By Valentina Za and Giuseppe Fonte

MILAN Italian bank UniCredit is set to report sharply higher revenue on Wednesday from a year ago as it continues to benefit from higher interest rates - but its exposure to Russia is drawing increased regulatory scrutiny.

The European Central Bank (ECB), which has long urged euro zone lenders to quit Russia, is concerned about UniCredit's ongoing presence, but it has not considered any action so far, a source close to the matter said. The ECB declined to comment.

UniCredit has so far shunned a retreat from Russia, where it runs a top 15 lender. An exit requires presidential approval due to restrictions on asset disposals Moscow introduced after it invaded Ukraine.

The ECB's Chief Supervisor Andrea Enria last month reiterated the regulator's "concerns about the disappointingly slow progress" made by banks with a local presence in disentangling themselves from Russia.

Banks have been asked to adopt an exit roadmap and speed up efforts, reporting regularly to management bodies and supervisors on the execution of those plans and any hurdles or delays, he said in a letter to European Union parliamentarians.

Any risks related to Russia are factored into the assessment process that leads supervisors to set bank-specific capital requirements for the year, Enria said in his June letter.

Last month's aborted mutiny in Russia has refocused investor attention to geopolitical risks facing the country, to which UniCredit had a 5 billion euro ($5.5 billion) maximum gross exposure at the end of March, down from 7.4 billion euros a year earlier.

It will present updated figures on Wednesday.

UniCredit last year set aside 900 million euros to cover potential Russia-related losses. At end-March, it had nearly halved its customer loans from a year earlier to 5.6 billion euros, cutting cross-border loans by 65% over the same period.

After unsuccessfully seeking a non-Russian buyer for its local business, this year it reinstated Russia into its earnings after presenting them pro-forma without it for several quarters.

Chief Executive Andrea Orcel, who last year considered boosting the Russian footprint by bidding for another local bank shortly before the war erupted, has said effectively giving away its Russian business, as Societe Generale has, would be morally wrong and not in shareholders' best interest.

Analysts expect UniCredit to post an 18% annual rise in quarterly revenue, with net profit down slightly from a year ago to 1.86 billion euros, according to the consensus gathered by the bank, due in part to the cost of voluntary staff departures.

($1 = 0.9053 euros)

(Reporting by Valentina Za in Milan and Giuseppe Fonte in Rome; Editing by Mark Potter)