JPMorgan Chase in talks to take over Apple’s credit card programme

JPMorgan eyes Apple : JPMorgan Chase (JPM) is reportedly in negotiations with Apple to assume control of the tech giant's credit card business, which is currently managed by Goldman Sachs, according to a Wall Street Journal report released on Tuesday.

The discussions, which began earlier this year, have made significant progress recently, but a final agreement may still be a few months away. Key aspects, such as the financial terms, remain unresolved.

Expensive partnership split

Last year, Goldman Sachs and Apple ended their partnership, which had included credit card and savings account offerings. Sources indicated that Goldman Sachs is facing a costly exit from the arrangement, which has been deemed too risky and unprofitable by other financial institutions.

Goldman Sachs, which has experienced significant losses from its consumer banking venture, is shifting its focus back to its core activities in investment banking and trading. The consumer banking segment, a key initiative under CEO David Solomon, has struggled, losing billions of dollars.

Launched in 2019, the credit card was a centerpiece of Solomon’s consumer banking strategy. However, Goldman's lack of experience with less affluent customers, as opposed to its typical wealthy client base, has been cited as a challenge. The card aimed to attract customers with lower credit scores, offering features like no fees and cashback, but led to higher provisions for bad loans and increased paper losses for Goldman’s consumer division.

Goldman Sachs cuts GM ties

Additionally, Goldman Sachs is also ending its credit card partnership with General Motors (GM). Earlier this month, Solomon addressed concerns about the bank's premature exit from the GM partnership, asserting that the bank had anticipated and planned for the associated challenges.

Investors have supported Goldman’s strategic shift back to its traditional Wall Street operations, contributing to a nearly 27% increase in the bank’s stock price this year.

(With Reuters Inputs)