* Sources say AgBank eyes first buy outside home market
* AgBank has 6 overseas branches vs 23,000 domestic
* Hong Kong is Asia's sixth-biggest bank loan market
By Denny Thomas and Saeed Azhar
Oct 23 (Reuters) - Agricultural Bank of China Ltd is considering a bid for Hong Kong-listed Wing Hang Bank Ltd, people familiar with the matter told Reuters, as China's fourth-biggest lender eyes its first acquisition outside its home market.
Wing Hang, with a stock market value of $4.5 billion, has also attracted interest from other suitors including Australia and New Zealand Banking Group Ltd, the nation's No. 4 bank, and Singapore's third-biggest lender United Overseas Bank Ltd, Reuters previously reported.
China's economic clout and the growth of the offshore yuan fixed-income market has made Hong Kong's mid-sized banks increasingly attractive to lenders seeking a gateway to the mainland and growth outside their home markets.
State-run AgBank, which raised $22.1 billion in a dual Shanghai and Hong Kong stock market listing in 2010, is keen to expand in Hong Kong in order to catch up with its bigger rivals, the people added.
While it has a market value $135 billion, AgBank has the least global exposure among China's top four lenders and a deal would help it catch up with its bigger rivals. AgBank has just six overseas branches, but has more than 23,000 domestic branches catering for 350 million customers.
Family-run Wing Hang Bank's controlling shareholders said last month they had received preliminary offers from independent third parties which they did not name. Hong Kong's Fung family and BNY International Financing Corp jointly own about 45 percent of the bank.
AgBank's interest in Wing Hang comes as Chong Hing Bank Ltd , another Hong Kong-based family-run bank, nears a deal to be bought by Yue Xiu Group, a trading arm of China's Guangzhou city government, Reuters reported earlier on Wednesday.
AgBank played down the chances of a bid. "To date, Agricultural Bank of China does not have overseas acquisition plans," a spokeswoman told Reuters. It still considers Hong Kong an overseas market despite British control having ended in 1997.
Yet people with direct knowledge of the matter said AgBank had held discussions about a possible offer. They declined to be identified as the talks were confidential.
Hong Kong's bank loan market is worth $786 billion, making it Asia's sixth-biggest, and the island city has been a major source of financing for mainland Chinese corporates, Deutsche Bank said in a report on Wednesday.
"With strong deposit liquidity inflow and a healthy U.S. dollar funding base, there have been more lending opportunities in Hong Kong as it acted as a financing conduit for mainland entities," it added.
Hong Kong's banking market is dominated by HSBC Holdings Plc , Standard Chartered Plc and Chinese lenders, making it challenging for small-and mid-sized lenders to compete effectively against more established rivals. That has resulted in their return on equity slumping to 9 percent from about 20 percent in 2001, Bank of America Merrill Lynch estimates.
The new Basel III rules on bank finances could also make it challenging for family-run banks to maintain requisite core capital ratios, as main shareholders would be required to replenish capital to maintain their stakes if there was any fundraising.
Wing Hang, which sources said was being advised by Nomura Holdings, declined to comment beyond its Oct. 16 statement which said its substantial shareholders were in dialogue with certain independent third parties, but no deal had yet been reached.