UPDATE 5-Danske Bank Q2 profits slide, loan losses weigh

* Q2 pretax profit DKK 37 mln, below forecast of 427 mln

* Bank repeats outlook for loan losses to stay high in 2009

* Says indicators point to stabilisation, trend uncertain

* Shares down 1.9 pct

(Adds details, quotes; updates share price)

By John Acher and Teis Jensen

COPENHAGEN, Aug 11 (Reuters) - Denmark's biggest financial group, Danske Bank (DANSKE.CO), posted a steeper-than-forecast drop in second-quarter pretax profit, hit particularly by loan writeoffs in the Baltic region and Ireland.

"The level of loan impairment charges is expected to remain high (in 2009), reflecting the general economic climate," Danske Bank said in a statement on Tuesday.

Pretax profit at the Nordic region's second-biggest lender fell to 37 million Danish crowns ($7.05 million) in April-June, from 4.36 billion a year ago.

The result was below an average forecast of 427 million crowns in a Reuters poll of 19 analysts whose estimates ranged widely, from a loss of 2.43 billion to a profit of 2.97 billion.

Danske Bank shares traded down 1.9 percent at 116 crowns by 1130 GMT, valuing the group at about $15.4 billion. The stock came off its session lows but still underperformed a 1.0 percent drop in the DJ Stoxx European banking sector index .SX7P and a 0.2 percent fall in the Copenhagen blue-chip index .OMXC20.

"The difficult economic conditions made extraordinarily high loan impairment charges necessary," said Danske Bank, the last of the "Big Six" Nordic banks to post second-quarter results.

Loan write-offs climbed to 6.55 billion crowns in the second quarter from 572 million in the year-ago quarter, exceeding analysts' average forecast of 6 billion crowns.

Chief Executive Peter Straarup told a news conference that the half-year results were "acceptable considering the very difficult macroeconomic conditions we had to live with."

"We are beginning to see some bright spots in the macroeconomic picture," Straarup said. "For example, we expect economic growth to return in the second half of the year in Denmark, Norway and other regions, but the trend has not yet stabilised."

He said more loan losses could be expected despite some signs of economic stabilisation. "Remember that banks often have relatively large losses even when the economy is on the way out of recession," Straarup said.

So far, Danske's losses on Swedish loans have been modest. But Chief Financial Officer Tonny Thierry Andersen told Reuters writedowns could be expected to increase in Sweden and Finland.

Danske's report followed stronger-than-forecast earnings for the quarter from Nordic rivals Nordea (NDA.ST) and Handelsbanken (SHBa.ST) and weaker-than-expected results from Norway's DnB NOR DNBNOR.OL and Sweden's SEB (SEBa.ST) and Swedbank (SWEDa.ST).

IRISH, BALTIC WOES

Operating expenses rose partly due to goodwill impairments in the troubled economies of Latvia and Lithuania. Standard & Poor's rating agency cut its credit rating on Latvia on Monday and said it may do the same for Lithuania. [ID:nN10485167]

The real Achilles' heel, however, was Ireland and Northern Ireland, where loan impairment charges for the first six months of 2009 totalled 3.7 billion crowns, though those markets only account for 6 percent of the group's total credit exposure.

Danske Bank owns National Irish Bank in Ireland and Northern Bank in Northern Ireland.

The Irish banking sector has been badly hit by a property slump in Ireland and the UK, and the country's budget deficit and unemployment have ballooned as recession grips the economy.

Danske Bank said the outlook for the Irish and Baltic economies was "particularly bleak".

Analyst Frank Braden at S&P Equity Research said the operating results were better than expected, but core activity was weak and net interest income lower than expected.

"Nor do we see any improvement in the Baltic countries. Business in the Baltics seems to have worsened, and Danske Bank seems to have more difficulties there than their competitors."

Danske Bank's forecast for Denmark's 2009 gross domestic product has worsened to a slump of 3.5 percent from a 2.4 percent drop seen in its first-quarter earnings report in May. ($1=5.247 Danish Crown) (Additional reporting by Ole Mikkelsen, Peter Levring and Henriette Jacobsen; editing by Will Waterman, Rupert Winchester and Simon Jessop)