* 250 jobs to go, Swiss arm to be shut
* Targets combined net profit of 300 mln Sfr for next three years
* 2012 net profit 97.9 mln vs 15.4 mln Sfr in 2011
* 7 mln Sfr in restructuring charge
ZURICH, March 22 (Reuters) - Liechtenstein's second-biggest bank, LLB said on Friday it would cut 23 percent of its staff and close its Swiss arm as it responds to an international crackdown on undeclared Swiss funds.
The tiny European principality has been quicker than Switzerland to succumb to pressure on banking secrecy laws, the so-called "lift the kimono" among private bankers. However, its banks have struggled with the resulting drop in client assets.
Wealth manager LLB has also been slower than some of its rivals like Switzerland's Julius Baer to offset the fund withdrawals at home by tapping new growth markets in Asia.
However, analysts welcomed LLB's restructuring plans, which will see it shed 250 of its 1,090 total headcount, mainly in Switzerland. Investors liked a rise in dividend to 1.50 Swiss francs from 0.30 a year earlier - still a far cry from 3.40 francs it paid between 2008 and 2010 - sending its shares higher in morning trade.
"Over the next three years, we will consistently focus our financial and personnel resources on clearly defined client segments and markets with potential," Roland Matt, chief executive of the majority state-owned bank said in a statement.
Liechtensteinische Landesbank, or LLB, is targeting a combined net profit of more than 300 million Swiss francs in the next three years. It made a net profit of 97.9 million francs in 2012, up sharply from 2011 when profits dived and it slashed its dividend payout.
The bank will charge 7 mln francs for the restructuring against future earnings, it said.
"We welcome the strategy change and focus of LLB, which goes much further than that of VP Bank," said Zuercher Kantonalbank analyst Andreas Venditti, who rates the stock at marketweight.
Rival VP Bank recently named its third CEO is four years, part of an effort to stanch outflows of client assets.
LLB suffered a net outflow of client funds of 342 million Swiss francs in 2012, with over 1 billion francs of withdrawals in traditional markets, particularly Germany, outweighing more than 500 million of inflows, largely from Russia, Kazakhstan and Ukraine.
By contrast, Liechtenstein's biggest bank LGT, owned by the royal family, said last week it attracted 10.5 billion Swiss francs in net new assets last year.
Banking has helped make the 36,000 inhabitants of the 160 square-kilometre principality wedged in the Alps between Austria and Switzerland, among the world's wealthiest, with national output per head seen at $141,000 in 2012.
But LLB's profits have slid in recent years before recovering in 2012. The spectre of a U.S. probe into how LLB and a host of other banks helped wealthy Americans avoid paying tax has also loomed over the bank. [IDD:nL6N0AV2O7]
At 1419 GMT, LLB stock traded 0.6 percent higher, having gained as much as 2.2 percent in earlier trade and outpacing VP, which slid 2.3 percent. The Stoxx 600 bank index was unchanged.
$1 = 0.9456 Swiss francs Reporting by Katharina Bart. Martin de Sa'Pinto in Zurich contributed reporting.; Editing by Clelia Oziel