UPDATE 2-Sberbank eyes 750 mln euro bid for VBI - source
* Sberbank CEO in Vienna for bid talks - source
* Sberbank only bidder left for VBI - sources
* Bid level seen testing VBI's resolve to divest assets
(Adds source, background)
By Michael Shields and Ekaterina Golubkova
VIENNA/MOSCOW, June 7 (Reuters) - Russian lender Sberbank's SBER03.MM boss will bid up to 750 million euros ($1.1 billion) for eastern European bank Volksbanken International (VBI) while he is in Vienna, a source close to the deal said.
Sberbank Chief Executive German Gref's talks on Tuesday with VBI parent Oesterreichische Volksbanken (OTVVp.VI) will test how low in price Austria's fourth-largest bank is willing to go to divest assets as it tries to bulk up its balance sheet and pass European stress tests.
Financial sources familiar with the matter said Sberbank is the only suitor left for VBI, which Volksbanken put up for sale in December along with its sister leasing business as a way to streamline and focus operations.
Gref is also in Vienna to co-chair a regional World Economic Forum meeting starting on Tuesday.
One source confirmed a report in Austrian newspaper Die Presse, citing two Russian sources close to Sberbank, as saying Gref was ready to offer 700-750 million euros for VBI, far less than the owners hoped.
"The numbers are right but negotiations are still going on," the source said, adding no decision was expected on Tuesday.
Another source close to Sberbank told Reuters the figures cited in Die Presse were not final.
"If the Austrian side agrees on a compromise, the principle agreement may be reached within a month," this source said, giving no detail on the compromise but saying it involved several conditions.
PLAN B DROPPED
Volksbanken has a 51 percent stake in VBI. France's Banque Populaire Caisse d'Epargne and Germany's DZ Bank/WGZ Bank each own 24.5 percent of the unit.
Volksbanken had hoped to raise at least 1.8 billion euros -- or 1.5 times equity -- with the VBI sale, a source close to the transaction said earlier this year. [ID:nLDE71N207]
Volksbanken declined comment, while Sberbank was not immediately available.
Sberbank, which sources had previously said had the inside track to buy VBI, said in April it was in talks with Austrian banks on possible acquisitions. [ID:nLDE73C1OW]
Two sources had said in February a "plan B" scenario had emerged in which Banque Populaire could buy out other VBI shareholders, but one source said last week the French had dropped out, leaving the field clear for Sberbank.
It remained unclear whether the sale would go ahead even though Volksbanken needs money.
"It is hard to say where the pain threshold lies for Volksbanken," one source close to the process said.
"This is a test of strength. Sberbank has time but Volksbanken also has time because the goal of repaying state capital is a soft target."
Volksbanken, which returned to profit in 2010 as risk provisions more than halved, is in the process of paying back 1 billion euros it got from the Austrian state during the financial crisis.
The regional cooperative banks that own a majority stake agreed last month to chip in 300 million euros to repay a tranche due this year. [ID:nLDE73E1JS]
Volksbanken has said divestments will help it repay tranches of 300 million due in 2014, and 400 million in 2018.
The bank, one of three Austrian lenders to take part in European stress tests this year, made a 2010 net profit of 55 million euros, reversing a 1.1 billion euro loss in 2009 after real estate assets and corporate loans soured.
VBI alone lost 21.8 million euros last year as core market Romania weighed on the group. [ID:nLDE72308H]
($1 = 0.6845 euro)
(Additional reporting by Sylvia Westall and Angelika Gruber in Vienna and Arno Schuetze in Frankfurt; Editing by Dan Lalor and David Hulmes)