Royal Bank of Scotland is finding the sale of its equities and advisory arms harder to crack than its small, well renowned corporate broking unit, leaving it facing big redundancy costs as part of its investment bank cull.

The majority-nationalised lender, which is exiting its loss-making equities and merger advisory arms in a drastic investment bank retreat, hoped to spark interest in some of the units by the end of January, ahead of the annual bonus season.

But with rivals retrenching too, their appetite is limited.

RBS is set to confirm on Monday or Tuesday the sale of its corporate broker Hoare Govett, adviser to the likes of Rolls Royce and easyJet, to U.S. firm Jefferies .

But while that deal offers buyers a line into some of the top FTSE 100 and 250 companies, for which Hoare Govett acts as a broker, it is likely to include only about 60 staff.

RBS aims to shed about 3,500 as part of its latest investment banking retreat. About 1,500 of those are in the businesses it is selling or closing -- cash equities, equities underwriting and M&A advisory -- and finding buyers looks far tougher as rivals shrink their own businesses.

It includes operations in Europe, Asia and the Middle East and a smaller operation in the United States.

With no single bidder emerging, the process quickly broke up into regional processes, people familiar with the matter said.

A process is running for Asia-Pacific, for European equities, and there are various advisory processes as well, one source said. Areas that do not lure a taker will be wound down.

The purchase price for assets may not be an issue, with RBS likely to accept a nominal price for any parts it can spin off. In fact, RBS will pay some staff costs related to the Hoare Govett switchover.

But most potential buyers -- bar emerging market outliers with bigger resources and no existing footprint in a particular region, which have so far proved elusive -- are balking at taking on more than a handful of expensive staff as markets remain rocky and cash equities struggle to make profits.

We don't want to fall into the trap of biting off more than we can chew, said a person at one firm that had also been circling the broking unit.

Staff costs are precisely what is spurring on RBS to try and flog the units too.

Redundancy costs for its investment bankers could run to several hundred million pounds -- a headache for a bank already under intense scrutiny over payouts for top bosses and staff.

RBS's investment bank restructuring could cost it 3.4 billion pounds in the next three years, including 738 million for equities, analysts at Credit Suisse estimate.

Lazard, the advisory firm seeking out buyers, has its fees tied to how much it can save the bank in restructuring costs, several sources familiar with the process said. Lazard and RBS declined to comment on the pay structure.

PICK AND MIX

Rival firms are expected to pick off key RBS staff, rather than take whole chunks of businesses, and Jefferies could swoop for staff from other parts if more buyers are not forthcoming, people familiar with the matter said. Jefferies declined to comment.

RBS's top M&A bankers in Europe have also explored ways of keeping their business afloat, potentially via a management buy-out with RBS retaining a stake, one source said. But that option is now unlikely to work, the person said.

Some bankers within RBS, keenly aware of the difficulties of selling the equities and M&A businesses and putting a value on them, do still hope that last minute contenders could emerge.

I'm amazed that Lazard managed to find a buyer for the brokerage, so everything is still possible, said one senior banker.

The most likely lifeline would come from banks in China, India, Australia or the Middle East, according to sources with knowledge of the matter.

Australia and New Zealand Banking Group and Bank of China <601988.SS> are among those circling parts of the Asian business and Commonwealth Bank of Australia has looked at parts of the Australian business, sources have said.

But even in Asia most contenders would be happier picking off key bankers, or swooping on portfolios of assets, such as shipping or trade finance loans.

RBS has halved the size of its investment bank as part of a major retreat since its 2008 taxpayer bailout, and has been forced by the government and the lower profitability across the industry to extend the retreat further.

RBS CEO Stephen Hester told staff that without changes, profitability in the bank's wholesale business would be at unacceptable levels.

The bank is keeping its stronger and more attractive business, like bond trading, debt advisory and foreign exchange, but will even trim those areas.

(Additional reporting by Sudip Kar-Gupta, Steve Slater and Kylie MacLellan in London, Narayan Somasunderam in Sydney and Denny Thomas in Hong Kong; Editing by Greg Mahlich and David Cowell)