* Sees mixed impact from rouble drop, rate hike in Russia
* Says hedging rouble exposure too expensive
* Repeats Western sanctions on Russia had limited impact so far (Adds quotes and background)
VIENNA, Dec 17 (Reuters) - Austrian lender Raiffeisen Bank International expects its Russian unit to have “highly positive” results again this year as the bank pursues selective business with a focus on existing customers, RBI said on Wednesday.
Emerging Europe’s second-biggest lender relies heavily on profits from Russia, its single most lucrative market. Its shares have touched record lows this week on concern about the economic crisis in Russia.
The stock was up 2.1 percent at 11.75 euros by 1547 GMT.
“Higher interest rates and the rouble’s drop could put some customers under pressure and thus affect their ability to service their debt. On the other hand there are positive effects, especially from the expected expansion of margins,” it said in a statement in response to a Reuters query.
It said the rouble devaluation had a positive impact on costs in Russia given group results are denominated in euros, but had a negative influence on revenues and capital.
Its Russian bank was in a good funding situation, did not depend on central bank funding, and had stable deposits given its solid reputation among corporate and small business clients, it added.
RBI officials had told a conference call after third-quarter results last month that it was mostly unhedged against rouble risks, and it reiterated this on Wednesday.
“Hedges are not standard market practice and very expensive as well. Given volatility they consume too much capital under current regulatory rules,” it said.
It also reiterated that it was not seeing much of a hit from Western sanctions against Moscow for its alleged support of separatist rebels in eastern Ukraine.
“Current sanctions had only a very slight impact on RBI’s business. We cannot rule out a negative impact on business relations in the medium term,” it said.
Reporting by Michael Shields; Editing by Shadia Nasralla