UPDATE 1-KBC shares rebound after three-day slide

* Shares leap as much as 16 pct after 23 pct slide

* Rebound after ING capital increase/divestments leads fall

(Adds details, background)

BRUSSELS, Oct 29 (Reuters) - Shares in Belgium's KBC (KBC.BR) rebounded on Thursday, after tumbling for three consecutive sessions following ING's (ING.AS) announced capital increase and the spin-off of its insurance business.

KBC's shares rose as much as 16.1 percent to 30.59 euros. They had fallen 22.8 percent in the three sessions since Friday's close.

An EU-imposed break-up and retrenchment of Dutch ING sparked fears that KBC and UK peers face tougher-than-expected sanctions from the European Commission in return for state aid, knocking their shares. [ID:nLQ54845]

However, a number of analysts said the market had overreacted, at least in the case of KBC.

KBW upgraded its rating on the stock to 'Outperform' from 'Market Perform', while reducing its target price to 37 euros from 40 euros.

Analyst Jean Pierre Lambert said one should not apply the ING solution to KBC as the latter did not need to raise fresh equity and was in a position to retain its franchise in Belgium and central and eastern Europe.

Bank Degroof upped its rating to 'Hold' from 'Sell', with a target price of 27 euros. Analyst Ivan Lathouders said this was in response to a 17.6 percent underperformance relative to the Euro Stoxx Bank index.

KBC, which has received 7 million euros ($10.32 million) in state aid, said late Wednesday it was committed to remaining in both banking and insurance in core markets, while reducing corporate lending and investment banking. [ID:nLS89123]

KBC repeated in a statement issued late on Wednesday that it expected a ruling from the Commission by early December and gave again an outline of its proposed business plan. ($1=.6785 Euro) (Reporting by Philip Blenkinsop; editing by Simon Jessop)