UPDATE 2-KB Fin switches underwriters for rights issue -sources

* CS, JPMorgan, Merrill, Citi replaced amid fee argument

* Goldman, Morgan Stanley chosen for mandate

* Disruption may delay offering

By Kim Yeon-hee (Recasts with paragraphs on fee details, adds byline)

SEOUL, June 29 (Reuters) - KB Financial Group (105560.KS), the parent company of top South Korean bank Kookmin, has switched the foreign underwriters for its planned $2 billion rights offering following a disagreement over fees, three banking sources said on Monday, a move that may delay the issue.

Credit Suisse (CSGN.VX), JPMorgan (JPM.N), Bank of America-Merrill Lynch (BAC.N) and Citi (C.N), which had advised on KB's (KB.N) rights offering scheduled for August or September, have been replaced by Goldman Sachs (GS.N) and Morgan Stanley (MS.N), the sources said.

They told Reuters the termination was triggered by "an argument over fees" last week, asking not to be named because of the sensitivity of the matter.

All of the four banks, Goldman and KB Financial declined to comment, while Morgan Stanley could not immediately be reached.

Samsung Securities (016360.KS) and Korea Investment & Securities remain domestic underwriters for KB's rights issue.

One of the three sources said the four foreign banks previously picked to work on the rights issue had originally made a relatively low-fee offer, of 0.6 percent of the proceeds from the rights issue, to KB Financial but later tried to change the agreement.

That compared with the 2.35 percent Shinhan Financial Group (055550.KS) paid to three foreign underwriters -- JPMorgan, UBS (UBSN.VX) and BNP Paribas (BNPP.PA) -- to raise 1.3 trillion won ($1.01 billion) in a new share sale in March.

Coordinators and bookrunners of initial public offerings typically earn around 3 percent in fees.

While dropping one or several underwriters is unlikely to kill the offering, the disruption could slow the process.

KB Financial Chief Executive Hwang Young-key told Reuters last week that the group's board meeting was scheduled for early July to discuss the planned rights offer. [ID:nHKG80658]

The new share sale will give the group the muscle to possibly buy smaller rival Korea Exchange Bank (KEB) (004940.KS), or non-banking financial services companies as the group moves to boost non-banking and wholesale businesses.

KEB is majority owned by U.S. private equity firm Lone Star [LS.UL]. ($1=1285.9 Won) (Editing by Chris Lewis and Muralikumar Anantharaman)