Ping An Insurance has failed in an effort to raise its bid for control of Guangdong Development Bank against rival consortiums led by Citigroup and Societe Generale, industry sources said yesterday.

Ping An Insurance, the mainland's second-largest life insurer, tried to persuade the Guangdong provincial government to accept an additional payment of over 5 billion yuan (US$629 million), the sources said.

The payment would have come on top of Ping An's previously submitted bid of around 23 billion yuan, the lowest among the three rival bidders, the sources said.

But the Guangdong government, the de facto owner of Guangdong Bank, decided not to accept the payment, which might not have been in line with bidding rules and could have angered Citigroup Inc and Societe Generale, the sources said.

"Ping An tried to provide the money to help clear some of Guangdong Bank's heavy debts," said a banking source based in the southern province of Guangdong, where Ping An is headquartered.

"The local government did seriously consider Ping An's proposal, but finally officials decided to give it up," said the source.

A second source in Shanghai and a third source in Beijing confirmed the size and details of Ping An's proposed payment.

Contacted by telephone, Ping An officials declined to comment yesterday.

In July industry sources, citing information from Guangdong Bank's external auditing report by KPMG, said the bank had about 50 billion yuan in bad debt at the end of 2005. The Guangdong government would have to shoulder 12-18 billion yuan of the bank's bad assets, they said.

"Obviously, the local government does need a huge amount of money to help clear Guangdong Bank's bad assets," said the Shanghai source.

"But if the local government accepted the payment - which would have one condition, that Ping An would win - it might seriously anger the foreign bidders Citigroup and SocGen, or even financial regulators in the United States and the European Union."

Sun Jianyong, a director at the China Insurance Regulatory Commission in charge of insurance capital management, told Reuters yesterday that Beijing had not yet picked a winner in the bidding war.

The commission is not directly involved in choosing the winning bid, but would have early knowledge of any decision.

"No decision has been made yet and the bids are still outstanding," Sun said.

The Beijing source said the winner would not be chosen until Chinese Premier Wen Jiabao returned to Beijing from an overseas trip. Wen is due back in China this Saturday after a trip to Europe and the central Asian nation of Tajikistan.

"After Wen is back, it may take a few days or weeks for the cabinet-level officials to review and make the key decision," the Beijing source said.

Final bidding documents from consortiums led by Citigroup and SocGen as well as from Ping An have been handed to a six-member committee, which will pass the proposals to the decision-making State Council, China's cabinet, the sources said.

The battle for the debt-laden bank, whose key attraction is its country-wide network of over 500 branches, has lasted over a year and involved lobbying by current and former senior officials from the United States and France.

Editor: Yan