Portugal's Novo Banco is set to fall into Chinese hands in a more than €4 billion deal that would be the biggest European financial services acquisition by a China-based group.

The auction of the "good bank" created from the wreckage of Banco Espírito Santo has turned into a shootout between Anbang Insurance and Fosun International, two acquisitive Chinese rivals, according to several people familiar with the situation.

A takeover of Portugal’s third-largest bank by assets by Anbang or Fosun at the price of more than €4 billion being mooted by bankers would highlight the intensifying pace of Chinese investments across Europe’s struggling financial services industry.

A deal would also illustrate nascent optimism about Portugal’s economy, which grew 0.9 per cent in 2014 after three years of consecutive declines. The Portuguese central bank forecasts growth of 1.7 per cent this year, rising to 2 per cent in 2017.

Final bids for Novo Banco are due to be submitted by the end of June. While five bidders remain in the process, the people said it now appeared to be a question of which Chinese group would pay more.

A senior Lisbon banker said Novo Banco was expected to go to one of the Chinese groups because they have “the financial capacity to make strong bids” and were “the most interested in developing the bank”.

The biggest financial services investment by a Chinese group in Europe to date was the $3 billion spent by China Development Bank to buy a 2.6 per cent stake in Barclays in 2007, according to Dealogic.

There is widespread relief among Portuguese bankers that the sale of Novo Banco looks likely to come close to covering the €4.9 billion cost of its bailout last year, something many thought impossible only a few months ago.

Copyright The Financial Times Limited 2015