SHANGHAI, June 14 (Reuters) - Ping An Insurance (2318.HK: Quote, Profile, Research) has approached undercapitalised Everbright Bank about taking a stake in the mid-sized lender, industry and regulatory sources said, as China's number-two life insurer seeks to remodel itself as a financial services firm.

Ping An executives have been in talks with Beijing-based Everbright, although these are at a very early stage and it is not certain they will produce agreement, sources told Reuters on Wednesday.

"Ping An executives contacted Everbright Bank and they expressed interest in taking a stake in the bank," said an industry source close to Shenzhen-based Ping An.

The sources said Britain's Standard Chartered (STAN.L: Quote, Profile, Research) (2888.HK: Quote, Profile, Research) has also been in negotiations with Everbright for more than three years and was still discussing taking a stake of about 20 percent. However, the arrival of Ping An as a suitor could complicate Standard Chartered's efforts, the sources said.

Spokesmen at both Standard Chartered and Ping An declined to comment. A spokesman for Everbright Bank, controlled by China Everbright Ltd. (0165.HK: Quote, Profile, Research) with 21.4 percent, was not immediately available to comment.

Chinese regulators said last week that domestic insurance companies were now allowed to invest in the country's banking sector, and Ping An has already been approved to bid for a stake in small-sized Shenzhen Commercial Bank.

Ping An's interest in Everbright comes as the insurer stumbles in its effort to win a stake in struggling Guangdong Development Bank, for which Citigroup Inc. (C.N: Quote, Profile, Research) and French lender Societe Generale (SOGN.PA: Quote, Profile, Research) are also competing.

BIG AMBITION

Ping An, in which HSBC Holdings Plc. (HSBA.L: Quote, Profile, Research) (0005.HK: Quote, Profile, Research) holds a 19.9 stake, wants to cast itself as a financial services player, hoping for another revenue stream as insurance premium growth slows.

Last July, the insurer launched its own Ping An Bank in Shanghai, a small-sized lender currently focused on corporate business and some connected transactions with Ping An Insurance.

"Ping An Bank is too small but it is a good try for Ping An to enter China's banking sector," said a regulatory source familiar with Ping An's strategy, adding Ping An has not indicated it intends to seek a stake greater than 20 percent.

Everbright Bank was originally waiting for China's cabinet to approve a state capital injection of as much as 10 billion yuan ($1.25 billion) late last year to bolster its finances, the sources said.

The bank's capital adequacy ratio stood at about 5 percent at the end of 2005, far below a regulatory minimum of 8 percent.

But the plan was delayed due to the illness of a key politician and issues of timing and the bank's future shareholding structure after the injection, the sources said.

Everbright is the flagship banking arm of China Everbright Group, a financial conglomerate founded in Hong Kong in 1983 and controlled directly by the cabinet. The Asian Development Bank holds nearly 2 percent. ($1=8.0035 yuan)

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By George Chen

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