June 29 (Bloomberg) -- KB Financial Group Inc. chose Goldman Sachs Group Inc. and Morgan Stanley to arrange its $2 billion share sale, replacing banks including JPMorgan Chase & Co. amid a dispute over fees, five people familiar with the matter said.

Seoul-based KB Financial, owner of South Korea’s largest bank, canceled previous agreements with Bank of America Corp., Citigroup Inc., Credit Suisse Group AG and JPMorgan, the people said, declining to be identified because talks are private. Yonhap Infomax reported the replacements earlier today.

KB Financial switched advisers after firms including Bank of America unsuccessfully tried to renegotiate fees, three of the people said. Under the previous agreement, KB Financial would have paid arrangers 0.6 percent of the capital raised, about one fourth of average commissions for underwriting rights offers, they said.

KB Financial shares fell 0.7 percent to 42,450 won as of 2:40 p.m. in Seoul trading.

Chairman Hwang Young Key said in a June 17 interview he will seek board approval to sell as much as $2 billion of new shares to existing stockholders. Some of the money may be used to extend more loans and finance possible acquisitions once the economy picks up, he said.

Samsung Securities Co. and Korea Investment & Securities Co. were also hired to help manage the offering, spokespeople at the two firms said.

Choi In Seok, a spokesman for KB Financial, declined to comment. Spokespeople for JPMorgan, Goldman Sachs, Bank of America, Credit Suisse and Morgan Stanley either declined to comment or weren’t immediately available.

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.netJungmin Hong in Seoul at jhong47@bloomberg.net

Last Updated: June 29, 2009 01:52 EDT