* 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
By Mette Fraende and Mia Shanley
COPENHAGEN, Oct 30 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
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
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
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
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
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)