UPDATE 2-Danske Bank seeks boost from share issue and job cuts
* Q3 pretax profit 2.22 bln DKK vs 2.15 bln avg forecast
* Targets core Tier 1 capital ratio above 13 pct by end 2013
* Announces 1,000 job cuts
* Shares down 7 pct (Adds CEO, analysts quotes, details, background, updates share price)
By Mette Fraende and Mia Shanley
COPENHAGEN, Oct 30 (Reuters) - Danske Bank plans to raise 7 billion Danish crowns ($1.2 billion) in a new share issue and cut a further 1,000 jobs to try to establish itself among the top three Nordic banks.
Denmark is the weak point of the Nordic region, on the edge of recession, with its banks stung by bad debts from a burst property bubble and writedowns on loans to struggling farmers.
The new share issue would help Danske Bank to improve its credit ratings, facilitating access to short-term funding and lower funding costs, it said in a statement on Tuesday.
The offering is expected to be completed within 24 hours, a source familiar with the matter told Reuters.
"This might be the right time to take the pain, since one does not know how the writedowns will develop in the future," Alm Brand analyst Stig Nymann said of the bank's latest efforts to restore its fortunes.
In May, ratings agency Moody's cut the bank's long-term rating to Baa1, while Standard & Poor's lowered its rating to A-/A-2.
Danske said that the share offering would be made as a private placement to institutional investors. An A.P. Moller-Maersk fund and the Cevian Capital II Master Fund intend to take up the offering, which will correspond to the proportion of the bank's share capital that they currently hold.
A tightening of writedown rules by regulators in April applied more pressure on bank profits and Danske was also hit by heavy impairments in Ireland. In May Danske announced that it would hive off $6 billion of bad loans at National Irish Bank as part of its reorganisation.
Chief Executive Eivind Kolding, who took the helm at Danske in February, sees a bumpy road ahead. "There are some macroeconomic issues that, certainly for the next two to three years, are not making it any easier to run a bank," he said at a news conference on Tuesday.
The bank said that it would cut 1,000 jobs in addition to the 2,000 cuts in the 2011 to 2014 period that it announced last year.
Reporting third-quarter results that were slightly better than forecast, Denmark's biggest financial institution reiterated a warning that 2012 net profits would stay low, but it added that impairment charges had stabilised.
"It is the group's ambition to be one of the top three Nordic banks in terms of return on equity," Danske said.
That could take a while. Return on equity for the top three - Sweden's Swedbank and Handelsbanken, plus Norway's DNB - is between 11.4 and 14.1 percent. Danske's is 4.1 pct - the only major Nordic bank with single-digit return on equity.
Danske has also set itself a target of lifting its total capital ratio to 17 percent and core Tier 1 capital ratio to more than 13 percent, from 12.7 percent, by the end of 2013.
Swedish banks already have core Tier 1 capital ratios well above 15 percent. Handelsbanken, with almost 18 percent core capital, has consistently had the lowest funding cost of any bank in Europe, thanks to a resilient local economy and high credit ratings.
The capital-rich Swedish lenders, such as Handelsbanken and Nordea, could even be seen muscling into a wave of mergers sweeping Danish rivals.
Danske Bank shares were down 7.1 percent at 1300 GMT, against a 0.5 percent fall in the Nordic banking sector index .
Third-quarter pretax profit rose to 2.22 billion Danish crowns, exceeding an average forecast of 2.15 billion crowns in a Reuters poll of analysts.. The result was helped by a spike in trading income and stronger net interest income.
Loan losses were steady at 2.88 billion crowns, slightly better than an average forecast of 3 billion crowns. ($1 = 5.7803 Danish crowns) (Additional reporting by Ole Mikkelsen and Kristian Mortensen; Editing by David Goodman)
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