March 11, 2014 / 5:16 PM / in 5 years

UPDATE 1-UniCredit Bank Austria in sale talks on Ukraine unit

* Unidentified suitor has submitted non-binding offer

* Sale seen within 12 months, hinge on return of stability

* UniCredit joins ranks of banks exiting Ukraine (Adds quotes and background)

VIENNA, March 11 (Reuters) - UniCredit has joined the exodus of foreign banks from Ukraine, putting its local unit up for sale in a deal it hopes to wrap up within a year should political and economic turmoil in the country settle down.

The Italian bank’s central and eastern European arm, Bank Austria, said an unidentified suitor had submitted a non-binding offer for the Ukrsotskbank business before the uprising that toppled President Viktor Yanukovich last month.

Talks continued despite unrest and a standoff with Russia, whose forces control the Crimean peninsula.

The sale talks were “of course subject to a normalisation of the political and economic environment, which by the way we are quite confident will take place,” Bank Austria finance chief Francesco Giordano told reporters.

“Naturally the conversation may take somewhat longer and is a bit less certain of execution in the current circumstances.”

The Ukrainian business was valued at 0.7 times equity value, he said. Reclassification of the Ukrainian bank as an asset held for sale and its operating loss in 2013 hit profits by around 250 million euros ($347 million), Bank Austria said.

UniCredit CEE head Gianni Franco Papa said as recently as December that the bank would not walk away lightly from Ukraine, where it merged two units last year to give it around 3.3 billion euros in assets, 435 branches and 6,200 staff.

Raiffeisen Bank International has put plans to sell its Ukrainian business on hold for now.

Among banks which have pared back in Ukraine are Germany’s Commerzbank, which sold its Bank Forum unit in 2012; Austria’s Erste Group, which sold its loss-making unit in 2012; and Sweden’s Swedbank, which sold its subsidiary last year.

Italy’s Intesa Sanpaolo said in January it would sell its Ukrainian unit to a unit of Ukraine-based Group DF.

Foreign banks that remain may have to choose between cutting their losses or holding on to grab market share.

Ukraine was badly hit by the financial crisis when GDP plunged 15 percent in 2009. Government coffers were depleted by huge debt repayments, efforts to protect the currency and high energy costs.

Support from the International Monetary Fund is seen as critical to shore up Ukraine’s collapsing finances and get its economy back on the right track.

Ukraine’s finance minister has said he hoped the IMF would work on an aid package of at least $15 billion. That figure would be in line with the IMF’s last loan to Ukraine in 2010.

$1 = 0.7205 Euros Reporting by Michael Shields; editing by Elaine Hardcastle

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