* CEO Stepic offers resignation for "personal reasons"
* Says acting to protect bank from reputational harm
* Step follows revelations about Singapore flat purchases
* Shares pare losses, down 2.4 pct
By Georgina Prodhan and Michael Shields
VIENNA, May 24 Raiffeisen Bank International
Chief Executive Herbert Stepic resigned on Friday in
what he called an effort to spare the bank he built into an
eastern European powerhouse from damaging publicity over his
personal property deals.
Stepic, 66, again denied wrongdoing in using front companies
in the Caribbean and Asia to buy flats in Singapore in 2006 and
2008 but said he decided to quit out of loyalty to Raiffeisen.
"Given the media reports, I soon became aware that, despite
the facts, a debate was taking place that threatened to do
massive harm to my company," a drawn-looking Stepic told a news
conference, his normally booming voice subdued.
The deals were exposed by the Offshore Leaks investigative
journalism project and have triggered scrutiny by Austria's FMA
financial markets regulator, central bank and Raiffeisen itself,
which is checking if he violated the law or internal guidelines.
RBI's supervisory board has still to accept Stepic's
resignation, but his fate seems sealed, and officials said a
formal decision was due within days.
Top members of the board issued a statement calling Stepic's
action "a sign of great loyalty to the company. It is great
credit to him that he shows with this difficult decision
willingness to avert reputational damage."
His departure may trigger structural changes or even asset
sales at RBI, which is 78 percent-owned by the Raiffeisen
Zentralbank group comprising Austria's eight
semi-autonomous provincial Raiffeisen banks and their branches.
"There's a fight going on in the background about what to do
with the whole group," said a banker who worked closely with
Stepic for many years and spoke on condition of anonymity.
"This structure is a result of empire-building by Stepic,
and only he could manage this organisation... He made everyone
dependent on him."
The abrupt fall from grace of Stepic, a burly man with a
trader's quick instincts, removes a larger-than-life figure who
made Raiffeisen into central and eastern Europe's second-biggest
lender, with 60,000 staff in 17 countries.
The hard-living, hard-working executive once called success
"the biggest drug there is".
Shares in Raiffeisen fell as much as 3.6 percent on the news
before paring losses to trade down 2.4 percent at 26.35 euros by
Guenter Hohberger, central and eastern Europe banks analyst
at Erste Group, said Stepic, whose contract was due to expire at
the end of 2015, would be hard to replace.
"I don't believe the bank will abandon its strategy - the
central and eastern Europe business is its fundamental
business," he said. "The question is, who can complete it?
Probably there is no-one who has this experience."
Stepic's deputy is Karl Sevelda, 63, who is in charge of
corporate clients. He has tended to shun the limelight as much
as it was sought by Stepic, who relishes promoting his
charitable foundation and collection of African art.
Former Austrian Finance Minister Josef Proell, who stepped
down for health reasons in 2011, also works at Raiffeisen, which
is closely aligned with the conservative People's Party, the
junior partner in Austria's governing coalition.
Heinrich Schaller, a former top executive at the Vienna
Stock Exchange with strong political connections, now sits on
the bank's supervisory board.
Stepic says he did not need to notify his bank or regulators
about three apartments in Singapore he bought via "project
companies" set up with the help of Swiss bank UBS in
the British Virgin Islands and Hong Kong.
UBS has declined to comment on the matter.
Wilhelm Rasinger, president of the Austrian Shareholders'
Association, said: "As I see it, these affairs were in his
private sphere, but we have different sensibilities about these
things from what we had 10 or 15 years ago."
The FMA investigated Stepic last year over a reported real
estate deal in Serbia financed with a loan from another bank
that went sour, but the watchdog said it took no action because
the investigation showed he had withdrawn from the project.
Stepic made headlines again in April when he returned 2
million euros of his 2012 pay package, saying he felt morally
obliged to cut his overly generous compensation.
A bank spokesman said he was unaware of any provisions for a
special departing pay-off for Stepic but had no further comment.
While a crackdown on cross-border tax dodging is gaining
momentum across the world, Stepic insisted again on Friday that
the Singapore property deals were above board because he had
made the investment with money taxed in Austria and also paid
tax on revenue from a sale.
In a calm but low voice, he said he was proud of what he had
accomplished in four decades at Raiffeisen, creating tens of
thousands of jobs in the former Communist East and making 800
million euros ($1.03 billion) in profit over the past five years
as the financial crisis raged.
Austrian bank executives can in principle invest their own
money as they see fit as long as they uphold required standards
for orderly business and personal reliability, the FMA says.
But those who use deals to circumvent the law, avoid tax or
launder money are subject to review. Whether bankers need to
inform employers of deals transacted on their own account
depends on banks' internal guidelines, it adds.
Analysts polled by Reuters expect its first-quarter profit
on Tuesday to drop 72 percent from the year-ago level, which was
flattered by one-off gains.