Bank of Communications is in negotiations to acquire a stake in Changshu Rural Commercial Bank, it has reported.
According to an unnamed regulatory source cited by Reuters, the fifth-largest bank in China is seeking to acquire a ten per cent stake in Jiangsu-based Changshu.
The deal is aimed at allowing Bank of Communications to provide a better service to customers in areas of eastern China where regional banks have traditionally dominated.
If successful it will mark the first time that the national lender has made an equity investment in another bank.
The source commented: "The local government and regulators welcome big banks to invest in small, rural banks and encourage them to develop rural banking businesses together in Jiangsu province.
"Changshu Bank also targets small- and medium-sized enterprises for banking services, which are believed to have huge market potential."
News of the talks follows yesterday's announcement from Bank of Communications' domestic rival Bank of Nanjing that it is considering taking stakes in financial services companies.