Heading Home: A Case Study of Handelsbanken's Nordic Market Exits

Abstract: Recent trends and changes in the banking market have transformed the competitive landscape and forced banks to rethink their internationalization strategies. One of these banks is Handelsbanken, one of Sweden's largest banks, which announced its divestment of its Danish and Finnish operations in October 2021. Through a case study analysis, this thesis investigates why Handelsbanken chose to divest these two units, as well as how this decision can inform the debate on the optimal geographical scope of European banks. This thesis contributes to existing literature on firm divestment strategies, determinants of bank internationalization, foreign bank performance and recent trends affecting the geographical scope of banking. On a firm-specific level, we find that the divestments served as an important constituent in a strategic refocusing process to concentrate the organization. Our findings also show that Handelsbanken's divestments were motivated by external factors, such as increased regulatory burden, which diminished scale economics between geographies. This suggests that the geographical scope of a European bank is dependent on its ability to achieve critical mass in each market it operates within.