Act, under which companies are not allowed to seek improper advantage with firms abroad by gifts of "anything of value".
At one point, JPMorgan hired the daughter of Wen Jiabao, the former Chinese prime minister, through her little-known consultancy business and under an alias, a relationship being probed by US regulators.
Investigations began in Hong Kong over the hiring of the son of the chief of state-controlled financial conglomerate China Everbright Group; and the daughter of a Chinese railway official just before the American firm won the contract to underwrite the $5bn IPO of state-run China Railway Group, which builds rail infrastructure in the country.
The US banking giant has been hit by a number of scandals since the financial crisis.
The American firm has agreed to pay $13bn (£8bn, €9.6bn) to the US government to settle claims that it misrepresented the quality of its mortgage assets in the run-up to the financial crisis. The settlement amount is the largest ever between the government and a corporation.
In October, JPMorgan agreed to pay one of the largest financial penalties in history after sealing a tentative $13bn deal with the US Department of Justice to put an end to a raft of government mortgage product-related probes.
Earlier, it was fined almost $1bn by global financial regulators over the London Whale trading scandal, which saw one of its chief dealers in London, Bruno Iksil, lose the company $6bn through a series of bad - but legal - market bets.