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UPDATE 1-Australian prosecutors drop cartel charges against former Citigroup head

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(Adds Deutsche Bank comment)

By Paulina Duran

SYDNEY, Aug 18 (Reuters) - Australian prosecutors dropped criminal charges against the former local head of Citigroup Inc and narrowed their case against the bank and other firms and executives over accusations of collusion on a 2015 share sale, a court heard on Wednesday.

Financial markets have closely watched the high-profile case https://www.reuters.com/article/us-anz-bank-lawsuit-idUSKCN1J10P1, which also targets Deutsche Bank, ANZ, and five other executives, as its outcome could influence https://www.reuters.com/article/us-anz-bank-lawsuit-analysis-idUSKBN1JH3BJ how capital raisings are carried out.

Prosecutors told the Federal Court they had dropped charges over two of three "arrangements" allegedly made between Citi and other banks to collude as a cartel during the Australia and New Zealand Banking Group stock issue.

The charges of cartel behaviour against Stephen Roberts, who headed Citigroup in Australia at the time had been dropped, and the case against the remaining eight "narrowed", Judge Michael Wigney said.

Trial on the 26 charges remaining from an earlier 42 was set to start in April and run between four and six months, he added.

The new indictment and charges may still be challenged, however, the court was told.

Prosecutors say the accused colluded to withhold unwanted shares and prevent a price decline. All of the accused have denied any wrongdoing.

In an emailed statement, Roberts said he was pleased to no longer face charges.

"The past several years have been extremely difficult for me and my family, and I am now looking forward to putting this behind me," he added.

Court documents show the new charges were submitted on Monday after prosecutors were ordered in July to refile, for a second time, an indictment considered to be "deficient" as it did not identify "sufficiently ... the essential factual ingredients of the alleged offences".

In a statement referring to the specific charges against Deutsche Bank, a spokeswoman said, "Deutsche Bank welcomes the decision...to drop four of the six charges related to ANZ's institutional share placement in August 2015."

The email added, "Deutsche Bank will continue to vigorously defend the remaining charges and reiterates its belief that the bank and its staff, including two former staff members Michael Ormaechea and Michael Richardson, acted appropriately."

ANZ and Citigroup declined to comment as the matter remains before the court. (Reporting by Paulina Duran in Sydney; Editing by Stephen Coates)