Feb. 29 (Bloomberg) -- HSBC Holdings Plc, Europe's biggest bank by market value, may sell its regional branches in France to Banque Federale des Banques Populaires for 2.1 billion euros ($3.2 billion) and focus on faster growing cities and emerging markets.

HSBC is in exclusive talks and has a ``firm'' cash offer for what would be its biggest-ever sale, the London-based bank said today in a statement. The price is 21 times the units' after-tax earnings last year and 3.7 times shareholders' equity on Dec. 31, HSBC said. The 400 branches generated less than 20 percent of HSBC's French pretax profit last year.

London-based HSCB aims to earn 60 percent of pretax profit from emerging markets, up from about 50 percent in the first half of 2007. In the U.S., it has cut lending, closed mortgage units and changed management to curtail bad debts from consumers with subprime credit scores. HSBC may need to add $13 billion to provisions, Goldman Sachs Group Inc. analysts wrote last month.

The French sale ``is logical, it is consistent with their strategy,'' said Derek Chambers, an analyst at Standard & Poor's Equity Research Ltd. in London who has a ``hold'' rating on the stock. ``The real challenge is to sort out the U.S.''

The regional banks are Societe Marseillaise de Credit, Banque de Savoie, Banque Chaix, Banque Marze, Banque Pelletier, Credit Commercial du Sud-Ouest and Banque Dupuy de Parseval, the company said. They had assets of 8.38 billion on Dec. 31 and profit of 100 million euros in 2007. They have 400 branches and 2,950 workers.

`Faster Growing Businesses'

``This offer is an opportunity for HSBC to redeploy capital to other investments as we pursue our strategy and rebalance our activities towards emerging markets and faster-growing business segments,'' HSBC Chairman Stephen Green said in the statement. There are still ``significant opportunities'' for banking in urban France through HSBC's international network, Green said.

The French units were part of Credit Commercial de France, which HSBC acquired for 11 billion euros in 2000, outbidding ING Groep NV. HSBC will retain its asset-management, investment- banking, corporate-banking and private-banking operations in France, the company said.

HSBC closed 1.8 percent lower at 766 pence in London trading. The shares are down 9 percent this year, valuing the bank at 90.9 billion pounds ($179 billion).

Banque Federale des Banques Populaires is the central coordinating unit of Groupe Banque Populaire, a network of regional lenders that isn't traded.

``This acquisition allows Groupe Banque Populaire to improve its growth prospects in retail banking,'' Banque Populaire Chairman Philippe Dupont said in the statement. ``We intend to retain the brands of the regional banks and their individual identities.''

HSBC reports full-year earnings on March 3. It plans to complete its $6.45 billion acquisition of Korea Exchange Bank from U.S. buyout firm Lone Star Funds in April.

To contact the reporter for this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: February 29, 2008 11:55 EST