JPMorgan Snaps Up Apple Card From Goldman Sachs; GS Takes Big Hit

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AuthorVihaan Mehta|Published at:
JPMorgan Snaps Up Apple Card From Goldman Sachs; GS Takes Big Hit
Overview

JPMorgan Chase & Co. is set to take over Apple Inc.'s credit card business, replacing Goldman Sachs Group Inc. The portfolio transfer is expected in two years. This move marks Goldman Sachs' exit from a costly consumer finance venture that incurred over $7 billion in losses since 2020, though the deal will boost Goldman's near-term earnings by releasing reserves.

JPMorgan Chase to Partner with Apple for Credit Card Business

JPMorgan Chase & Co. will assume the role of partner for Apple Inc.'s credit card operations, displacing Goldman Sachs Group Inc. This significant shift signals the end of Goldman Sachs' ambitious, albeit costly, venture into consumer finance.

Goldman Sachs' Costly Exit

The transfer of the credit card portfolio is anticipated to occur in approximately two years. For Goldman Sachs, the arrangement offers an immediate benefit, projected to boost earnings per share by 46 cents in the fourth quarter. The firm will also release $2.48 billion of reserves previously set aside for loan losses. However, this comes with a $2.26 billion reduction in net revenue due to marking down the outstanding credit card loan portfolio and terminating contractual ties.

Analysts at RBC Capital Markets noted that Goldman Sachs has experienced substantial losses, exceeding $7 billion before taxes, since the beginning of 2020 on its consumer-lending divisions. The move away from this segment, which faced mounting shareholder and employee skepticism, allows the investment bank to refocus on its core franchises like investment banking and asset management.

Apple's Continued Consumer Focus

Apple, meanwhile, remains committed to its strategy in consumer-focused financial services. The Cupertino-based technology giant has solidified its position in the digital wallet space and will continue its partnership with Mastercard Inc. as the payment network provider for the credit card.

Allison Beer, JPMorgan's head of cards and connected commerce, expressed enthusiasm for the collaboration, highlighting Apple's global brand recognition for innovation and customer experience. The deal is expected to encompass roughly $20 billion in outstanding card balances, with a discount exceeding $1 billion to Goldman Sachs. Previous reports indicated Apple had also considered Synchrony Financial and Capital One Financial Corp. as potential partners.

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