VIENNA, Jan 31 (Reuters) - Austria's Raiffeisen Bank International (RBI), the biggest Western bank in Russia, on Wednesday reported a 67% drop in fourth quarter profit, below expectations, hurt in part by losses related to Swiss franc-denominated loans in Poland.

Net profit in the quarter was 272 million euros ($294 million), down from 826 million euros a year earlier, the bank said. Analysts had expected profit of 318 million euros, according to a consensus published by RBI.

RBI has been studying a sale or spin-off of its business in Russia since the country's invasion of Ukraine, warning that an exit may take some time.

"The group continues to work on a potential transaction," it said.

Its presence there underlines the links between Austria and Russia, which maintain close ties through Russian gas pipelines and finance, with Vienna a hub for cash from Russia and its former Soviet neighbours.

A separate deal, to take a nearly 28% stake in Austrian construction group Strabag (STRV.VI) via a deal with sanctioned Russian businessman Oleg Deripaska, is "on track", RBI said on Wednesday, with a closing expected early this year.

Hitting fourth quarter earnings were higher taxes in Ukraine, plus a 273 million euros charge to deal with litigation and losses over Swiss franc-denominated loans in Poland.

The issue, which has affected numerous banks operating in Poland, stems from more than a decade ago, when mortgage customers took out loans in francs to take advantage of low Swiss interest rates, only to face far higher costs when the value of the Polish zloty slumped.

Courts have been deciding how the loans can be treated, including what banks can charge in interest for the loans, creating uncertainty for lenders and their bottom lines.

RBI's Russian business has contributed a major portion of the bank's earnings over the years.

Russia made up 38% of RBI's after tax profit in 2023, though that was down from 49% in 2022.

Earnings that RBI makes in Russia stay with the local subsidiary because of Western sanctions.

($1 = 0.9245 euros)

(Reporting by Alexandra Schwartz-Goerlich Writing by Tom Sims Editing by Kirsti Knolle and Mark Potter)