UPDATE 1-LGT, Austria consortium in Constantia talks -sources

* Bidding to take over bailed out wealth manager

* No talks about price yet

* LGT bought other asset managers this year

(Adds background about LGT, Constantia)

By Eva Komarek and Christian Gutlederer

VIENNA, Nov 5 (Reuters) - Liechtenstein's LGT bank and a group led by a former UniCredit Bank Austria (CRDI.MI: Quote, Profile, Research) manager are both in talks to buy Constantia Privatbank, five sources with knowledge of the matter told Reuters.

LGT, Liechtenstein's largest bank, said in an interview last month it was looking for acquisitions after buying the Swiss private banking unit of Dresdner Bank from Commerzbank (CBKG.DE: Quote, Profile, Research) earlier this year. [ID:nLC24586] [ID:nLR79635]

Constantia, catering to wealthy clients in Austria and a large custodian for investment funds, ran into a liquidity squeeze last year when problems at affiliated real estate group Immofinanz (IMFI.VI: Quote, Profile, Research) sent nervous clients scurrying.

Christine de Castelbajac, a heir of Austria's Turnauer family, which owned a range of industrial and real estate firms, had to cede control of Constantia to Austria's five biggest banks in a government-orchestrated bail-out to avoid a bank run.

The banks -- Bank Austria, Erste Group (ERST.VI: Quote, Profile, Research), Raiffeisen Zentralbank [RZB.UL], Oesterreichische Volksbanken (OTVVp.VI: Quote, Profile, Research) and Bawag P.S.K. -- have since been trying to sell the banking and asset management arm, and sort out various legal battles.

LGT and a consortium led by former Bank Austria board member Willi Hemetsberger are currently at the due diligence stage for the bank's planned sale, while the precise shape of the bank was still determined, the sources said.

"People are not talking about the price yet, because it is unclear what the 'new' bank will look like," one source said.

Constantia's owners are in the process of breaking up the bank into the "good" banking and asset management business and a "bad bank" which would take on liabilities for the legal battles as well as some assets linked to the Immofinanz group.

Two of the sources said LGT, which is looking to expand its presence in Austria, stands a better chance than the consortium in the sale because it is a big institutional buyer.

LGT and Hemetsberger both had no comment.

Earlier this year German private bank Hauck & Aufhaeuser pulled out of talks to buy Constantia because it had doubts that the split between "good" and "bad" assets would leave it protected against possible litigation. [ID:nL7688118] (Writing by Sylvia Westall and Boris Groendahl, editing by Will Waterman)