China Life Insurance Co Ltd gained 3.97 percent to close at 20.67 yuan ($3.16) per share on Tuesday, following an agreement to buy a 23.686 percent stake in China Guangfa Bank Co Ltd.

The largest commercial insurance group in the Chinese mainland announced on Monday that it had reached a definitive agreement to acquire Citigroup Inc's 20 percent stake in CGB and IBM Credit LLC's 3.686 percent stake in the bank at 6.39 yuan per share. The acquisition will cost China Life a total of 23.31 billion yuan.

Once the transaction is settled, the insurance group will become the single largest shareholder of the Guangzhou-based commercial lender, with its stake in the bank increasing to 43.686 percent of the total.

The transaction is expected to close in the second half of 2016, subject to regulatory approvals and other customary closing conditions.

China Life said in a statement: "China Guangfa Bank is strongly competitive in differentiated business areas such as retail banking and lending to small and micro businesses. With well-established infrastructure, it has a foundation for the acceleration of development.

"The bank is in harmony with our corporation in terms of size, the client and businesses. After we become its single largest shareholder, both parties will have the opportunity to achieve comprehensive and collaborative development, optimize operational efficiency, improve customer loyalty, increase our comprehensive competitiveness, and enhance the ability to fight against risks."

China Life listed acquisition of a bank as one of its strategic targets last year. Apart from CGB, the group also approached Huaxia Bank Co Ltd, but it turned out that Deutsche Bank AG reached an agreement to sell its 19.99 percent stake in Huaxia Bank to People's Insurance Co (Group) of China Ltd in December.

Francisco Aristeguieta, CEO of Citi Asia Pacific, said: "While we are proud of our decade-long partnership with China Guangfa Bank, this transaction is consistent with the simplification of Citi and allows us to focus our resources in China on growing our core franchise further."

Citi first acquired its stake in CGB through a consortium investment in 2006 that included China Life.

After the introduction of strategic investors, CGB started seeking an initial public offering in 2011, in order to raise around 35 billion yuan. But the plan was shelved since its shareholding reform did not proceed smoothly, said a banking analyst who declined to be named due to regulatory requirements.

He said the equity acquisition by China Life may accelerate the bank's IPO process.

China Life noted that the investment faces risks including the worsening of asset quality and the weakening of profitability in China's banking sector.