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SHANGHAI, June 9 (Reuters) Pudong Development Bank Co., Citigroup's partner in China, said on Friday it had discovered that collateral for 32 mortgage loans totalling more than $15 million were faked.

The bank was announcing the result of an internal investigation.

Earlier this week, the Shanghai-listed lender said it was probing a possible case of fraud involving $50 million in loans.

''Pudong Bank has discovered that collateral for 32 mortgage loans worth 126 million yuan ($15.7 million) from the Lujiazui district branch in Shanghai were faked,'' the bank said in a filing to the Shanghai Stock Exchange (www.sse.com.cn).

''The company has taken immediate action to obtain proper collateral for the loans and to keep risks under control,'' it said, adding that so far it had not suffered any loss related to the loans.

The official Xinhua News Agency reported this week that loans worth 400 million yuan from Pudong Bank were allegedly funneled through a single person who used the proceeds to invest in 91 properties in Shanghai.

The bank's statement on Friday didn't give details of the suspected fraud, but said it had first discovered irregularities last October.

Mortgages have been one of the most risky sorts of bank loans in China, and the focus of many illicit deals, as investors buy for speculation in a booming market.

Mid- and small-sized banks regard mortgages as important areas for lending as they struggle to compete with the ''Big Four'' banks, which dominate corporate loans.

Pudong Bank shares slipped 2.23 percent to 8.75 yuan on Friday. A major reason was the approach of share issues by major Chinese banks, but some traders cited concern about Pudong Bank's loans.

($1=8.0089 Yuan) REUTERS PV PM1719