Wachovia is pleased Citigroup will not stop it merging with Wells Fargo.
US financial giant Citigroup says it will not seek to bar Wells Fargo from taking over troubled bank Wachovia.
Citigroup said it was walking away from talks aimed at dividing up Wachovia's assets with rival Wells Fargo.
However, Citigroup said it would still seek damages from the two banks over its thwarted attempt to secure Wachovia's banking operations.
Hit hard by the credit crisis, Wachovia was keen secure what it saw as the better offer from Wells Fargo.
"Citi believes that it has strong legal claims against Wachovia, Wells Fargo and their officers, directors, advisors and others for breach of contract," the US banking group said in a statement.
"However, Citigroup has decided not to ask that the Wells Fargo-Wachovia merger be enjoined."
Wachovia said it was pleased that Citigroup was ending its efforts to stop it merging with Wells Fargo.
Wachovia, the fourth largest US bank, had been in danger of failure after its share price fell by more than 70%.
Citigroup stepped in with a bid of $2.2bn (£1.3bn) in stock for Wachovia's banking activities.
The offer also covered $42bn of Wachovia's $312bn losses, with the US Federal Deposit Insurance Corporation absorbing the rest.
However, Wells Fargo later made a rival bid of $15bn in an all-stock deal to buy all of Wachovia, stressing its proposal involved no government intervention or taxpayer risk.