UPDATE 3-Nordea sticks to 2022 turnaround targets in boost to shares

* Operating profit up 11% v Q4 2019

* Repeated 2022 goals

* Dividend 0.79 per share during 2021

* Share gains over 4% in morning trading (Adds share price)

STOCKHOLM, Feb 4 - Nordea Bank stuck to its 2022 targets and cut its cost outlook on Thursday after delivering higher quarterly operating profit on improved lending income and growth in assets under management.

Increasing income and cutting costs are key to a turnaround plan for the Nordic region’s biggest bank, which is aiming to achieve a 10% return-on-equity and 50% cost-to-income ratio.

“We made good progress in 2020. We improved our performance and delivered on our business plan and key priorities. We are well on track towards meeting our 2022 targets,” Nordea Chief Executive Frank Vang-Jensen said in a statement.

Nordea’s shares were up 4.6% at 0829 GMT, outperforming the European banking index which was 0.3% higher.

“Solid set of results and generous dividend proposal are supportive of our positive view on the stock,” a Citigroup analyst note on Nordea’s results said.

Fourth-quarter operating profit rose 11% to 973 million euros ($1.17 billion), in line with a mean forecast of 972 million seen by analysts in a Refinitiv poll.

Nordea said its net interest income, which includes income from mortgages, increased 7% to 1.17 billion euros, just ahead of analysts’ expectations of 1.16 billion euros.

Loan loss provisions, closely watched in the wake of the steep economic slump due to the COVID-19 pandemic, fell to 28 million euros from 86 million euros a year ago, and lower than the 99 million euros expected by analysts.

Costs for 2021 will be below 4.6 billion euros, an improvement on the 4.7 billion previously forecast, it said.

Operating expenses for the year fell 22% to 4.6 billion from 5.99 billion in 2019. However, costs in the fourth quarter were 3% higher than the last quarter of 2019.

Nordea proposed a dividend of 0.39 euros per share for 2020, taking the total shareholder payout in 2021 to 0.79 per share as it has yet to pay its 2019 dividend due to restrictions imposed as a result of the coronavirus crisis.

The bank said 0.07 euros will be paid in February and 0.72 will be paid after September. ($1 = 0.8324 euros) (Reporting by Tarmo Virki in Tallinn and Colm Fulton in Stockholm; Editing by Jacqueline Wong, Amy Caren Daniel and Alexander Smith)