The Anne Curtis effect on bank deposits

FILIPINOS are notoriously bad at saving money, a shortcoming made worse by having neighbors with world-class levels of thrift. Data compiled by two Japanese researchers show a Philippine savings rate of 13.8% in the 2001-2007 period, compared with an astonishing 46.3% for Singapore and 46.2% for China. What’s less well-known is that Filipinos used to have a perfectly respectable savings rate of 21.9% in the late 1960s, which peaked at just over 26% in the run-up to the 1980s, worsened during the crisis years of the Marcos government and then, contrary to expectations, worsened even further through the post-EDSA years and the slow climb to prosperity in the present day.

Is the inability to save a function of poverty? The figures don’t seem to bear this theory out: Indonesia had a 29.9% savings rate late in the last decade while Thailand came in at 32.2%. Does one need to be a rich country to know the value of thrift? Not really: war-ravaged Vietnam built up its savings rate from virtually a standing start -- 3.9% in the late 1980s -- to a spectacular 29% by 2007. Whatever the reasons might be for low savings rates, they are likely to be cultural - a desire to enjoy life more, treat friends to dinner, take expensive vacations, and buy the latest luxury goods. Not for nothing are shopping malls booming in the Philippines - it’s hard to think of any other industry that has evolved so perfectly to capture a population’s disposable cash.

What we’re seeing in the data for the Philippines is the unusual combination of a relatively stable state, with a growing economy, in which savings rates persistently refuse to rise, even in good times. No other country in developing Asia can even claim to have seen its savings rate fall compared with the 1960s, though Taiwan’s and Hong Kong’s rates are currently below their historical averages and could dip further. But the point about Taiwan and Hong Kong is that they grew wealthy before they came to adopt relatively profligate habits, while the Philippines is spending its nest egg freely without having even achieved anywhere near the same level of affluence. 

We can get a sense of the desperation of the Philippine savings situation by the signals our banks are sending us. Over the past few years banks have focused their marketing campaigns on attracting depositors - a critical activity, because banks must accumulate deposits in order to lend money. Most have emphasized the ease of doing business or the hassle-free process of opening an account, but one bank -- PSBank -- has take the unique approach of rebuking Filipinos for failing to accumulate the kind of capital they need to live the good life.

Central to the good life, the ads tell us, is the ability to woo beautiful women. And that’s where PSBank endorser Anne Curtis comes in. She’s the actress who since May 2013 has been poking fun at all those hapless suitors who promise women the moon and the stars, without actually having the savings to back up their boasts. Whatever you might think of the sexual politics behind the ads, it’s hard to deny the importance of the message: people need to save more to live out their dreams, see them through retirement, and provide for loved ones in good times and bad. You don’t even need to be a PSBank depositor to benefit from this message: the act of saving more is good for you, no matter where you keep your deposits.

The other great thing about this ad campaign is that its impact can be tracked in the deposits data, which are diligently compiled by the central bank. May 2013 just happened to coincide with the end of a stagnant period in thrift bank deposits dating back to the 2008 financial crisis. The first of these charts show how savings deposits have risen at thrift banks since that point, while the second shows how overall deposits at thrift banks have allowed banks to lend more. 

It’s easy to dismiss the broad rise in overall thrift bank deposits as merely an effect of the growing economy, and there’s no easy way to quantify the exact impact Miss Curtis had on deposit levels. But the data from PSBank itself suggest an overall steady rise in the bank’s savings deposits, with a healthy bump up around the time Miss Curtis joined the campaign. 

This is where we issue the standard warning that correlation is not causation, and remind ourselves of the post hoc, ergo proper hoc fallacy. That said, it’s very rare for banking statistics to share the same space with celebrities, who always add an element of fun to any economic analysis.

No matter what the exact cause, any rise in deposits for a spendthrift country like the Philippines is a good thing, allowing banks to lend more and add fuel to the country’s economic development. Someday we might be able to point to May 2013 as the exact moment when the savings rate took a turn for the better. When the economists write the the book on that momentous event and soberly examine all the factors that might have propelled the turnaround, it's quite possible that some of those scholars will be adventurous enough to consider the impact of a single actress, seductively dressed and cooing into the camera, telling her suitors in no uncertain terms, “No money no honey.”

source:  Businessworld