Royal Bank of Scotland is retrenching to its core businesses and plans to exit up to 36 countries, but unpicking a decade of deals in the eye of a financial storm will be a long slog.

Retail and commercial banking businesses in Asia, such as in India, Pakistan, Indonesia and Taiwan, are likely to find the most interest.

HSBC, Standard Chartered and Australia and New Zealand Banking Group are all considering bids for the Asian assets, people with direct knowledge of the matter have told Reuters.

Prospective buyers -- even those with reinforced balance sheets -- are wary of using precious capital on deals, however.

Acquirers are scarce and they are scared, one banker said. It only takes a suggestion that they might be overpaying for an acquisition and their stock is down.

RBS has also put its central and east European (CEE) units on the block and signaled all or parts of U.S. bank Charter One will be pared, but they may need calmer times to get interest.

Chief Executive Stephen Hester -- backed by majority shareholder the UK government -- is reversing the acquisitive strategy of his predecessor, Fred Goodwin.

It will focus RBS on retail and commercial banking in Britain and the United States and target a much smaller investment bank on big financial hubs and 17 key countries. In effect, RBS is quitting wherever it lacks scale.

Morgan Stanley and UBS are advising on the retreat, people familiar with the matter said, alongside consultancy McKinsey. Morgan Stanley is leading the Asia sales.

It is not clear if any bidder would have the appetite for all a region's assets. That would provide speed and certainty for RBS by avoiding the best bits being cherry picked.

Hester said the retreat will take three to five years. That dampened expectations for quick deals, and could be a realistic timeframe given the grim economic outlook.

After all, RBS last month scrapped the sale of its UK insurance business. Other well-regarded businesses are also not getting snapped up, even in Asia, where growth has slowed but remains far higher than in the west.

Crippled insurer American International Group is facing failure in its effort to sell its Asian unit.

INDIA IS THE PRIZE

RBS landed some prize Asian assets under its ill-fated acquisition of parts of Dutch bank ABN AMRO in 2007, including about 3.7 million retail customers.

But branches are thinly spread and most will offer only a bolt-on for suitors.

In India, RBS acquired 28 branches from ABN and has more than 3,000 staff, with strength in areas like project finance, and has $7.4 billion in assets, and $3.8 billion in deposits.

The unit could be worth about $700 million, according to people familiar with the matter.

India is the prize, said one of the sources.

RBS plans to quit Pakistan, where it has been for 60 years and is strong in equities and corporate finance.

The bank has a larger network in Indonesia than any other foreign bank, with 20 branches in ten cities. Other pockets likely to get interest include Taiwan, China, Japan, Singapore and New Zealand and United Arab Emirates in the Middle East.

ANZ has hired Credit Suisse for a potential $2 billion bid for the Asian assets, sources said.

HSBC said its $18 billion rights issue will give it flexibility to pursue bolt-on deals and Standard Chartered said it will keep an eye on M&A but with a fairly cautious perspective.

The sale of assets in CEE could be on ice until confidence returns after several torrid months for banks in the region.

RBS acquired 20 branches in Romania and 10 in Kazakhstan as part of its ABN deal, and also plans a full retreat from Slovakia and Uzbekistan.

Hester said last week U.S. bank Citizens will remain key, but with renewed focus on New England and the mid-Atlantic states. More vulnerable are the assets of Charter One, the bank bought five years ago, in Illinois, Indiana, Michigan and Ohio, and areas such as credit cards and dealer finance.

(Additional reporting by Michael Flaherty, Tony Munroe, Saeed Azhar, Narayanan Somasundaram and Denny Thomas; Editing by Andrew Macdonald)

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