MILAN—Italy’s second-biggest bank UniCredit said a full write-off of its Russian business, including cross-border exposure, would cost around 7.4 billion euros ($8.1 billion), leaving its capital distribution plans hanging by a thread. UniCredit, which is one of Europe’s banks most exposed to Russia, said it would still be able to pay proposed cash dividends for 2021 even in an extreme scenario where it zeroed its exposure. That would shave two percentage points off a key capital ratio, which stood at 15.03 percent at the end of last year—lowering it to just above 13 percent. Provided this key measure of financial strength stays above 13 percent, UniCredit said it remained committed to buying back its own shares for up to 2.58 billion euros under the strategy new CEO Andrea Orcel announced in December. “Whilst we do not consider this extreme scenario as our base case, we are taking a prudent and …