The effects of bundling strategy on bank interest margins: theoretical and empirical evidence

This study theoretically categorizes bank non-interest income as compulsory and complementary parts of the loan transaction, and incorporates them into the [Ho, Thomas S. Y., and Anthony Saunders. 1981. "The Determinants of Bank Interest Margins: Theory and Empirical Evidence." Journal of Financial and Quantitative Analysis 16: 581-600] 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 margins for 14 European countries. The results and robustness tests confirm that the theoretical findings hold.