In a major shake-up for the premium credit card market, JPMorgan Chase is set to take over the Apple Card program from Goldman Sachs. The announcement, made late on Wednesday, marks the end of a rocky and ultimately unsuccessful foray into consumer lending for the investment banking giant Goldman Sachs.
The End of a Troubled Partnership
The partnership between Apple and Goldman Sachs, which launched the co-branded credit card in 2019, was fraught with difficulties from the start. According to reports, executives at Goldman were frequently frustrated by Apple's marketing approach, including advertisements that emphasized the card was "not from a bank." More critically, Apple's insistence on approving nearly all applicants led to higher-than-expected loan losses for Goldman, eroding the profitability of the venture.
This deal effectively concludes what has been described as a failed experiment in consumer lending for Goldman Sachs. The investment bank is exiting the partnership by selling the outstanding card balances, reported to be over $20 billion, to JPMorgan. The Wall Street Journal reported that Goldman is taking a discount of more than $1 billion on this sale. While Goldman did not comment directly on the discount figure, it indicated the transaction would boost its fourth-quarter earnings by 46 cents per share.
JPMorgan Steps In as the New Issuer
JPMorgan Chase, through its massive retail and commercial banking arm Chase, will now become the new issuer for the Apple Card. The companies confirmed that Mastercard will continue to serve as the payment network. The transition is expected to be completed within 24 months, pending the necessary regulatory approvals.
For JPMorgan, the acquisition brings a significant portfolio of card balances onto its books. The bank stated it will recognize a substantial $2.2 billion provision for credit losses related to this deal in its upcoming fourth-quarter earnings report, scheduled for January 13.
Broader Implications for Apple and the Market
For Apple, this move represents a hope for a fresh start for its credit card initiative. The tech giant has been actively exploring new revenue streams beyond its core iPhone business, which has seen slowing sales growth. However, many of these ventures, including the high-profile cancellation of its electric car project in February 2024, have struggled to gain traction.
The news also impacted stock markets. Ahead of Thursday's trading, Apple's stock fell 1.1%, continuing a sell-off that recently saw it lose its position as the second-largest U.S. company by market capitalization to Alphabet. Shares of JPMorgan dipped 0.2%, while Goldman Sachs declined 0.4% in premarket activity.
This strategic shift underscores the challenges of marrying technology and finance, even for giants like Apple and Goldman Sachs. All eyes will now be on JPMorgan to see if it can successfully manage the program and deliver the stability and growth that eluded its predecessor.
