UPDATE 1-KDB CEO says to "aggressively" mull KEB buy -report

* KDB to actively participate in industry shake-up -report

* KEB shares up 1.4 pct, versus 0.4 pct drop in KOSPI

(Adds share price, background)

By Kim Yeon-hee

SEOUL, Nov 20 (Reuters) - The state-owned Korea Development Bank (KDB) will "aggressively" consider buying Korea Exchange Bank (004940.KS), a media report quoted KDB CEO as saying, in his first public expression of interest in the domestic rival.

His remarks, which KDB could not immediately confirm, come as U.S. private equity firm Lone Star [LS.UL] is believed to be restarting the sale of its 51 percent stake in South Korea's No. 6 lender, in a deal estimated at about 6 trillion won.

"We are open to possible acquisitions of domestic and foreign banks such as Korea Exchange Bank (KEB)," online media outlet eDaily quoted Min Euoo-sung, chief executive of Korea Development Bank, as telling a forum on Friday.

"As there have always been shake-ups in the banking sector after financial crises, our banking industry is likely to face a shake-up next year. KDB will aggressively participate."

The prospective bidding for KEB, which has strength in foreign exchange trading and trade financing, may help the state-owned bank expand its deposit base prior to a planned government stake sale in KDB, though some analysts have cautioned the purchase may prove burdensome.

Min told reporters on Nov. 2 that he was in discussion with the government how to boost its retail base. [ID:nSP350795]

Previous attempts by Lone Star at selling a majority of KEB to Kookmin Bank and HSBC (HSBA.L) failed due to price differences and legal disputes over the private equity house's South Korean activities.

Kookmin Bank is the core unit of KB Financial Group (105560.KS), which has also reiterated its interest in KEB.

KDB offered to buy an over 25 percent stake of Lehman Brothers before it collapsed in September last year, but the talks failed due to price gaps and volatile market conditions.

Shares in KEB rose 1.4 percent at 14,850 won by 0149 GMT, outperforming the wider market .KS11, which fell 0.4 percent.

(Editing by Jonathan Hopfner)