Huaxia Bank, part owned by Deutsche Bank AG, plans to set up a fund-management unit to diversify revenue by tapping local investors' growing appetite for shares.

The bank is recruiting staff for the venture, Beijing-based Huaxia said in a statement on its website, without giving details.

China's regulator allowed domestic lenders expand into fund management with foreign partners from 2005, giving banks another source of income and helping develop the nation's capital markets. Publicly-traded, Chinese banks last year derived 89 percent of their earnings from interest income -- the difference between what they pay depositors and what they charge on loans -- according to UBS AG. That compares with an average 65 percent at banks overseas.

Bank of Communications, China Construction Bank, and Industrial & Commercial Bank of China have all set up fund units.

The nation's decade-old fund management industry is expanding as a stock market rally prompts households to transfer savings to shares from banks, whose deposit rates trail inflation.

The CSI 300 Index has more than doubled this year, leading gains among 89 global benchmarks. Domestic mutual funds more than tripled assets to 1.8 trillion yuan ($245 billion) in the first half, central bank figure show.

Huaxia's shares have gained 156 percent this year.