VIENNA (Reuters) - Raiffeisen Bank International's (RBI) (>> Raiffeisen Bank International AG) first-quarter profit fell by nearly half, showing the impact of a squeeze on the bank's income even though bad debt charges fell.

The second-biggest lender in emerging Europe also reiterated on Thursday it might report an annual loss in 2015, partly the result of booking most of an expected 550 million euros (394 million pounds) in restructuring costs to help to hit a core capital ratio of 12 percent by the end of 2017.

Vienna-based RBI was a pioneer in central and eastern Europe when communism crumbled but hits from Ukraine and Hungary pushed it to a loss of 493 million euros in 2014, its first on record.

First-quarter profits dropped to 83 million euros (59 million pounds) from 161 million a year ago.

Analysts polled by Reuters had on average expected a consolidated profit of 73.9 million euros, while a consensus compiled by RBI itself forecast profit at 58 million.

"Raiffeisen reported better-than-expected Q1 figures," Kepler analyst Thomas Neuhold wrote in a note to clients. He also said lower-than-expected risk provisions and costs had offset weaker-than-expected revenue and fee income figures.

The bank said it had experienced only limited direct impact from western sanctions on Russia for its role in the Ukraine crisis. But it took a 64 million euro hit from the sharp currency depreciation in Ukraine, where its business lost 82 million euros in the quarter.

It also booked a 53 million euro charge from hedging rouble dividends from Russia, where it made 95 million.

It stuck to its forecast that 2015 net provisions for bad loans would stay high but fall from the 1.72 billion in 2014.

Its non-performing loan ratio in Russia rose to 6.4 percent while the non-performing loan coverage ratio rose to 76.4 percent. The higher bad debt charges were in line with expectations.

Raiffeisen plans to sell operations in Poland and Slovenia and its Zuno direct bank while cutting back in Russia, Asia and the United States after decades of expansion in central and eastern Europe. It said the revamp was on track.

Due diligence for the sale of its Polish arm had started, but the business's foreign-exchange mortgage portfolio and funding would be discussed at a later stage, it said. The bank's results presentation showed its Swiss franc loans in Poland at 3.26 billion euros.

Discussions with various parties were ongoing for its business in Slovenia, while at its Czech and Slovak arm Zuno due diligence had started and bids were being evaluated, it said.

The group's fully-loaded common equity tier 1 capital ratio, a gauge of financial strength, fell to 9.9 percent of risk-weighted assets from 10.0 at end-2014.

RBI shares were down 2 percent, lagging the sector index <.SX7E>.

The shares, which hit an all-time low in January, trade at about 11 times 12-month forward earnings, a discount to Erste Group (>> Erste Group Bank AG) on 12.6 times and CEE market leader UniCredit (>> UniCredit SpA) on 13.6 times, according to StarMine, which ranks analyst estimates by their track record.

(Editing by Susan Thomas and Jane Merriman)

By Michael Shields