BEIJING (Reuters) - Postal Savings Bank of China (PSBC) said it has raised about $7 billion (£4.6 billion) by selling a 17 percent stake to investors including UBS Group AG (>> UBS Group AG) and JPMorgan (>> JPMorgan Chase & Co.), ahead of a multi-billion dollar initial public offering next year.

The sale marks the single biggest private fund-raising in China's financial industry with the 10 investors attracted to the bank's customer base of almost 500 million - larger than the population of the United States.

Investing in Chinese banks ahead of their public floats has also reaped billions of dollars in profits for Western banks in the past.

The presence of big name investors, including Alibaba's  (>> Alibaba Group Holding Ltd) Ant Financial unit, Tencent Holdings (>> Tencent Holdings Ltd) and Canada Pension Plan Investment Board (CPPIB), bodes well for the IPO, which bankers have said could raise between $12 billion and $15 billion, likely one of the world's biggest next year.

Mark Machin, head of International for CPPIB which invested around $500 million, said key elements of PSBC's appeal included the biggest distribution network of any lender in China, its exposure to less developed rural areas and focus on consumer lending as well as low levels of non-performing loans.

"It's a loan book skewed to the retail sector, rather than the high risk corporate sector and that's its attraction for us," he added.

The deal values China's sixth-biggest lender by assets at about $41.5 billion. It was struck at slightly above 1 times price-to-book ratio, and the lender will use much of the funds to strengthen its capital, bankers said, declining to be identified as they were not authorised to speak on the matter.

Other investors included China Life Insurance Co (>> China Life Insurance Company Limited)<2628.HK> , which said it subscribed to about $2 billion worth of shares, as well as Singapore's DBS Group (>> DBS Group Holdings Ltd), China Telecom Corp  (>> China Telecom Corporation Limited) the World Bank's International Finance Corp.

Singapore state investor Temasek [TEM.UL] also participated, saying it was confident in the long-term prospects of the Chinese economy.

UBS and JPMorgan said in separate statements they would undertake strategic cooperation with PSBC, leveraging their global commercial and investment banking networks, as well as providing services to China's increasingly affluent population.

PSBC [IPO-PSBC.HK], which has more than 40,000 branches nationwide, was set up as a deposit-taking bank in 2007, using the network of the former postal savings bureau.

It had 6.8 trillion yuan (£703.2 million) in assets at the end of September and a non-performing loan ratio of 0.82 percent, half the average ratio of 1.59 percent for China's commercial banking sector.

It reported after-tax profit of 32.57 billion yuan in 2014, according to a stock exchange filing by China Life.

PSBC President Lu Jiajin declined at a briefing on Wednesday to provide a timeline for the lender's IPO or its likely size.

(Reporting by Clark Li and Matthew Miller; Additional reporting by Elzio Barreto and Fiona Lau of IFR in Hong Kong and Meng Meng in Beijing; Editing by Edwina Gibbs)

By Clark Li and Matthew Miller