RPT-UPDATE 1-KEB surges after HSBC agrees majority stake buy

(Repeats to add UPDATE 1 tag)

SEOUL, Sept 4 (Reuters) - Korea Exchange Bank (KEB) (004940.KS: Quote, Profile, Research, Stock Buzz) shares surged up to 5.1 percent on Tuesday as HSBC's move to buy a controlling stake was seen bolstering its competitiveness in Asia's third-largest banking market.

But rival Kookmin Bank (060000.KS: Quote, Profile, Research, Stock Buzz) fell 1.6 percent to 75,200 won as HSBC Holding's Plc (HSBA.L: Quote, Profile, Research, Stock Buzz) (0005.HK: Quote, Profile, Research, Stock Buzz) agreement on Monday to buy a 51 percent stake in KEB from private equity fund Lone Star [LS.UL] threatened to take away an asset long coveted by South Korea's biggest lender.

"If HSBC takes over, KEB could become more competitive against other banks in Korea and that would benefit minority shareholders," said Koo Kyung-whe, an analyst at Hyundai Securities.

KEB shares gained 4.5 percent to 15,250 won by 0035, compared to a 0.48 percent gain in the main KOSPI .

HSBC's $6.3 billion offer price on Monday corresponded to 18,045 won per share, according to the U.K.-based lender's conversion rate.

The surge in South Korea's fifth-biggest commercial lender came despite concerns the deal may not secure government and regulatory approval, and even though the U.K.-based lender omitted to provide a tender offer for minority shareholders.

"Frankly speaking, nobody is sure what will happen," said Koo, referring to approval of the deal.

Kookmin may end up being a big loser from the HSBC move for KEB. U.S. fund Lone Star last year scrapped a deal to sell KEB to South Korea's biggest lender for $7.3 billion, citing regulatory issues.

Kookmin has been actively looking to expand its dominant market share and analysts expect the lender to continue seeking acquisitions, possibly in the form of a brokerage given that it currently does not own an investment house.