UPDATE 2-Austria's Volksbanken loses 1.4 billion euros
* Unconsolidated loss 1.35 bln eur, group loss 959 mln
* Debt crisis, writedowns hammer results
* Including recapitalisation steps, loss 53.5 mln euros
* Ex-ECB official Tumpel-Gugerell set to join board-source (Adds source on Tumpel-Gugerell)
By Michael Shields
VIENNA, April 5 (Reuters) - Ailing Austrian lender Volksbanken AG lost 1.35 billion euros ($1.8 billion) last year, it said on Thursday, its last annual results before a state-led rescue ushers in new leadership.
Impairments on businesses in eastern Europe, losses on Greek debt and other bad loans hammered Volksbanken, once Austria's fourth-biggest bank, which failed last year's European stress tests.
The looming loss and slow pace of restructuring prompted Austria in February to launch a bailout that will cost the state more than 1 billion euros in writedowns, fresh capital and guarantees.
The bank had warned in November it would lose at least 10 percent more than the 900 million to 1.05 billion euros it had forecast only a month before. A financial source told Reuters last month the unconsolidated loss under Austrian accounting rules would approach 1.4 billion euros.
Including the recapitalisation measures set to be agreed by shareholders at their annual meeting on April 26, the loss for the year was 53.5 million euros, Volksbanken said in a statement, adding the bailout meant it remained well capitalised.
Its participation certificates did not trade by 1130 GMT.
Regional banks will remain majority owners of Volksbanken under the scheme, which calls for the state to inject 250 million euros and the regional banks at least 230 million euros.
That will give the state a stake of over 40 percent and the right to name four supervisory board members. The most prominent of these will be Gertrude Tumpel-Gugerell, the former European Central Bank executive board member, one financial source said.
Austrian media have named former BAWAG PSK executive Stephan Koren as a potential successor for Volksbanken Chief Executive Gerald Wenzel, whose contract ends this month.
MORE BILLS TO PAY
The government has annoyed the financial sector by raising the special tax that all banks have to pay by 25 percent until 2017 to help finance the rescue, which entails cutting shareholders' equity by 70 percent.
That hit minority shareholders including DZ Bank Group , Ergo and Raiffeisen Zentralbank.
Ratings agencies have cited Austria's relatively large financial sector as a risk to its sovereign debt rating. Standard & Poor's has already stripped Austria of its AAA rating and Moody's has warned it might do the same.
Finance Minister Maria Fekter had repeatedly said she would rather not nationalise a third bank after the state had to take over Volksbanken's Kommunalkredit unit and Hypo Group Alpe Adria as the financial crisis raged, but in the end had to act.
Volksbanken, which sold its eastern European arm VBI to Russia's Sberbank in a move to shrink back to health, is in the process of forming a mutual liability association with its regional bank shareholders.
The plan - modelled on Dutch lending cooperative Rabobank - would let it consolidate the regional banks' capital while keeping them as separate entities.
Austria faces another bank bill for KA Finanz, the "bad bank" split off from Kommunalkredit, to help absorb the impact of Greek debt and credit default swaps it held. ($1=0.7623 euros) (Editing by Greg Mahlich)
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