Royal Bank of Scotland Group PLC (RBS) is close to selling its retail- and commercial-banking assets in China, India and Malaysia to U.K. peer HSBC Holdings PLC (HBC), people familiar with the situation said.

According to the people, regulatory approval is pending for the deal, which is expected to close this month but could still fall through.

The assets in those countries are the final piece of an auction that began earlier this year, as the U.K. lender continues to trim operations to repay a government bailout during the financial crisis.

In August, Australia & New Zealand Banking Group Ltd. (ANZ.AU) bought RBS' retail- and commercial-banking operations in Taiwan, Singapore, Indonesia and Hong Kong, and its institutional businesses in Taiwan, the Philippines and Vietnam for $550 million. Pakistan's MCB Bank Ltd. bought the Pakistan operations.

Rival Standard Chartered PLC (STAN.LN) was at some point in exclusive talks with RBS over the Indian, Chinese and Malaysian assets, but the talks stalled over price, a person familiar with the situation has said.

The person said Standard Chartered was willing to pay $200 million to $250 million for the assets but RBS was expecting more.

RBS will soon see the U.K. government owning 84% of the bank, from 70% currently, after it decided to participate in a state insurance scheme to protect it against big impairment losses.

The bank is going through a massive restructuring following a total GBP45.5 billion capital injection by the government since last year. The bank expanded aggressively under former Chief Executive Sir Fred Goodwin, including through the acquisition of part of ABN Amro Holding NV in 2007.

RBS paid GBP10 billion for its part of ABN, which included the Asian businesses and wholesale-banking operations in Europe.

By selling its Asia retail and commercial operations, RBS will pare its list of 10,000 corporate clients to fewer than 1,000.

The bank is retaining its investment-banking operations and corporate-banking business in the region.

Meanwhile, HSBC's interest for the assets underscore the bank's hunger to continue growing in Asia, where it is already focused on.

Because of its exposure to the region, U.K.-based HSBC has been able to weather the financial crisis better than its peers.

Banks have been eyeing expansion in China in particular, a country that has continued to grow despite the global recession.

HSBC currently has 87 outlets across China, one of the largest networks among foreign banks in the country.

It has said its goal is to have around 120 outlets by the end of next year.

-By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, patricia.kowsmann@dowjones.com
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