Pudong Development Bank has agreed to waive exclusivity agreements with partner Citigroup, 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 $70 million (€59 million) in 2003 for 4.62 per cent of 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 US giant agreed to increase its slice of Pudong Bank to the maximum allowable 19.9 per cent, Pudong Bank said.

"The two parties agreed to terminate all the exclusivity agreements signed previously," the bank said in a statement published in the official 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 $1.5 billion for up to half of Guangdong Bank, putting in the highest bid among rival suitors ABN AMRO Holding, Société Générale and others, sources close to the situation said.

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

Citigroup has been active in Asia, which yields some $9 billion in annual revenue. In China, the US firm is trying to catch rivals such as HSBC that have bigger stakes in the country's financial industry. Overseas investors want access to more than $1.7 trillion in personal savings. For its part, Beijing is struggling to clean up a banking sector saddled with $200 billion in sour debt.