Danske Bank on Wednesday raised its long-term earnings target and said it plans to divest its Norwegian retail business as part of a strategy to catch up with more profitable Nordic rivals.

Denmark's largest lender now aims for a return on equity (ROE) by 2026 of 13%, up from a previous goal of between 8.5% to 9%, and a cost-income ratio of around 45%, down from a mid-50s percentage goal earlier.

"Danske Bank has during recent years made fundamental changes to refocus the bank, reduce our risk exposure, develop our organisation and accelerate our commercial momentum," said CEO Carsten Egeriis.

Over the last few years, Danske has poured money into anti-money laundering measures and digital systems, investments which left the lender lagging behind its Nordic competitors on earnings.

Rival Nordic banks Nordea and DNB both have long-term ROE targets of more than 13%, while Swedbank has a goal of at least 15%.

As part of its new strategy, Danske announced it would exit the Norwegian retail customer market to focus on large businesses in the Nordic country instead. The process of finding a new owner was "well-progressed," it said.

Danske Bank is Norway's third-biggest bank after DNB and Nordea with a market share of close to 5%, regulatory data shows.

Danske also said it would double investments into the strategic development of the bank, including digital platforms, expert advisory services and sustainability.

The lender's new financial targets are based on an assumption of 3% lending growth and less than 1% growth in deposits, Danske said.

Danske, which paid no dividend for 2022 due to a $2 billion settlement

in the United States and Denmark over a massive money-laundering scandal, said it will restart dividend payments when it reports results for the first half of 2023 in July. ($1 = 6.9713 Danish crowns) (Reporting by Nikolaj Skydsgaard, editing by Terje Solsvik)