SHANGHAI/HONG KONG, Feb 6 China's Chongqing City Commercial Bank, in which U.S. private e

SHANGHAI/HONG KONG, Feb 6 (Reuters) China's Chongqing City Commercial Bank, in which U.S. private equity giant Carlyle Group is buying a stake, plans an initial public offering (IPO) in Hong Kong later this year worth hundreds of millions of dollars, sources familiar with the situation said on Tuesday.

Late last year, the small western Chinese lender agreed to sell a combined 25 percent stake to Washington-based Carlyle and Hong Kong lender Dah Sing Banking Corp. for about US$130 million.

The foreign purchase is still subject to approval from the China Banking Regulatory Commission, which Chongqing Bank hopes to secure by the end of March, sources said.

One of the sources told Reuters on Tuesday that the lender was looking to raise roughly HK$2 billion (US$256.4 million) in its IPO.

The IPO size has not been finalised and depends on valuations, market conditions, and other factors.

The source also noted that several global investment banks, including Lehman Brothers Holdings Inc., Morgan Stanley and Goldman Sachs, have shown interest in helping city government-run Chongqing Bank underwrite the IPO.

Lehman Brothers represented Chongqing Bank in its negotiations last year with Carlyle and Dah Sing.

''Lehman may have a better chance to win as they already have close relations with Chongqing Bank and the city government,'' said one source close to the Chinese Bank.

Lehman Brothers declined to comment.

Chongqing Bank, with 66 branches in the western Chinese metropolis of Chongqing, declined to comment on Tuesday.

The lender has said previously it would pursue an overseas listing once the Carlyle and Dah Sing investments are completed.

Foreign investors have crowded into IPOs by Chinese lenders since they first began listing in Hong Kong in June 2005. Industrial&Commercial Bank of China, the country's biggest bank, raised $21.9 billion last year in a dual Hong Kong and Shanghai share sale that was the world's largest.

A number of second-tier Chinese banks are expected to list in Hong Kong this year.

Bank of Beijing, which is 19.9 percent-owned by Dutch financial services firm ING, has chosen Goldman Sachs, Merrill Lynch and Citic Securities to underwrite an IPO worth between US$750 million and $1 billion this year.

CITIC Bank, the country's seventh-largest by assets, plans to raise about US$2 billion in a dual Hong Kong and Shanghai listing this year, and recently sold a 5 percent stake to Spain's Banco Bilbao Vizcaya Argentaria.

Sources said Chongqing Bank expects that the customer base and reputation of its new partner Dah Sing Bank in Hong Kong will help it gain recognition among investors when it goes to the former British colony for its IPO late this year.

''That is definitely part of why Chongqing Bank wants a Hong Kong IPO instead of one in Shanghai or Shenzhen,'' said one of the sources, referring to Dah Sing's investment.

REUTERS DKS RN1909