ADB takes 5 pct of China's Hangzhou city bank

BEIJING, Aug 24 (Reuters) The Asian Development Bank (ADB) said on Thursday it is paying up to million for a stake of about 5 percent in Hangzhou City Commercial Bank.

The stake is the latest of a series of investments by foreign financial institutions in China's 100-plus city commercial banks.

Hangzhou City Commercial Bank is the fourth-largest commercial bank in Hangzhou, a thriving private-sector business and manufacturing hub near Shanghai.

The bank has about 26,000 corporate customers, 1.5 million individual customers and a loan market share of around 5 percent, according to the ADB.

The Manila-based multilateral lender said its investment would help Hangzhou City Commercial Bank to develop its corporate governance and internal control procedures.

Beijing has been encouraging overseas strategic investors to take strategic stakes in city commercial banks. The banks are a key source of loans to small and medium-sized businesses but suffer from weak risk management and insufficient capital.

Top French bank BNP Paribas spent million for a 19.2 percent stake in Nanjing City Commercial Bank late last year.

Bank of Nova Scotia is in advanced talks to buy up to 19.9 percent of Dalian City Commercial Bank, while in July Australia and New Zealand Banking Group Ltd. completed the purchase of a 20 percent stake in Tianjin City Commercial Bank for 1.5 million.

In China, the ADB has also invested in a state-owned commercial bank (Bank of China), a joint stock commercial bank (China Everbright Bank), a joint venture bank (Xiamen International Bank) and a credit guarantee company (Credit Orienwise).

REUTERS PV BD1245