The Effects of Bundling Strategy on Bank Interest Margins: Theoretical and Empirical Evidence

29 Pages Posted: 22 Apr 2021 Last revised: 16 Oct 2021

Date Written: October 15, 2021

Abstract

This study theoretically categorizes fee and commission income as compulsory and complementary, and incorporates them into the Ho and Saunders (1981) bank model in the presence of bundling strategy, as a popular banking strategy. By also considering different information levels of customers, the study finds a negative relationship between interest income and these two non-interest income components. These negative relationships are tested by analyzing the determinants of banks' net interest margin for 14 European countries. The results confirm that the theoretical findings hold.

Keywords: Bundling, Non-interest income, European banking, Interest margin, Diversification

JEL Classification: G21, G28

Suggested Citation

Gerek, Caner, The Effects of Bundling Strategy on Bank Interest Margins: Theoretical and Empirical Evidence (October 15, 2021). Available at SSRN: https://ssrn.com/abstract=3831569 or http://dx.doi.org/10.2139/ssrn.3831569

Caner Gerek (Contact Author)

Kirklareli University ( email )

Kofcaz yolu üzeri ana kampüs
İktisadi ve İdari Bilimler Fakültesi
Kirklareli, Kirklareli
Turkey

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