The Home Development Mutual Fund (HDMF), more popularly known as the Pag-IBIG Fund, is confident 2018 will be another banner year as the fund’s net income is expected to hit a new record high, putting the agency on track to provide higher dividends and lower housing loan rates to members.
MANILA, Philippines — Acmad Rizaldy Moti, HDMF chief executive officer, is particularly optimistic about the fund’s growth prospects for this year, saying the agency is on track to repeat its stellar performance in 2017 or even surpass it.
“We expect 2018 to be much better than 2017. We expect to record another P30 billion in net income. We are positive that we are on track, and that we will hit our target if not surpass it,” Moti told The STAR in an interview.
Pag-IBIG posted a net income of P30.27 billion in 2017, 21 percent higher than the P24.9 billion recorded in the previous year. This was the first time the fund’s net income breached the P30 billion mark.
For this year, the agency expects to keep its net income above the P30 billion mark at P30.61 billion, slightly higher than last year’s level.
“We are pretty much on track to hit the P30 billion mark so it would be the second year in a row that our net income would be at least P30 billion. And most likely, as a sign also of the strength of the fund, we will again declare up to 90 percent of our net income as dividend payout,” he said.
Moti said the projected net income for this year could have been higher by P5 billion, if not for mark-to-market losses from the fund’s investments in government securities.
According to the official, Pag-IBIG is on track to attain its targets as the fund’s end-May performance showed growth across all business areas.
In the first five months, Moti said Pag-IBIG’s net income has already reached P13.2 billion, about 10 percent higher than the target of P11.97 billion for the period. It was also about 43 percent of the agency’s net income target for the whole of 2018.
In terms of revenue, Moti said Pag-IBIG has already earned P17.18 billion as of end-May.
About P9.99 billion of the amount came in the form of earnings from housing loans and institutional loans, while P3.28 billion was interest earnings from short-term loans, such as multipurpose loans and calamity loans.
Another P1.28 billion was generated as income from investments, and the remaining P2.63 billion came from other income, including penalties and gains from the sale of acquired assets.
For the whole of 2018, the fund’s revenue may reach P46.5 billion, 7.32 percent higher than last year’s P43.33 billion.
As a result of the strong performance, Moti said fund members may earn higher dividends by the end of the year. He said the fund may again declare 90 percent of its net income as dividend payouts for this year.
Under the Pag-IBIG charter, the fund must declare at least 70 percent of its net income as dividends.
Last year, HDMF recorded the highest dividend payout rate ever at 7.6 percent.
“This year, we expect dividends to be in the range of 6.5 percent to seven percent. We are on track at around 6.9 percent,” Moti said, adding that “it is hard to say because our investments are slightly impaired in terms of potential, but there’s a chance that it can even go higher than seven percent.”
Nevertheless, Pag-IBIG recorded another milestone in the first five months. “We are now officially a half a trillion peso fund,” Moti proudly announced.
As of end-May, the state fund’s assets reached P503 billion, according to Moti. It was the first time the fund breached the P500 billion mark in terms of assets.
Housing loans
With higher assets comes higher loan takeouts and lower interest rates for members of the Pag-IBIG Fund.
Starting last Valentine’s Day, Pag-IBIG adjusted downward the interest rates for the affordable housing and regular housing programs.
For loans up to P450,000, the interest rate was lowered to three percent per annum over a 30-year repayment period. Interest rates for regular housing loans also went down to as low as 5.375 percent per annum for a one-year repricing period, and 6.375 percent for a three-year repricing period.
Pag-IBIG said these are the lowest ever interest rates recorded under its housing programs.
But despite lower interest rates, Moti said the new policy would not significantly impact the state fund’s financial robustness.
In fact, he said the new rates would attract more members to tap Pag-IBIG’s loan programs, and therefore increase loan takeouts for 2018.
“By reducing the rates we believe that more and more borrowers would go to the fund,” Moti said.
For 2018, loan takeouts are expected to expand by 10 percent to P71.5 billion from the record high P65 billion in 2017. However, Moti said this could still grow further to as much as P76 billion.
The official said Pag-IBIG has already penetrated 100 percent of the market share in terms of socialized housing loans, or those costing up to P450,000. For loans above P450,000 but not exceeding P1.7 million (otherwise called the low-cost housing category), Moti said 80 percent of the market goes to the fund.
Going forward, the HDMF chief said opportunities for growth would come from the next segment, or those loans amounting above P1.7 million to P6 million. Of the 81,000 loans extended by Pag-IBIG last year, only 2,500 were in this segment.
“It’s not a significant number but we believe in terms of the growth of the fund, that would be the main driver in the future, in the next three years,” he said.
Moti said the Fund is striving to convince more major developers to become accredited partners. He said HDMF is also studying the possibility of relaxing some of its rules—one of which is the provision of loans only for units that are already 100 percent constructed.
With these strategies, Moti said the fund is confident it will hit its target of reaching P100 billion in annual loan takeouts by 2022.
Investments
Aside from growing the financing business, Moti said Pag-IBIG is also taking steps to diversify its investments to strengthen the fund and increase its income.
He said the HDMF board of directors has approved the terms of reference for a plan to invest P5 billion into the domestic stock market.
Under the investment program, five fund managers will be allocated P1 billion each, which will be invested in domestic equities.
Pag-IBIG currently has P61.6 billion in cash and investible funds, 78 percent of which is placed in government securities.
Meanwhile, Moti said the fund is also planning to offer new loan products and options following the shift last year to a new digital system.
Since upgrading its system, he said Pag-IBIG is now able to determine which products are needed by members, allowing the fund to design and eventually introduce new products.
“Pag-IBIG Fund is doing quite well as expected. The clear indicator is that we can afford to give a subsidized rate of three percent for housing loans,” Moti said.