* Says potential buyers to submit binding offers soon
* Working on splitting off Hypo assets into "bad bank" (Recasts with CEO comments from news conference)
VIENNA, April 17 Nationalised Austrian lender Hypo Alpe Adria expects to get no more than half a billion euros ($690 million) for its Balkans network in a deal that could wrap up by year's end, Chief Executive Alexander Picker said on Thursday.
Picker, in charge of splitting Hypo into good and bad parts as it is wound down at a cost to taxpayers of up to 4 billion euros, said he had fought to avoid writing down the unit, which it sees as its prime asset, in 2013 accounts.
Auditors refused to go along with his argument that a markdown would undermine the price Hypo can get for the network of banks and leasing operations in Slovenia, Croatia, Serbia, Bosnia and Montenegro that the EU has ordered to be sold by mid-2015.
"The upshot is that we will certainly not get a price above book value," Picker said, putting its book value at around 500 million euros, after writedowns halved its worth.
Rising risk provisions and writedowns made Hypo's 2013 group loss balloon to 1.86 billion euros.
"There were more skeletons in the closet than we had thought," Picker told a news conference, citing loan-loss provisions that more than quadrupled to 1.36 billion euros and a "bad surprise" at its Italian business, which lost 238 million linked to an investigation by prosecutors of suspected fraud and to repayments to overcharged lease clients.
Deutsche Bank is running the sale of Hypo's Balkans network.
Picker said binding offers were due soon. Financial and strategic suitors - including some keen on the whole business - were in the hunt, he said, but gave no names or numbers.
BAD BANK ON WAY
Hiving off non-performing assets into its own internal bad bank - a process that is continuing - reduced the Balkans unit's total assets to 8.5 billion euros from 10.1 billion in 2012. Its non-performing loan ratio fell to 12.3 percent from 15.0.
The unit's operating profit before risk provisions more than halved to 48.3 million euros in what it called tough markets that showed no signs of substantial improvement in 2014. Provisions of 340 million triggered a 286 million net loss.
Hypo said deposits at home and abroad had suffered in the fourth quarter as a result of the public debate about whether to let the group go bust as a potential way to get creditors to help pay for its wind-down costs.
The government finally ended months of uncertainty in March by deciding to adopt a bad-bank model that will swell state debt and deficits this year.
After swallowing more than 5.5 billion euros in state aid since 2008 - including a 750 million-euro capital shot approved this month - Hypo posted a tier 1 capital ratio of 9.8 percent of risk-weighted assets, up from 8.6 percent a year earlier.
It has said it will need up to 700 million euros more to cope with writedowns and maintain minimum capital levels until its transfers 17.7 billion euros worth of assets into the bad bank supposed to be set up by September.
Picker, who became CEO this year, declined to rule out the bad bank going bust once 12.2 billion euros in debt guarantees from its home province of Carinthia run out. That is down from a ruinous 21.5 billion in Carinthian guarantees in place when Austria had to take over Hypo in 2009. ($1 = 0.7243 Euros) (Reporting by Michael Shields; editing by Georgina Prodhan and Tom Pfeiffer)