* To stop activities in non-core markets
* Aims to bring cost-income ratio down to 55 pct
* Aims to repay "significant" part of state aid
* Says selling Irish unit not an option (Adds details, comments)
BRUSSELS, Oct 8 Belgian banking group KBC said on Monday that concentrating on core markets of Belgium and eastern Europe should increase its profitability after it has weaned itself off most state aid.
Johan Thijs, chief executive since May, said KBC would stop almost all activities outside of Belgium, the Czech Republic, Hungary, Slovakia and Bulgaria to bring down costs.
KBC, which took 7 billion euros ($9.14 billion) from Belgium and the region of Flanders during the 2008-09 financial crisis, said its cost-income ratio should drop to 55 percent in 2015 from 60 percent in 2011.
"The targets aren't shocking, I think they're realistic," said analyst Matthias De Wit at Petercam.
KBC has made the main divestments it agreed to with European regulators in exchange for receiving financial aid, but it still needs to sell smaller units in Belgium, Germany, Russia and Serbia.
The group would also review its operations in financing long-term projects, Thijs told reporters at the group's headquarters in Brussels.
"If we need to finance projects that are not part of our core markets or our current client base, if they are different from that, we will no longer pursue such projects in the future," said Thijs, who had headed KBC's Belgian business unit.
KBC said that, apart from cutting costs, it would also try to increase income in core markets by adapting its product range.
Shares of the group declined as much as 5.7 percent on Monday, making it the worst performer on the FTSEurofirst 300 index of leading European stocks.
"Shares shot up on Friday ahead of the presentation as some market participants expected big news on the repayment of state aid. Now there was little news on this front they are disappointed," De Wit said.
KBC still needs to repay a further 4.17 billion euros of principal, plus penalties, by the end of 2013, having already paid 500 million euros of principal in December. Thijs said KBC would pay a significant part of this by the end of 2012.
KBC will create a new business unit for its Czech operations and will split up its Merchant Banking division.
Thijs declined to specify the extent of expected job cuts.
KBC group will now consist of the Belgian, Czech and International Markets businesses. KBC Bank Ireland, with a sizeable loss-making residential mortgage business, would be incorporated into the latter unit.
KBC had 16.4 billion euros ($21.42 billion) of outstanding loans in Ireland, 21.4 percent of which were marked as non-performing at the end of the second quarter.
On Monday, KBC said that it would aim to generate more income from retail banking in Ireland and that selling the unit was not an option for now. ($1 = 0.7657 euros) (Reporting By Robert-Jan Bartunek; Editing by Philip Blenkinsop and Toby Chopra)