HSBC has reiterated its shifting focus towards emerging markets, by announcing yesterday that it is selling its regional French banking division for €2.1 billion (£1.6 billion).

Britain’s biggest bank has entered exclusive negotiations with Banque Populaire, the French mutual, after it made a firm cash offer for the 400-branch business.

The assets comprise seven regional banks in the southern half of the country, including Société Marseillaise de Crédit, Banque de Savoie, Banque Chaix and Banque Marze. HSBC acquired the businesses, which are run semi-autonomously and do not carry the HSBC brand, when it bought CCF, the banking group, in 2000.

Several other bidders, including CIC and BNP Paribas, are thought to have taken a look at the business, which achieved a price tag of 21 times profits and 3.7 times shareholders’ equity.

Stephen Green, chairman of HSBC, said: “This is an opportunity to redeploy capital to other investments as we rebalance our activities towards emerging markets and faster-growing business segments.”

Last year HSBC committed itself to investing predominantly in emerging markets after coming under fire from Knight Vinke, the activist investor, for neglecting its Far East heritage in pursuit of the slower-growth markets of the West. The deal requires regulatory approval and could take up to six months to complete.

Banque Populaire is one of the biggest retail banking groups in France, with seven million customers and 2,900 branches. In 2006 it made €1.7 billion in net profits. Philippe Dupont, its chairman and chief executive, pledged to retain the brand names and individual identities of the seven banks. HSBC will continue to operate in France through its HSBC-branded network.

HSBC is expected to report a 12 per cent rise in annual profit to a record $24.7 billion (£12.4 billion) when it wraps up the British bank reporting season on Monday.

Although the bad debt charge is forecast to rise from $10.6 billion last time to $15.8 billion, because of US sub-prime losses, HSBC is expected to post strong results in Europe and Asia.

So far, the big British banks have admitted to about £5.1 billion in losses related to the credit crunch, mostly through exposure to asset-backed securities. HSBC’s exposure is more direct because it is the only big UK bank to have lent directly to US households with poor credit histories.

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