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 1454 GMT. 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.
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