UPDATE 1-Russia Sberbank to seek Turkish bank stake-source

* GE selling 20.85 pct stake in Garanti Bank

* Stake worth $3.7 bln at current market cap

* Source says five or six bidders expected (Adds details, quote, background)

By Conor Sweeney

MOSCOW, March 8 (Reuters) - Sberbank SBER03.MM , Russia's biggest lender, is lining up a bid for the 20.85 percent stake in Turkey's Garanti Bank (GARAN.IS) being sold by General Electric Co (GE.N), a source close to the deal said on Monday.

The stake in Garanti, the most actively traded stock on the Istanbul bourse, is worth almost $3.7 billion at current market prices. U.S. conglomerate General Electric is selling the stake as part of its strategy to scale back its finance arm.

"GE is delighted that Sberbank is going to be one of five or six bidders for its stake in Garanti," the source told Reuters, on condition of anonymity. He said bids were due by March 12.

"GE is delighted that, in this environment, there is so much interest in the stake."

Sberbank was not available for comment late on Monday, a public holiday in Russia. Officials at Garanti Bank were also unavailable when contacted by Reuters.

State-controlled Sberbank aims to expand its presence overseas and in 2008 unveiled a five-year strategy to generate between 5 percent and 7 percent of its earnings abroad.

Garanti has boomed in recent years to become one of the Turkish banking sector's greatest successes. Its shares rose 143 percent in 2009, outperforming both the index of banking stocks, which rose 116 percent, and the Istanbul index as a whole, as it reported strong profit growth.

Dogus Group owns a 30.5 percent stake in Garanti and analysts have speculated it could increase its holding.

Turkish media have also reported Spain's Banco Santander (SAN.MC), Italy's Intesa Sanpaolo (ISP.MI) and a Gulf-based investment fund as among the potential bidders for the stake.

A market source in Turkey told Reuters in February that HSBC Holdings Plc (HSBA.L) and Standard Chartered Plc (STAN.L) were also potential bidders. [ID:nLDE61P09H]

General Electric, the world's largest maker of jet engines and electricity-producing turbines, has made trimming back GE Capital a major strategic focus. The finance arm's profit fell 73 percent last year. [ID:nN26210651]

General Electric Chief Executive Jeffrey Immelt has repeatedly assured investors that GE Capital will be a smaller, but "meaningful" contributor to the conglomerate's earnings. (Additional reporting by Dmitry Sergeyev in Moscow and Thomas Grove in Istanbul, writing by Robin Paxton, editing by Gerald E. McCormick)