The Effects of Bundling Strategy on Bank Interest Margins: Theoretical and Empirical Evidence
30 Pages Posted: 22 Apr 2021
Date Written: April 21, 2021
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: Suggested Citation