UPDATE 1-S.Korea's Kookmin Bank sells $1.7 bln KB shares

* Kookmin Bank sells $1.7 bln stake in parent KB to meet regulations

* KB shares priced at 51,800 won, 3.2 pct discount to Thursday's close

* KB shares up 2.4 pct, outperform KOSPI (Recasts, adds share price)

SEOUL, July 8 (Reuters) - South Korea's top mortgage lender Kookmin Bank said on Friday it had sold a 9 percent stake worth $1.7 billion in its parent KB Financial Group within the offered price range, sending KB shares up nearly 4 percent.

Kookmin had offered 35 million shares in KB Financial at an indicative price range of 51,600 won-52,000 won each late on Thursday, or a discount of 2.8-3.6 percent to Thursday's closing price, according to a term sheet obtained by Reuters.

Kookmin Bank said on Friday it sold the stocks at 51,800 won apiece. The bank is required to offload its entire stake in KB Financial, which it acquired when it created holding company KB in 2008, by September under local banking laws.

Shares in KB rose 1.7 percent by 0030 GMT after gaining as much as 3.55 percent, in a flat wider market .

"The discount wasn't higher than expected, and among foreign buyers many look like long-term investors, which means there won't be any immediate sale of KB shares again," said Kim In, a banking analyst at Eugene Investment & Securities.

"The overhang issue had been pressuring KB shares."

Market speculation of the stock offering mounted in recent weeks, as KB shares rebounded steadily from multi-month lows in late June.

The stock, which had been weighed by concerns that KB may bid for $6 billion stake in Woori Finance Holdings , rebounded around 8 percent after it did not participate in the bidding that closed on June 29.

Citigroup Inc and Bank of America Merrill Lynch are joint bookrunners for the deal. ($1 = 1064.000 Korean Won) (Reporting by Ju-min Park and Fiona Lau; Editing by Jonathan Hopfner)