Money Store Inc. is rejiggering its subprime auto finance division in the wake of rising delinquencies and chargeoffs.

The unit has performed inadequately, said chief executive Marc Turtletaub in a written statement released Tuesday evening. By the end of the month, delinquencies will be as high as 10%, and chargeoffs could reach 7%, he said.

Loan volume for the unit will be reduced while the Union, N.J., lender centralizes processing and beefs up its management team.

Last quarter Money Store originated $168 million of subprime auto loans, a 67% increase from the year before. The company's auto unit provides about 5% of its total loan volume. Auto loan delinquency problems are not expected to affect the company's performance drastically, Mr. Turtletaub said.

Wall Street did not agree. Money Store's stock dropped more than 10%, from $32.13 at Tuesday's close, to $28.75 Wednesday afternoon.

But many analysts expressed confidence in the company's ability to manage any upcoming disappointments well.

Wednesday, Piper Jaffray Inc., Minneapolis, reiterated its "buy" rating on the company and its 1997 and 1998 earnings-per-share estimates.

"We expect very strong home equity loan volume based on the extension of the 'no payment for three months' promotion," the Piper Jaffray report said. "Ultimately, the company will be judged on how it deals with issues in the auto division, rather than the fundamental impact from yesterday's announcement," the report concluded.

Piper Jaffray expects Money Store's stock to reach $37 within 12 months.

Prudential Securities, New York, also reiterated its "buy" rating on Money Store Wednesday morning.

And Moody's Investors Service reaffirmed its ratings of Money Store debt Wednesday afternoon.

Subprime auto finance has been a volatile area for many lenders. The collapse of several high-profile subprime auto lenders this year prompted banks and finance companies with significant subprime auto portfolios to tighten lending standards.

Money Store's unit has not performed as well as expected this year, analysts said.

On Aug. 22, the president of the auto unit, J. Tom Jones, resigned for "personal reasons," the company said. He was succeeded by former vice president William J. Bradley.

The fact that other lenders have left the business does not mean Money Store will be following in their footsteps, said a spokesman. "The Money Store is still committed to subprime auto lending," he said.

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