Deutsche Bank
A statue is pictured in front of the former headquarters of Germany's largest business bank, Deutsche Bank in Frankfurt .

Goldman Sachs, Deutsche Bank and Morgan Stanley are likely to acquire holdings in China's Huarong Asset Management, as the fund looks for a stake sale ahead of its initial public offering (IPO).

Huarong, one of China's biggest banks with bad debts, is planning to sell $1.5bn (£964m, €1.12bn) in shares ahead of its Hong Kong listing, the Financial Times reports, citing anonymous sources.

The banks are reportedly in talks with Huarong over the acquisition. The FT's sources did not say how much each bank might acquire, but noted that Goldman Sachs is leading the race to acquire the lion's share of the stake.

Huarong is the biggest of the four funds the Chinese government established to dispose of an estimated 1.4tn yuan ($230bn) worth of bad loans from China's leading four state banks. It was formed by the government in 1999.

Huarong has been attracting investment from foreign lenders in spite of being loaded with bad loans.

Earlier, Goldman, Deutsche Bank and Morgan Stanley formed joint ventures with Huarong to purchase its bad loans. Deutsche Bank continues to have an active partnership with Huarong.

Huarong, which manages over 300bn yuan of assets, posted a 66% surge in its net profit to 6.96bn yuan for the year 2012.

Cinda Asset Management Plan

Cinda Asset Management, which was created by the Chinese government along with Huarong to help the top four state lenders with their bad loans, is also following the same IPO path. Having raised more than $1.6bn last year from investors including China's National Social Security Fund, Standard Chartered and UBS, Cinda is currently working on its IPO.

While Huarong bought bad loans from Industrial and Commercial Bank of China, Cinda purchased debts from China Construction Bank.