Mizuho Financial Group Inc., the nation's biggest banking group by assets, is considering taking over Ashikaga Bank, which is undergoing rehabilitation under state control, sources said Friday.

The move by Mizuho -- the first bank to raise a hand to buy Ashikaga -- could prompt a takeover battle involving both domestic and foreign banks, they said.

The Tochigi Prefecture-based regional lander was placed under government control in December 2003 after it was found to be insolvent with a negative net worth of 102.3 billion yen as of Sept. 30 that year.

Instead of directly buying Ashikaga shares from the government, Mizuho plans to set up an investment fund with other sponsors, the sources said. Then Ashikaga shares would be acquired by the fund, where Mizuho would play a central role, they said.

The plan, if realized, would enable Mizuho to send a new president to replace the current state-appointed president, Norito Ikeda, they said.

Ashikaga Bank was declared insolvent after a financial inspection by the Financial Services Agency found that the bank had a negative net worth of 102.3 billion yen as of Sept. 30, 2003, driving its capital adequacy ratio down to minus 3.7 percent.

Banks operating domestically must have a minimum capital adequacy ratio of 4 percent. Ashikaga Bank swung back into the black in fiscal 2004 for the first time in four years, though its negative net worth came to 562.2 billion yen at the end of March.