December 13, 2007 -- Wuhan Urban Commercial Bank plans to increase investment into the company and sell new shares by the end of this year. It was announced on December 6, during a celebration of the bank's tenth anniversary, that the total capital to be raised ranges from between 560 million yuan (US$75.87 million) and 2.25 billion yuan (US$300 million).

"With the support and help from the local government, the bank successfully eliminated bad assets last year. Since then, the operational performance has improved quite a bit," Dechao Lei, deputy director of financial office of Wuhan municipal government, told Emerging China.

As well the improvement with the bank's assets, the bank will set up branches to carry out inter-regional development, and also consider bringing a foreign strategic investor in to speed up the listing plan, said Lei.

"The government as the main shareholder of Wuhan Urban Commercial Bank would certainly share the benefits after the successful listing. But for the bank itself, there is still a long way to go to make that happen," said Lei.

The development of city commercial banks of Wuhan did lag behind far way with Beijing Commercial Bank and Nanjing Commercial banks based in developed provinces, said Lei.

"Under the regional economic development strategy, the bank will actively cooperate towards the construction of Wuhan's satellite cities as well, which includes eight cities," said Lei.

When contacted the Wuhan Urban Commercial bank, they refused to comment further on the listing strategy.

"The key factor to the growth of Wuhan Urban Commercial Bank is to strengthen the capacity itself and meet all the standards of the regulators as early as possible," said Lei.

As a result of banking industry reform, the asset quality of city commercial banks has improved. In 2006, the average capital efficiency ratio reached 8.48 percent, the core capital adequacy ratio accomplished 7.35 percent and the non-performing loan ratio fell to 4.8 percent.

"The model of the development of city commercial banks is already quite mature. With certain patterns in practice, the timing for city commercial banks to go public is perfect," Yu Xiaoyi, an analyst with Guang Fa Securities Co., Ltd, told Emerging China.

Due to the expansion of scale, the internal management and administration structure are the main problems for the banks; meantime they also need strong technology platforms as well, according to Yu.

"Due to the uneven economic development among the districts all over the country, the city commercial banks show some differences. There is a clear gap of city commercial banks between the giant cities and the second and third tier cities in China." said Yu.

However, there is a very open system for the listing strategy for the city commercial banks, which means the competitive ones would also capture the opportunity to grow better, according to Yu.

Currently, there are nine domestic city commercial banks across the country. Banks in Shanghai, Nanjing, Xi'an, Jinan, Beijing, Hangzhou, Nanchong, Tianjin, Ningbo have already introduced of foreign strategic investors.

With the outer help of foreign strategic investors, the city commercial banks have changed notably. For instance, the operating results of the banks have improved significantly with high quality of the assets. Meantime, well internal control system and risk prevention mechanism have been implemented appropriately within the banks, according to the state-owned People's daily.

"Besides introducing foreign investment into the banking system, the city commercial banks could see domestic institutional investors as a better option," Dorris Chen, an analyst with BNP Paribas Peregrine's Shanghai office, told Emerging China.

According to the statistics published by the China Banking Regulatory Commission, at the end of 2006, total assets in China's 114 city commercial banks, as well as loans, profits continued to grow rapidly.

Total assets reached 2.6 trillion yuan (US$0.35 trillion) with an increase of 24 percent. The balance of loans rose to 14,000 trillion yuan (US$1896 trillion) with an increase of 23 percent, and the profits came to 13.6 billion yuan (US$1.84 billion) with an increase of 47 percent.