Shanghai Pudong Development Bank's shareholders voted Wednesday to waive an exclusivity agreement with Citigroup Inc., allowing Citi to form partnerships with other Chinese banks.
Citigroup, a strategic investor in the bank, now will be able to increase its 4.62% stake in it to 19.9%.
Bloomberg News reported that under the agreement approved by shareholders, Citigroup will set up a card processing platform for its credit card venture with Pudong Bank and will be prevented from striking a similar arrangement with Guangdong Development Bank before 2008.
Citigroup, which has assets of $1.5 trillion, is leading one of three groups that have been vying for a stake in Guangdong Development Bank, whose nearly 500 outlets are mostly in economically vibrant southern China. Citigroup signed an exclusivity agreement with Pudong Development Bank when it first invested in it in 2003.
Citi was able to negotiate deals with other Chinese banks without violating the exclusivity agreement, but needed the waiver to invest in other Chinese banks, a spokesman for Pudong Development Bank said.
Jin Yun, Pudong Development's chairman, said 99.47% of the voting shareholders approved the waiver.
According to documents distributed at the shareholder meeting, the waiver agreement also seeks to protect Pudong Development Bank from unfair competition that may arise from Citigroup's involvement with Guangdong Development or other banks.
For example, Citigroup cannot disclose any confidential information about Pudong Development Bank, including information about its credit card customers, to other banks, the documents said.
A consortium led by Citigroup, another led by Societe Generale SA of Paris, and China's Ping An Insurance (Group) Co. have been competing for an 85% stake in the 18-year-old Guangdong Development Bank.
People familiar with the negotiations said that Citigroup's consortium submitted the highest bid, $2.93 billion, and that Citi is aiming to get itself a 40% to 45% stake in Guangdong Development. But foreign ownership of Chinese banks is capped at under 25%.
