China Development Bank, Commerzbank eye Dresdner

A spokesman for state-owned CDB could not be reached for comment on the report, which said Commerzbank remained the favorite to buy Dresdner, Germany's third-largest lender.

Banking sources in Frankfurt told Reuters last month that Allianz was talking to Commerzbank and to Spanish bank Santander about Dresdner. German financial daily Boersen-Zeitung has reported that Commerzbank is the most likely buyer.

CDB, which lends money explicitly to advance the government's policy aims, would need permission from the State Council, China's cabinet, for any overseas acquisition.

The cabinet rejected a request last month by CDB to increase its 3.1 percent stake in Barclays when the British bank raised fresh capital.

Banking sources said CDB wanted to invest another 500 million pounds ($980.8 million) in Barclays but encountered political opposition because of steep paper losses on its initial shareholding, which it bought last year. CDB finished up spending 136 million pounds to avoid being diluted.

Chinese financial institutions, well capitalized and showing interest in expanding overseas, are regularly mentioned as potential investors in Western banks.

A German newspaper in March named China Investment Corp, the country's year-old sovereign wealth fund, as being in intensive talks to buy Dresdner, while a British newspaper last month said CIC was considering investing in HSBC.