Goldman Sachs Seeks Exit from Apple Card Partnership Amid Financial Losses

Since its launch over six years ago, the Apple Card has faced significant challenges for its partner bank, Goldman Sachs. Reports indicate that Goldman Sachs is actively seeking to exit the partnership due to substantial financial losses, with estimates suggesting a loss of at least $1 billion attributed to the Apple Card alone. The total losses in Goldman Sachs' consumer products division have reached approximately $6 billion, although not all losses stem from credit delinquencies.

9to5Mac

Currently, JPMorgan Chase is viewed as the "preferred choice" to take over the Apple Card partnership, according to a report from The Wall Street Journal. However, as of now, no formal agreement has been reached. Other potential contenders mentioned include American Express, Capital One, and Synchrony, though their likelihood of taking over appears low. American Express CEO Stephen Squeri has expressed skepticism regarding the partnership's value, particularly due to the Apple Card's customer base, which includes a significant number of subprime borrowers.

9to5Mac

The Apple Card has a delinquency rate of approximately 4%, exceeding the industry average of 3.05%. This is particularly concerning given that the card's subprime customer rate stands at 34%, compared to JPMorgan Chase's 15% and Capital One's 31%. The total balances on Apple Card accounts exceed $20 billion, which raises concerns about the financial viability of any potential takeover. Analysts suggest that any new lender would need to negotiate a deal at a "huge discount" to account for these risks.

9to5Mac

An additional element in this discussion is the Apple Card Savings Account, also issued by Goldman Sachs. While customers can link their cash back rewards to this savings account, it operates independently of the Apple Card itself. JPMorgan Chase does not currently offer high-yield savings accounts, which raises questions about the future of this product should the credit card partnership transition to a new lender. Goldman Sachs has indicated it may continue to offer its Marcus by Goldman Sachs savings account, even if the Apple Card is reassigned.

9to5Mac

Looking ahead, it is anticipated that the partnership between Goldman Sachs and Apple will conclude by 2026, following extensive negotiations with various lenders. The future of the Apple Card remains uncertain, particularly regarding its terms and conditions. If a new lender takes over, it is plausible that changes could be implemented, such as the introduction of late fees and a reduction in the card's generous offerings. Capital One may emerge as a strong alternative if JPMorgan Chase's negotiations do not materialize, especially given its recent acquisition of Discover, which could enhance its profitability in the credit card sector.

9to5Mac

While the financial losses associated with the Apple Card are well-documented, there is a lack of clarity regarding the exact timeline for the transition and the specific terms that a new lender might impose. Additionally, the implications for existing Apple Card customers remain largely speculative at this stage.

9to5Mac

• “Because that’s what you want a co-brand partnership for, is the distribution, as well,” — Stephen Squeri, CEO of American Express.

9to5Mac