Danske Bank said that ratings agency Standard & Poor's had downgraded the bank's credit rating by one notch and adjusted its outlook upwards.

The ratings agency downgraded the Danske Bank Group to A-/A-2 from A/A-1. The bank is Denmark's biggest financial institution.

The bank's outlook was also adjusted upwards, from "negative" to "stable".

The action came as S&P's expects the bank will continue to see high impairment charges in its Irish banking business, as well ongoing challenges for some sectors in Denmark.

Danske Bank owns National Irish Bank in Ireland and Northern Bank in Northern Ireland and has been stung by high impairment charges as the Irish economy suffered during the financial crisis.

Reporting its first quarter results earlier this month, Danske Bank said it would hive off $6 billion of bad loans at NIB as part of a reorganisation aimed at drawing a line under the fallout from the 2008 financial crisis and generating cost savings to help revive earnings.

Danske's chief executive Eivind Kolding has warned the bank's writedowns are set to continue and earnings will remain unsatisfactory for two years. In its home market, the bank has faced writedowns first from troubled property investors and then from agricultural clients.

The bank said in a statement it took note of S&P's downgrades but also of the fact that S&P considered its business position to be strong and viewed its liquidity as adequate.

"S&P's decision to downgrade the bank was unexpected in light of the decline in loan impairment charges in Ireland and Denmark from the fourth quater of 2011 to the first quarter of 2012," the bank's chief financial officer Henrik Ramlau-Hansen said in the statement.

''At the same time, we have announced a new business model for Ireland and expect impairment charges to decline over the coming years," Ramlau-Hansen said.