Business Administration, Management, and Operations Commons^™

The Chicken Or The Egg? The Trade-Off Between Bank Fee Income And Net Interest Margins, Barry Williams, Gulasekaran Rajaguru

Gulasekaran Rajaguru

This study considers the time series relationship between bank fee income and bank net interest margins in Australia, applying panel vector autoregressions to a unique, hand-collected dataset. Increases in bank fee income are being used to supplement decreases in net interest margins. The increase in magnitude of fee income associated with reductions in margin income is smaller than the decrease in net interest margins, resulting in a net wealth transfer favouring users of bank services; although not all users of bank services gained and/or gained equally. The overall increase in fee income is marginally greater that the reduction in margin …