J.P. Morgan in discussions to takeover Apple credit card business from Goldman

According to a report by The Wall Street Journal, JPMorgan Chase is in advanced discussions with Apple to take over its credit card business from Goldman Sachs. This potential transition follows Apple and Goldman's decision to part ways last year, as Goldman seeks to exit consumer finance. While no deal is finalized yet, negotiations are centered around the price JPMorgan would pay for the existing $17 billion in card balances and other terms. JPMorgan aims to secure the deal at less than full face value, reflecting potential concerns over the portfolio’s subprime exposure and customer service challenges that plagued Goldman's involvement.

For JPMorgan Chase, this deal could expand its already dominant credit card business, adding Apple’s 12 million loyal cardholders to its customer base. The acquisition would also deepen the ties between the bank and Apple, which already has partnerships on products and Apple Pay. However, JPMorgan would need to address the legacy issues Goldman faced, including high delinquency rates and regulatory scrutiny. This represents both a challenge and an opportunity for JPMorgan to streamline operations and build a more profitable structure.

Apple, on the other hand, stands to benefit from securing a new partner for its credit card program, allowing it to move forward from its troubled relationship with Goldman. While Apple has shown openness to changing some of the terms of the card program, such as its unusual billing structure, the tech giant's ability to retain favorable terms will be key in finalizing a deal. Apple also gains stability by partnering with the largest U.S. bank, which could bring further integration of financial products and services with its tech ecosystem.

Goldman Sachs would be expected to take a financial hit from the deal, given the possibility of selling the Apple card balances at a loss, as well as its ongoing struggles to offload other credit card portfolios, like General Motors’. Goldman’s initial foray into consumer finance has proven costly, and its exit from Apple’s program reflects broader challenges in managing subprime credit risk and regulatory compliance. This would likely add to the bank's expected pretax losses, already estimated at $400 million.

In summary, if a deal materializes, JPMorgan stands to gain a substantial boost to its credit card business, Apple secures a new, more stable partner, and Goldman Sachs potentially cuts its losses as it retreats from consumer finance. However, the final terms, particularly regarding the value of the portfolio and adjustments to the card's features, will dictate how successful each party emerges from this high-profile negotiation.