KEY POINTS:
The credit crunch is forcing GE Money to pull back from the home loan and car finance markets - with the loss of 335 jobs.
The Australasian financier says the cost of wholesale funds means these businesses are no longer viable.
In Australia and New Zealand it will
stop offering home loans through third parties such as brokers and mortgage managers. It will continue to lend directly and through its subsidiary Wizard Home Loans, and to service existing loans.
It will also stop offering vehicle finance through car dealers, but will retain the arrangement it has to offer finance to people who buy vehicles on internet auction site Trade Me.
About 80 jobs will be lost at the company's New Zealand branch in Auckland - 10 per cent of the company's workforce here - with the rest of the retrenchment to occur in Australia. It currently employs 4500 staff Australasia-wide.
New Zealand managing director Greg White said the moves were a direct result of the international credit crisis.
"The implication in terms of global funding, particularly in terms of the cost of funds, we don't see as something that is going reverse itself very quickly."
The company said home lending and motor finance were capital-intensive businesses, and the returns at present no longer justified the cost of funding the products.
It said the unprecedented conditions in the credit markets meant it had to be more selective in its allocation of capital.
However, it would continue offering retail store finance, credit cards, personal loans and insurance, and believed there was growth to be had in those markets.
"That's putting that in the context of where we're going in the future," White said.
"It is tough at the minute, there's no question about that, but what we see is an opportunity to think about the long term."
Director of Massey University's Centre for Banking Studies, David Tripe, said GE Money was completely dependent on scarce and increasingly expensive wholesale funding, as opposed to the major banks which relied on wholesale sources for around 40 per cent of their funding.
"What it means is that the impact on their cost of funds is even more vicious."
He believed personal lending was more profitable because of the high interest rates the company charged - up to 30 per cent, and an average of 22 per cent.
"If you've got a business built around that, I suspect cost of funds isn't nearly as important a consideration."
GE's current retail variable home loan rate is 10.39 per cent.
GE Money has been trying to sell Wizard Home Loans for some months. It is reported to have paid A$500 million for the business in 2004.
White said yesterday Wizard would "continue as it is for the moment".
The company has had some exposure to the Blue Chip property investment scheme collapse.
It funded mortgages on the homes of some Blue Chip investors who are now struggling to pay.
The company is ultimately owned by American giant General Electric.
Crunched:
* GE Money is pulling back from the home and car loan market.
* It will cease offering home loans through third parties such as brokers and mortgage managers.
* It will stop offering vehicle finance through car dealers but will still offer finance to people who buy vehicles on Trade Me.
* 335 jobs will be lost, about 80 of them in New Zealand.