UPDATE 2-Danske Bank sticks to profitability goal despite analyst scepticism

(Adds CEO comment, share price reaction)

COPENHAGEN, July 23 (Reuters) - Danske Bank reiterated its profitability targets on Friday despite analyst scepticism before and after it reported second-quarter earnings boosted by a recovery in Nordic economies and higher client activity.

The bank aims to achieve return on equity (ROE) of 9-10% in 2023, raising questions among analysts.

“We have progressed with the execution of our plan to become a better and more efficient bank,” new Chief Executive Carsten Egeriis said in a statement on Friday.

“However, we still need to work determinedly in order to fulfil our financial ambitions.”

Danske’s second-quarter return on equity declined to 6.5%, down from 7.5% in the first quarter and well below the level of its Nordic peers. Nordea achieved 11.9%, Norway’s DNB 11.9% and SEB 14.7% in the same quarter.

“There is a great deal of scepticism among analysts, myself included, that they can actually achieve these goals,” Jyske Bank’s Anders Haulund Vollesen told Reuters.

Vollesen said analysts were starting to doubt Danske’s ambitious cost-cutting plans, especially within compliance, while also boosting top line growth.

“They stick to it, which is positive and a signal that they still believe they can see a path towards its goals that some analysts cannot,” Vollesen said.

Danske said it will provide an update on its Better Bank strategy, formulated under Egeriis’s predecessor in 2019, when the lender presents third-quarter results this year.

“We’ll provide an update on our compliance situation, on our costs, on our digitisation and, of course, also on commercial momentum,” Egeriis told Reuters, reiterating that the RoE target will not be adjusted.

Danske reported net profit and loan impairment charges - a keenly watched measure during the COVID-19 pandemic - at 2.8 billion Danish crowns ($443.1 million) and 0.24 billion crowns respectively, both in line with preliminary results published by Danske on July 8.

Shares in Danske Bank were trading 3.5% down at 0903 GMT and are up about 10% this year, underperforming a roughly 20% gain for the European banking index. ($1 = 6.3192 Danish crowns)

Reporting by Nikolaj Skydsgaard and Stine Jacobsen Editing by David Goodman