Finance and Accounting Research Seminar Yufeng Wu (Ohio State University) "Cross-selling Mortgages and Deposits"

This paper quantifies banks’ incentives to cross-sell deposits and mortgages and the value created by doing so. We begin with a border difference-in-differences design that exploits county-level changes in Conforming Loan Limits to estimate how shifts in a bank’s mortgage market share affect its deposit intake. Guided by this estimate, we develop and estimate a dynamic model in which banks with market power compete in both markets and face complementary demand: households derive utility from obtaining deposit and mortgage services from the same institution. We discipline the model using the deposit–mortgage sensitivity estimated from a border strategy. The estimates indicate significant complementarities in consumer demand. Banks leverage this complementary demand through cross-selling and derive 2.3% of their market value from it.