SHANGHAI/BEIJING, March 27 (Reuters) - Chinese bank

shares outperformed the broader stock market in early Friday

trade after Reuters reported that the banking regulator is

considering easing shareholder restrictions to broaden options

for lenders seeking to raise capital.

The National Financial Regulatory Administration may allow

some bank shareholders to become major investors - defined as

owning stakes of 5% or more - in up to two additional banks, on

top of a current limit of two, people with knowledge of the

matter told Reuters on Thursday.

A change in the rule could prompt banks to issue more shares

either privately or in the open market.

The regulator did not respond on Thursday to a faxed request

for comment on potential rule changes.

The benchmark CSI300 share price index opened 1%

lower on Friday before recovering somewhat, whereas the CSI

Banks Index opened only 0.3% lower and was roughly

flat in early trade.

The potential rule change would have "a positive impact on

China banks," Citi said in a client note.

It would accelerate loan growth, drive management incentives

to boost earnings and share prices, and prod incremental buying

from institutional investors including insurers, Citi said.

Easing restrictions "could broaden the investor base for

China banks, and would thus be positive for the sector in

general," JPMorgan said in a report.

Ping An Insurance (Group) Co of China

has banks in its portfolio whose shares were performing better

than peers on Friday.

The conglomerate stepped up investment in banks last year

but its controlling stake in Ping An Bank means it

cannot become a major shareholder in other lenders.

Relaxing shareholder rules would "potentially allow Ping An

Group to hold more than 5% in addition to its share in its

subsidiary, Ping An Bank," JPMorgan said.

JPMorgan said potential beneficiaries could include Ping An

portfolio lenders such as Industrial and Commercial Bank of

China (ICBC) , China Construction Bank

(CCB) , Postal Savings Bank of China

and China Merchants Bank .

These four banks report earnings later on Friday.