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

30 Pages Posted: 22 Apr 2021

Date Written: April 21, 2021

Abstract

This study theoretically categorizes fee and commission income as inseparable and complement, and incorporates them into the Ho and Saunders (1981) bank model in the presence of bundling strategy, as a popular banking strategy. By also assuming 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, Less-informed customers

JEL Classification: G21

Suggested Citation

Gerek, Caner, The Effects of Bundling Strategy on Bank Interest Margins: Theoretical and Empirical Evidence (April 21, 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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