UPDATE 2-Danske Bank sees low profit and high charges in 2012

* Q4 pretax profit 615 bln DKK vs 1.03 bln forecast

* Q4 loan impairments 4.79 bln DKK vs 3.55 bln DKK forecast

* Says 2012 profit will stay at low level

* Says loan writedowns will remain high

* Shares rise 3.5 percent, outperforming wider market

By Mette Fraende

COPENHAGEN, Feb 9 (Reuters) - Danske Bank warned on Thursday that 2012 earnings would remain low and loan writedowns high after fourth-quarter pretax profits dropped 57 percent, below forecasts, hit by a spike in loan impairments.

The bank said it saw limited potential for economic growth in Europe and loan losses in Denmark had been bigger than expected and market conditions in Ireland and Northern Ireland, where it also has operations, remained difficult.

Danske Bank shares rose after what was seen as a prudent outlook by analysts, who also cited markets hopes that the lender can bring costs down and earnings up under its new management.

"They are being very cautious," Sydbank analyst Bjorn Schwarz said. "Income is on the right track, expenses are on the right track, and recent economic indicators have shown that it should be possible to turn around the rise in loan losses this year."

"Also, investors believe in the new management team, believe that the bank can improve profitability," he said, referring to incoming Chief Executive Eivind Kolding who will replace Peter Straarup who retires next week after 43 years with the Group, 14 as CEO.

The bank said in November it would cut expenses by about 2 billion crowns from 2012-14, axing 2,000 jobs in the process, after quarterly profit was wiped out by a drop in trading income, becoming the latest Nordic lender to combat slowing revenue growth and higher funding costs.

"We believe that the group has the right foundation to improve its earnings," Danske Bank said in the statement.

Danske Bank's stock was trading up 3.9 percent at 88.30 crowns at 1011 GMT, outperforming the Nordic banking sector index which was up 1.8 percent, and a weaker Copenhagen bourse's bluechip index.

The lender's pretax profits dropped to 615 million Danish crowns ($109.67 million) in the fourth quarter from 1.45 billion in the same period a year earlier, missing an average 1.03 billion crowns forecast in a Reuters poll of analysts.

"The second half of 2011 was characterised by considerable financial turbulence and economic downturn," Straarup said in statement.

"Our results are therefore lower than expected at the beginning of the year," said Straarup.

Net interest income was steady in the fourth quarter at 6.18 billion crowns against 6.07 billion a year earlier, driven by higher lending rates, in line with 6.17 billion forecast by analysts.

Net trading income more than doubled from a year ago to 1.64 billion crowns, slightly above a 1.52 billion crowns forecast.

LOAN LOSSES SPIKE

The Nordic region's second-biggest lender said fourth-quarter loan impairment charges rose 61 percent from a year earlier to 4.79 billion crowns, mainly due to adverse trends in agriculture and shipping.

The loan writedowns exceeded analysts' average 3.55 billion crowns estimate.

"The really big disappointment is the loan losses which were about 1 billion crowns higher than expected," Nordea said in a note to clients.

For 2011 as a whole, loan impairments related mainly to the commercial property segments in Ireland and Northern Ireland and to the agricultural, commercial property and personal customer segments in Denmark, Danske Bank said.

Danske Bank owns National Irish Bank in the Republic of Ireland and Northern Bank in Northern Ireland.

"Earnings look better than expected ... but the level of writedowns ruins the picture," said Alm. Brand analyst Stig Nymann.

"It is disappointing that the Irish writedowns rose in the fourth quarter since they fell in the third quarter compared with the first and second quarter," Nymann said.

Two weeks ago, Nordea, the Nordic region's biggest bank, posted better-than-expected fourth-quarter operating profits but net loan losses were higher than forecast, particularly in Denmark.

Danske Bank said it would not propose to pay a dividend out of 2011 earnings.