UPDATE 2-KBC sets bolder targets, share buyback

(Adds shares, comment, more details)

By Emma Davis

PRAGUE, Dec 7 (Reuters) - Belgian banking and insurance group KBC <KBKBt.BR> set more ambitious targets for the next three years on Thursday and announced plans to buy back some 3 billion euros ($4 billion) of its own shares by 2009.

KBC's stock was up 3.25 percent at 90.45 euros by 0946 GMT, extending its advance in the past seven trading days to 8 percent. The DJ Stoxx European banking index <.SX7P> was up 0.6 percent in morning trade.

KBC said it would target earnings per share growth of at least 12 percent in the period 2007-2009, compared with a 10 percent goal for 2006-2008.

It also aims for an average adjusted return on equity of at least 18.5 percent over the next three years from a previous 16 percent.

Analysts said the net goals were higher than they had expected and Delta Lloyd Securities said in a research note that it would increase its share price target from 96 euros.

BUYBACK

The 3 billion euro share buyback follows the recent completion of a 1 billion euro programme and is prompted by the high price of possible acquisitions, notably in its second home market, central and eastern Europe.

Chief Executive Andre Bergen told a news conference in Prague he was not worried about the price KBC would have to pay for its shares. They traded at about twice book value, he said, compared with a multiple of four to five for central and eastern European assets.

However, KBC said it could review the buyback plan if it found value-enhancing projects in the meantime.

Bergen said KBC preferred to expand on its own given the cost of potential purchases.

"If it makes good strategic sense, we certainly will increase the number of franchises in our portfolio. At the moment, our teams are looking in different countries at several possibilities," Bergen said.

KBC has steadily built its presence in central and eastern Europe with a series of acquisitions and is frequently cited as a bidder for banks that come on offer there.

Bergen said the focus of the group remained on Belgium and central and eastern Europe, but high prices in the latter meant KBC would not exclude other parts of the world.

KBC also announced on Thursday that its Hungarian financial service provider K&H Group would almost double its network to 320 branches by 2009.

KBC set a banking cost-income ratio target of a maximum 55 percent and said it aimed for an insurance combined ratio -- which measures claims against premiums -- of no more than 95 percent.

KBC said it intended to maintain its policy of increasing its cash dividend with a payout ratio of 40 to 45 percent.

This year's dividend would not include the capital gain of around 0.5 billion euros from the sale of Spanish private banking company Banco Urquijo, KBC said, adding this would be included in the 2007 share buyback. ((Reporting by Emma Davis; writing by Philip Blenkinsop; editing by Sue Thomas, Paul Bolding; e-mail: emma.davis@reuters.com; Reuters Messaging: emma.davis.reuters.com@reuters.net; tel: +32 2 287 6810))

Keywords: KBC/