SINGAPORE (Reuters) - DBS Group Holdings, Southeast Asia's biggest bank, is in talks to buy a majority stake in Taiwan's Far Eastern International Bank (FEIB), which has a market value of about $1.1 billion, sources familiar with the talks said on Monday.

The talks between DBS, which is on an acquisition trail to expand in Asia, and FEIB have gone beyond the exploratory stage, one of the sources told Reuters.

If the deal goes through it would be another move in consolidation in Taiwan's banking industry, with foreign lenders and private equity funds looking to buy assets as Taiwan emerges from a consumer credit crunch.

Earlier this month, Carlyle Group agreed to pay US$657 million for a 35 percent stake in small Taiwanese lender Ta Chong Bank.

Goldman Sachs is advising FEIB on the deal, a second source said.

DBS declined to comment.

TARGETING ASIAN GROWTH

DBS said last year it hoped to earn half if its revenue from overseas in three to five years from about one-third and that China and Hong Kong would play a major role in boosting its international business.

But finding acquisition targets in Asia has been hard for the lender, which is 28 percent owned by Singapore's state investor Temasek Holdings.

Last month, it said it had ended talks with Lone Star on buying the U.S. private equity firm's controlling stake in South Korean lender Korea Exchange Bank, the second time it failed in its attempt to buy the Korean bank.

A report in Taiwan's Economic Daily News on Monday said FEIB hopes to sell its stake at T$23-T$25 (US$0.70 - US$0.76) per share, about 2.2-2.4 times price to book.

FEIB shares rose 6.82 percent to T$18.80 after the newspaper report while DBS closed unchanged at S$23.90.

FEIB planned to set up a joint venture, which would own 100 percent of the bank. After that, Far Eastern Group would hold a 25 percent stake of the JV, the paper said.

FEIB said in a statement earlier Monday that it had not reached an agreement with any potential investor, but that it had been the bank's mid- to long-term goal to form a strategic alliance with a leading global bank. Bank officials were not available for comment.

FEIB, which has run into difficulties competing with market leaders like Chinatrust Financial, had been in talks to sell a stake to foreign lenders including Citigroup, HSBC and ABN AMRO, over the years.

But no agreement had been reached partly because Far Eastern Group chairman Douglas Hsu asked for a higher price.

FEIB, a smaller lender, had posted a pretax profit of T$23 million in the six months to June, after having a net loss of T$1.67 billion for the full year of 2006.

(additional reporting by Faith Hung in Taipei)

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