Shanghai Pudong Development Bank Co. (600000.SH) said Friday foreign strategic investor Citigroup Inc. (C) has no plan at present to sell its 3.8% stake in the mid-sized Chinese lender after the lockup period for the shares expired late December.

The comment helped support Shanghai Pudong Bank's share price early Friday, following sharp declines in Chinese banking stocks this week on concerns about cash-starved foreign lenders selling down their stakes.

At the Shanghai stock market's midday close, Shanghai Pudong Bank's shares were up 2.6% at CNY14.01 ($2.05), compared with a 0.3% gain in the benchmark Shanghai Composite Index.

"As far as I know, Shanghai Pudong Bank hasn't received a notice from Citi that it plans to sell its stake in our bank," said Shen Si, board secretary of the Chinese bank. "So far the two parties are happy with the alliance."

Stephen Thomas, a spokesman at Citibank China, declined to comment on the issue.

"Citi's relationship with SPD Bank remains strong and we look forward to continuing to partner with SPD Bank to our mutual benefit," he said.

Citigroup paid about CNY600 million for a 5% holding in Shanghai Pudong Bank in 2002, with the option of increasing its stake subject to regulatory approval. Citigroup said at the time it would help the Chinese bank improve its risk management, retail banking, and credit-card business.

However, Citigroup's stake was diluted to 3.8% following additional share offerings by Shanghai Pudong Bank.

Analysts have also queried the future of Citigroup's partnership with Shanghai Pudong Bank after the U.S. lender led a consortium two years ago to acquire a combined 85% stake in south China-based Guangdong Development Bank.

Citibank China's Thomas said he wouldn't comment on future plans.

Citigroup, like many banks in the West, has been severely hit by the financial crisis. Last year, the U.S. government injected US$45 billion in capital into the bank, and agreed to shoulder hundreds of billions of dollars of potential losses on its risky assets.

Investors believe Citigroup may also seek to raise cash by following the example of some other Western banks that have sold down stakes they bought in Chinese banks' initial public offerings in 2005 and 2006, following the end of three-year lockup periods.

Last week, UBS AG sold its entire 1.33% stake in Bank of China Ltd. for US$808 million, becoming the first foreign investor to exit a major Chinese lender.

Since then, Bank of America Corp. raised US$2.8 billion by cutting its stake in China Construction Bank Corp. to 16.6% from 19.1%, and the Li Ka Shing Foundation sold 2 billion shares in Bank of China in a placement that raised US$511 million for the charitable foundation owned by Hong Kong's richest man.

Royal Bank of Scotland Group PLC also said Thursday it is considering selling its 4.3% stake in Bank of China.

-Rose Yu contributed to this story, Dow Jones Newswires; 8621 6120-1200; rose.yu@dowjones.com

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