UPDATE 3-Danske Bank ousts CEO Kolding, says needs more qualified banker
* Danske Bank says to replace CEO Kolding
* Appoints head of corporate banking Thomas Borgen
* Shares rise to highest level since May 2011
COPENHAGEN, Sept 16 (Reuters) - Danske Bank ousted Chief Executive Eivind Kolding after 19 months in the job during which profit growth stagnated and it was pilloried over a failed advertising campaign, bluntly saying it needed a more qualified banker at the helm.
Denmark's biggest bank, which has not paid a dividend in five years, said he would be replaced by Thomas F. Borgen, head of its corporate and institutional banking unit.
Kolding was voted out unanimously by the board early on Monday and learned of his ousting when he turned up for work. A Danske source who did not wish to be named said the decision took the chief executive by surprise.
"It is, in this phase, necessary to have a chief executive officer with stronger qualifications within banking," the bank said in a statement.
Since becoming CEO, the bank's revenues have been largely flat though loan impairments have improved sharply. Danske's return on equity is far lower than that of its Nordic peers. Its profitability in the second quarter of the year was 6.2 percent, compared with rival Nordea's 11.5 percent.
Danske Bank's shares were up 3.5 percent at 120.50 crowns per share at 0151 GMT - the highest level since May 2011 - against a 0.8 percent rise in the Copenhagen stock exchange's benchmark index.
Kolding had also come under criticism as CEO after the lender launched a rebranding TV and print advertising campaign called "New Standards" last year which was widely criticised.
The bank used an image of a man with a dollar bill taped to his mouth, with "Occupy" written across it. The ad provoked a barrage of criticism on social media for using the anti-capitalist Occupy movement to promote the bank. Danske apologised and withdrew that part of the campaign.
Danske Bank has struggled to recover from the global financial crisis as quickly as its Nordic peers, hurt by a burst property bubble as well as a struggling agriculture sector that has left Denmark teetering on the edge of recession for the past year.
Kolding was made chief executive in February 2012 after holding the positions of deputy chairman and chairman. He joined Danske Bank in 2001 after more than a decade at Danish oil and shipping group A.P. Moller-Maersk which has a 22.8 percent stake in the lender.
Analysts say he had lost some credibility with investors after the country's financial regulator called on the bank to get tougher on the way it calculates risk in its corporate loan book. The lender said at the time that it may not be able to pay its 2013 dividend in full.
"They were chastised over risk weights, and chastised over risk management, so it does feel like the CEO didn't have control over these things," said Nick Anderson, analyst at Berenberg Bank.
Danske Bank's image rating was the 10th best in Denmark in 2005, according to an annual banking image rating carried out by Berlingske Business Magasin. In 2011, before Kolding took charge, it was at 94th and this year at 125th.
Borgen, a Norwegian, is the first non-Dane chosen to be the bank's chief executive. He headed the bank's Norwegian unit from 2001 to 2009, when he was appointed head of International Banking Activities and Danske Markets.
"Thomas F. Borgen is an experienced and customer-oriented banker, who knows how to run a modern bank," Chairman Ole Andersen said.
He will have the task of pulling up the bank's return on equity - Danske wants to get it above 12 percent in 2015. He will also be expected to get the lender in shape to pay dividends - Danske is the only major Nordic bank not to do so.
Danske has challenged the regulator's demands that it get tougher on its risk weights - and Borgen will be overseeing that battle as it goes to the company appeals board.
Henrik Didner, a portfolio manager at Swedish mutual fund Didner & Gerge Fonder AB which owns 1.44 percent of the share capital in Danske, said the appointment signalled the board's determination to transform Danske into a more competitive bank.
"They may have lacked that a little in the last four to six years because they have been so occupied with the problems (of the financial crisis). Things could be done faster," Didner said.
Alm Brand analyst Jesper Christensen said: "What they need going forward is a chief executive with more operational banking experience than Eivind Kolding."
Danske Bank's pre-tax profit rose 7.1 percent to 2.68 billion crowns ($476.52 million) in the second quarter 2013 from 2.50 billion crowns in the second period of 2012, while loan impairment charges almost halved to 924 million crowns from 1.69 billion crowns.