China Postal was relaunched as a retail-focused bank in March with 1.6 trillion yuan (US$208 billion) in deposits. Its predecessor, the postal savings bureau, could not lend and most of those deposits wound up with the central bank.

Armed with a new mandate and a plan to restructure its 36,000-branch network, China Postal has been talking to investment bankers about a 2008 initial public offering (IPO) in the range of US$2-3 billion, sources have said.

Some bankers call that kind of talk premature, saying China Postal is more likely to hire advisers on a further restructuring as a precursor to an IPO, perhaps also bringing on strategic investors.

Bankers agreed that any deal would not happen until 2008, at the earliest.

But the draw of the public market is compelling: CITIC Bank Corp, China's No 7 lender, raised US$6 billion in a simultaneous Hong Kong-Shanghai offering last month.

Its domestic A shares are up 75 percent from the 5.80 yuan offer price, while its Hong Kong H shares are up 8 percent.

The disparity in performance prompted one foreign investor to call one of the underwriters and jokingly request that his allocation be made in A shares rather than H shares.

China Postal would also be keen on a simultaneous listing, one source said. Such listings are becoming more popular now that two have been achieved, and Beijing is keen to develop the mainland capital markets.

"When it does happen, it's going to be huge," said one banker who has spoken with China Postal management about a deal. "But this is going to be a long gestation period."

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