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

33 Pages Posted: 22 Apr 2021 Last revised: 19 Oct 2021

Date Written: October 17, 2021

Abstract

This study theoretically categorizes bank non-interest income as compulsory and complementary
parts of the loan transaction, 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 17, 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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