Updated December 18th, 2023 at 20:38 IST

Goldman Sachs faces challenging departure from Apple credit card partnership

Prospective bidders may push for changes in deal terms and access to Apple's proprietary credit card data.

Reported by: Business Desk
Apple: $2.951 trillion | Image:Unsplash
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Goldman Sachs faces a challenging exit from its four-year credit card partnership with Apple, seeking a buyer for its stake in a venture perceived as risky and unprofitable by other lenders.

Pressure on Goldman to reduce the stake's value during potential talks with bidders is expected, adding to CEO David Solomon's consumer banking challenges. Analysts anticipate a possible writedown on the Apple card, reflecting losses from Goldman's consumer banking ventures.

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Prospective bidders may push for changes in deal terms and access to Apple's proprietary credit card data, with Synchrony Financial, Citigroup, and Capital One seen as logical partners. Apple recently proposed a 12 to 15-month exit plan for Goldman.

Solomon's consumer strategy faces headwinds amid efforts to explore "strategic alternatives" for the consumer unit. Analysts interpret Solomon's remarks as a sign of the card operations losing money, highlighting challenges in underwriting and revenue generation. The initial deal with Apple posed challenges for other banks, such as JPMorgan Chase, due to small profit shares.

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New credit card businesses typically incur losses in early years, and Goldman's lack of experience in lending to less-affluent customers contributed to mounting paper losses. Despite promising features like no annual fees and high-yield savings accounts, the Apple card venture faced complexities in sharing business costs and handling potential loan losses.

The unwinding of the partnership adds another layer of complexity to Goldman's consumer banking endeavours.

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(With Reuters inputs)
 

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Published December 18th, 2023 at 20:38 IST