MILAN, Jan 12 (Reuters) - UniCredit shares fell on Wednesday amid concerns the Italian lender's potential plans for expansion in Russia through Otkritie Bank could bring risks that outweigh the prospect of higher returns.

A person familiar with the matter told Reuters on Tuesday that Italy's second-biggest bank was among potential suitors https://www.reuters.com/article/otkritie-m-a-unicredit/italys-unicredit-among-suitors-for-russias-otkritie-bank-source-says-idUSKBN2JL1OI for Otkritie, which Russia's central bank is looking to sell more than four years after bailing it out.

UniCredit shares were 3.6% lower at 1345 GMT, underperforming Italian rivals and extending Tuesday's decline of 1.1%, triggered by reports of the bank's interest in Otkritie.

Analysts said further expansion in a country where UniCredit has been since 1989 would expose it to greater geopolitical risks and possibly jeopardise its plans https://reut.rs/3thvN4V to return billions in capital to shareholders by 2024.

"(It) runs counter to a trend in recent years in which foreign lenders scaled back their local presence as Western sanctions and compliance risks (money-laundering scandals) weighed on their business," Banca Akros wrote in a note.

Russia's central bank, which has owned Otkritie since bailing it out in 2017, wants to divest its stake through a sale to a strategic investor or an initial public offering (IPO).

The central bank declined to comment on specific bidders or how much of its 100% stake was on offer.

"Given the size and complexity of the deal, time is needed to study the incoming proposals in detail," the central bank told Reuters, adding that an IPO was still an option.

In October, Russian daily Kommersant cited sources saying structures linked to Gazprombank and the Region-Rossium investment group were interested in Otkritie.

GEOPOLITICAL RISK

Otkritie doubled its profit in the first nine months of 2021 with a return on equity (ROE) of 14.7%, well above an average of 6.1% for euro zone banks in the first quarter of last year.

As a consequence, Russian banks are more expensive relative to many euro zone lenders that can be bought at a discount to their book value.

Despite the attractive returns delivered by Russian banks, analysts flagged the risks to UniCredit of an enlarged presence at a time of increased tension between Washington and Moscow over Ukraine, among other differences.

With 45 billion euros ($51 billion) in assets, Otkritie is Russia's seventh-largest bank and a merger would increase UniCredit's risk-weighted assets in the country five-fold.

Its Russian subsidiary, AO UniCredit Bank, is already one of the country's biggest commercial banks.

"The relative size of the deal and the higher geopolitical risk linked with the region could be key areas of concerns for the market if UniCredit would go ahead," analysts at Citi said.

Chief Executive Andrea Orcel said in December when presenting a business plan that UniCredit would consider mergers and acquisitions in countries where it operates if it helped strengthen its franchise and meet its return targets.

But having pledged to reward shareholders with 16 billion euros in dividends and buybacks by 2024, Orcel also said he did not expect deals of a size that might endanger those plans.

Orcel has dealmaking experience in Russia. While at Merrill Lynch, Orcel and his brother Riccardo worked on the Russian government's sale in 2011 of a 10% stake in VTB Bank - where Riccardo became deputy chief executive.

In 2013, while working at UBS, Orcel advised Qatar's sovereign wealth fund on its investment in VTB.

Analysts at Jefferies said it was unclear if UniCredit's interest was part of its normal duty to shareholders to look at opportunities, or a serious intent to pursue an acquisition.

"While this would strictly fit with UniCredit's stated guidance to consider 'in-market' consolidation opportunities, the news is likely to be met with some scepticism/caution given the scale of the business and potential implications for excess capital return," Jefferies said. ($1 = 0.8797 euros)

(Additional reporting by Andrea Mandala; Editing by Mark Potter and David Clarke)