* RBS Asia hiring in equities, investment banking
* Seeking Chinese securities joint venture
* HSBC "might be" in lead for retail, commercial Asia assets (Adds quotes, detail, background, bylines)
By Don Durfee and Michael Flaherty
HONG KONG, Oct 28 (Reuters) - Royal Bank of Scotland's Asia-Pacific operations are "eating the lunch" of rivals, hiring in derivatives and trading, and in talks about a China securities joint venture, according to the bank's regional CEO.
RBS, 70 percent-owned by the British government after last year's bailout, is selling its retail and commercial banking business in Asia, shrinking its presence across the region and reducing lending to clients.
Nevertheless, Asia-Pacific CEO John McCormick said in an interview on Wednesday that the bank was back in business, hiring across several divisions and focusing on top corporate clients in the region.
McCormick would not disclose details of the sale of the remaining retail and commercial units in Asia, saying only that HSBC "might be" in the lead to acquire the assets. He hopes to wrap up a sale soon.
"Some of our colleagues in other banks are trying to box RBS. Why? Because we're a right royal pain in the backside. We're up in their face eating their lunch," McCormick said.
"We were never out of the game, but if there was ever any doubt, we are bloody well back in it. And we are hunting these people down."
The 48-year-old Irish-born banking veteran, who spent 16 years at Bank of America before joining RBS in 2000 -- he quips he's a "one woman, two-bank" man -- said RBS endured tough times last year and is having to narrow its focus in Asia.
By selling its Asia retail and commercial business, RBS will pare its list of 10,000 corporate clients to fewer than 1,000.
The retail and commercial banking divisions in China, India and Malaysia are worth "a few hundred million" dollars, a source familiar with the matter told Reuters earlier this month.
"At the end of the day, there's no doubt we have had to pick ourselves up and dust ourselves off and restate what we're doing. And we bit the bullet at the end of last year," McCormick said, listing a series of top management changes.
But morale issues at RBS are not unlike those at other banks, he said, noting Goldman Sachs, Merrill Lynch and other institutions had gone through major changes, too.
RBS remains competitive in areas such as currency derivatives, debt underwriting and private placements, he said.
The bank has also been involved in large debt and equity offerings, including a dollar bond issue by commodities trader Noble Group, Rio Tinto's rights issue, and bond offerings from the Australian, Italian and British governments.
Doubts remain, however, as to whether RBS and other international banks that scaled back lending and other services in Asia during the downturn can win back clients.
"Customers have a long memory in Asia," said Markus Ohlig, Asia Pacific head of consultant Greenwich Associates.
"It will be difficult to rebuild those relationships. On average, clients in this part of the world are more relationship-driven than in Europe or the United States."
HIRING
RBS is hiring predominantly in equities, said McCormick, such as cash equities, equities derivatives and equity capital markets. It's hiring in markets, sales and trading and also hiring senior corporate coverage bankers, investment bankers and a new head of financial institutions for the region.
"We've had very little turnover on the trading side. The real game for us next year is to broaden and deepen relationships with clients," he said, with a focus on currency, interest rates, bonds, credit, commodities and equities products.
McCormick, 48, spoke about how the bank will use its slimmer balance sheet to gain business.
"The balance sheet is reduced at the group level, but Asia is a growth area," he said. "We'll be more frugal than in the past."
"Historically, both ABN (AMRO) and RBS were a little too lavish with their balance sheet, so we will be cleverer and more demanding of the sectors and the counterparty-specific clients."
At the same time, RBS will move away from products that are balance sheet and liquidity heavy, McCormick said, such as long-dated asset finance projects, project finance and leveraged finance. Edinburgh-based RBS has cut its presence to 11 Asian countries from 15.
RBS has missed out on a resurgent initial public offering market in Hong Kong and China, partly, McCormick noted, as the bank lacks a securities joint venture in China.
"We are actively seeking a partner," he said. That's one of the top five intiatives for the investment banking side."
He called the sale earlier this year of RBS's stake in Bank of China "regrettable," saying it would have been a great strategic partnership. Like other banks hit by the financial crisis, RBS was forced to raise money through selling off a stake in the Chinese bank.
McCormick said that, despite the challenges, RBS is fighting hard to wrest market share from rivals in what remains of its footprint in Asia.
"There's still that bit of the mongrel in us. That kind of insurgency, that hunger, a desire to win." (Editing by Chris Lewis and Ian Geoghegan)