It was the first loss since Nordea was created as the result of a bank merger in 1998.

The bank, which also set out Vang-Jensen's financial strategy on Thursday, had already been seeing profits decline due to low interest rates and tough competition in mortgages and loans.

Like other Nordic banks, Nordea's shares have tumbled following a money-laundering scandal at Danske Bank and have shed around 40% in the past two years.

In the third quarter Nordea said it faced one-off charges totalling 1.3 billion euros ($1.5 billion), resulting in an overall operating loss of 421 million euros for July-September.

That compared with analysts' expectations for a 905 million euro profit, according to a Refinitiv poll of six analysts.

Since Vang-Jensen took over as CEO last month, the bank has announced the departure of three senior executives including its finance chief and its chief operating officer as the bank looked to revise its leadership.

On Thursday, it set a target to achieve a return-on-equity target of above 10% in 2022, a cost-to-income ratio of 50%, a management buffer of 150-200 bps above the regulatory CET1 requirement and a dividend payout ratio of 60-70%, both starting from 2020.

"We will continuously assess the opportunity to use share buybacks as a tool to distribute excess capital," the bank said.

The bank said it would provide further details on its new financial targets in a briefing for investors on Friday.

Excluding the one-off charges Nordea reported a return on equity of 8.4% in the third quarter. That was the lowest of the Nordic region's top six banks and well below Sweden's SEB and Swedbank which had 13.2% and 14.1% respectively.

Despite the loss, Nordea's shares rose 0.3% by 0856 GMT, in line with the European banking index <.SX7P>.

"I think its fairly encouraging that they now have a clear target to strive against with a new CEO," said Robin Rane, analyst at Kepler Cheuvreux. "The new cost targets for 2020 of 4.7 billion was lower than the market was expecting in terms of costs for 2020, so I would say on the cost side, besides the capital policy, I think the targets are pretty encouraging."

Christer Gardell, co-founder and managing partner of activist fund Cevian Capital, Nordea's sixth largest shareholder with a 2.3% stake, said the new targets looked conservative but that was typical for a company that has recently changed its CEO and could be upgraded in the future.

"The scene is now set to quickly improve the bank's results, and thereafter exceed and upward adjust the very conservative targets, especially for return on equity – we see significantly more potential in the bank," Gardell said in an emailed statement to Reuters.

Nordea said that one-off items contributing to the third quarter loss included an impairment charge for IT intangibles, a restructuring provision, an additional loan loss provision and expenses related to a share sale.

"We are reporting an expense related to sale of Luminor shares of 75 million euros," Vang-Jensen said in a statement, referring to the divestment of its Baltic joint venture with DNB to a Blackstone private equity consortium.

"An impairment charge of 735 million euros is reported, largely due to the new business plan, which also leads to a restructuring provision of 204 million euros," he added.

Vang-Jensen said Nordea had increased its provisions after dialogue with the European Central Bank, reflecting a more subdued outlook in certain sectors in the third quarter, but said it was a one-off event and did not go into further details.

Interest income, the bank's most-watched income line, fell 4% versus the same period a year earlier to 1.08 billion euros.

Nordea moved its headquarters to Helsinki from Stockholm last year in a bid to trim costs and ensure more of its business fell under euro zone rather than Swedish banking regulations.

Nordea said it targets a dividend of 0.4 euros for 2019. Analysts had forecast a dividend of 0.47 euros in the Refinitiv poll.

($1 = 0.8980 euros)

(Reporting by Anne Kauranen, Johan Ahlander, Colm Fulton and Tarmo Virki; Editing by Christopher Cushing and Susan Fenton)

By Johan Ahlander and Anne Kauranen