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UPDATE 2-Danske shares rise on prospect of recovery from pandemic impairments

* Danske reports lowest annual net profit in 6 years

* Shares up 2.6%

* Almost half-way in job reduction plan

* Internal investigation into Estonia-case finished (Adds comment by CEO, share reaction, details on impairments)

COPENHAGEN, Feb 4 (Reuters) - Shares in Danske Bank rose on Thursday, shrugging off the lowest annual profit in six years as the lender said lower costs and fewer impairment charges should lead to higher profits for 2021.

Shares in Denmark’s biggest lender traded up 2.63% at 0947 GMT.

In common with other banks, Danske’s earnings fell last year because of the pandemic-induced economic decline, as it was forced to make large impairment charges.

“The major factor is of course impairments,” Chief Executive Chris Vogelzang told Reuters, although he said planned higher costs also weighed.

Impairment charges reflect a bank’s estimation of the macroeconomic situation and how many of its loans could turn bad.

Annual impairment charges were 7 billion Danish crowns ($1.13 billion) last year, but Danske expects that number to halve in 2021 and forecasts the year’s net profits to more than double to between 9 and 11 billion crowns.

Danske reported a fourth-quarter net profit of 1.45 billion Danish crowns ($234.06 million), just below the 1.5 billion forecast by analysts in a Refinitiv poll.

The lender said it expected costs to drop to 24.5 billion this year, down from a record 28.1 billion last year.

In late 2019, Danske pledged to get costs and compliance under control by 2023. The goal depended on spending 1.5 billion on cost-cutting initiatives last year and 1,600 job cuts.

“We are close to half way,” Vogelzang said on the job losses. He could not rule out that more employees would be laid off in the coming years to cut costs further.

An internal investigation into Danske’s clients and transactions in its Baltic businesses, spurred by the lender’s involvement in a 200 billion euro ($239.84 billion) money-laundering scandal, was finalised in the fourth quarter, Danske said.

The findings had been reported to relevant authorities.

Danske will propose a dividend of 2 crowns per share. ($1 = 6.2029 Danish crowns) ($1 = 0.8339 euros) (Reporting by Nikolaj Skydsgaard; editing by John Stonestreet, Jane Merriman and Barbara Lewis)

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