* To refocus on less capital intensive activities
* Sees scope to increase market share
* Aims to increase dividend payouts (Adds details)
By Maya Nikolaeva
PARIS, Feb 5 (Reuters) - BNP Paribas pledged a higher dividend payout and said its priority was to keep its return on equity at 10 percent beyond 2016 after it announced further cost cutting measures for its investment bank.
BNP said it had started to cut the investment bank balance sheet earlier than European rivals and said it now hopes to win market share as they play catch up.
Reporting annual results on Friday, it set out plans to cut costs in corporate and institutional banking by a further 12 percent by 2019 to bolster profitability, and sought to reassure investors about its capital buffers.
BNP said it will pull back from costly activities, such as repo operations and market making in bond trading, and reinvest part of the capital in securities services, transaction banking, and advisory businesses.
It declined to give the impact on jobs, adding that its "transformation plan" is in early stages.
Regulatory and compliance costs, and a previously announced 900 million euro ($1 billion) writedown on the value of its BNL Italian unit, pushed fourth-quarter net income down 51.7 percent to 665 million euros, undershooting the average of analyst estimates of 845 million in a Reuters poll.
BNP shares rose 2.1 percent to 41.85 euros by 1555 GMT.
BNP Paribas results come after some of Europe's biggest banks, such as Deutsche Bank and Credit Suisse , posted full year losses and flagged tough times in investment banking.
BNP Paribas shares have been trading at a discount to the sector with a price-to-earnings ratio of 7.20 versus 7.31 for Credit Suisse and 8.49 for HSBC, according to Thomson Reuters data.
France's biggest bank sought to reassure investors with a common equity tier one ratio target -- a key measure of financial health -- of 12 percent by 2018 versus 10.9 percent at the end of 2015.
"The level of CET 1 is a good sign for the continued gradual increase in dividends," said Yohan Salleron, a fund manager at Mandarine Gestion.
BNP Paribas chief executive office Jean-Laurent Bonnafe told analysts on a conference call that "one should assume that the payout ratio could go up", according to the new 2017-2020 strategic plan, that is currently in the works.
In 2016 the actual return on equity could come at 9-9.5 percent, the bank said.
Fourth-quarter revenue growth was slightly better than expected, with corporate and institutional banking (CIB) revenue up 8.4 percent, partly thanks to a sharp increase in derivatives trading. Pretax income fell 9 percent, reflecting a rise in regulatory costs.
"Unlike our competitors, we already deleveraged our CIB back in 2011 and 2012," Chief Executive Jean-Laurent Bonnafe said in an interview on the bank's website. ($1 = 0.8936 euros)
Additional reporting by Julien Ponthus and Sudi Kar-Gupta; Editing by James Regan and Keith Weir