Shanghai Pengxin Group Co is in talks to buy control of Brazilian mid-sized lender Banco Indusval & Partners SA (BI&P), as the Chinese conglomerate wants to expand beyond commodities in Latin America's largest economy, three sources with direct knowledge of the matter said.

Representatives of Pengxin and partners of BI&P have discussed tie-up scenarios, two of the sources said. The sources requested anonymity to discuss the issue.

The talks are preliminary and may not result in a deal, said the three sources.

Pengxin's search for financial, logistics and commodities companies in Brazil is gaining steam following the $200 million purchase in April of a controlling stake in grain processor Fiagril Participacoes SA. The Chinese group could spend up to $3 billion in Brazilian targets, sources told Reuters recently.

Sao Paulo-based BI&P and Pengxin did not respond to requests for comment.

Pengxin has not hired an investment bank as adviser for the BI&P deal, one of the sources said, noting that an internal team handling mergers and acquisitions was looking for targets.

Under terms of the Fiagril deal, Pengxin agreed to supply credit to the grain trader and processor. Acquiring a lender in Brazil with knowledge of agricultural markets and clients could facilitate Pengxin's goals for other agribusiness deals, two of the sources said.

Chinese interest in smaller Brazilian banks has waned as rising defaults and a 2-year recession eroded their capital buffer. While some of China's top lenders have moved into Brazil in recent years, their return on investment has fallen short of expectations amid rising legal and accounting problems.

Pengxin is treading carefully in its efforts to buy a bank, following reports that Chinese purchases of financial companies in Brazil have faced legal and regulatory roadblocks, two sources said.

China Construction Bank Corp is injecting $217 million into CCB Brasil, formerly Banco Industrial & Comercial SA, which it bought two years ago, but has struggled with soaring loan-loss provisions.