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Shanghai Pudong Development Bank (SHA: 600000) has agreed to waive exclusivity agreements with partner Citigroup Inc., clearing the way for the world¡¯s top financial services firm to pursue a second and larger investment in a Chinese lender.

Citigroup paid about US$70 million in 2003 for 4.62 percent of Shanghai Pudong Development Bank Co. Ltd., agreeing not to invest in another domestic lender, among other conditions.

Pudong bank, China¡¯s third-largest domestically listed lender, decided last Thursday to drop that condition, which some industry executives had feared would derail Citigroup¡¯s effort to buy a sizeable portion of Guangdong Development Bank.

In return, Citigroup and Pudong bank carved out a new pact that sealed cooperation covering a range of businesses, and the U.S. giant agreed to increase its slice of Pudong bank to the maximum allowable 19.9 percent, Pudong bank said without elaborating.

¡°The two parties agreed to terminate all the exclusivity agreements signed previously,¡± Pudong bank said in a statement published in the Shanghai Securities News on Saturday. ¡°Pudong Bank¡¯s board also agreed to terminate its previous agreement with Citigroup restricting purchases of stakes in China.¡±

Citigroup offered to pay about US$1.5 billion for up to half of Guangdong bank, putting in the highest bid among rival suitors ABN AMRO Holding, Societe Generale and others, sources close to the situation have told reporters.

Such a large share is unprecedented for a single foreign investor. The government will make a final decision on a winner by early next year, industry sources say.

Citigroup has been active in Asia, which yields some US$9 billion in annual revenue. In China, the U.S. firm is trying to catch rivals such as HSBC Holdings Plc. that have bigger stakes in the country¡¯s financial industry.