Potential Resolution for the Apple Card in Close Reach
In a strategic move, JPMorgan Chase is set to acquire the Apple Card portfolio from Goldman Sachs, marking a significant shift in the retail credit card business. This acquisition is expected to deepen JPMorgan Chase's digital banking presence and strengthen its partnership with the tech giant, Apple [1][2][3].
The deal comes with a substantial discount on the approximately $20 billion book value of the Apple Card portfolio, reflecting the high subprime credit exposure within the portfolio. Approximately 34% of Apple Card users have FICO scores below 660, compared to only 15% in Chase's existing credit card book [1][4][5]. This discount is primarily due to Chase's concern over higher credit risk and the Apple Card's unique no-late-fees policy, which reduces common lender protections against losses from delinquent accounts [1].
For Apple, this transition to JPMorgan Chase could help stabilize and scale its consumer finance offering, as the bank is better equipped to manage credit risk at scale [2][3]. This move also highlights shifting dynamics in fintech partnerships, emphasizing JPMorgan's role as a dominant digital banking player within Apple's ecosystem [2][3].
In terms of operational changes, Chase is expected to perform quick write-downs on some marginal accounts to clean up the portfolio. The acquisition will include only the loan books related to the Apple-branded cards. Additionally, Chase plans to integrate Apple's technologies into its broader business and may allow customers to choose their billing date [1].
The Javelin Card Bench, a competitive intelligence tool, will integrate Apple into Chase when the deal closes. The exact discount Chase will apply to the book value is uncertain, but it is predicted to be around 10% or approximately $2 billion. The accounting of the revenue and related goods is yet to be determined [1].
Notably, Goldman Sachs (GS) previously sold its interest in the General Motors card to Barclaycard. With the Apple Card portfolio leaving its hands, Goldman Sachs is exiting a loss-making and heavily regulated retail credit card business [6].
This acquisition is a significant step for both companies, marking Goldman Sachs' exit from a challenging retail credit card business and JPMorgan Chase's entry into a lucrative volume opportunity to engage loyal Apple customers. The deal is expected to close soon, subject to regulatory approval.
[1] "JPMorgan Chase to Buy Apple Card Business From Goldman Sachs" - The Wall Street Journal [2] "JPMorgan Chase to Buy Apple Card Portfolio from Goldman Sachs" - CNBC [3] "JPMorgan Chase to Acquire Apple Card Portfolio from Goldman Sachs" - Bloomberg [4] "Subprime Lending: A Comprehensive Analysis" - Investopedia [5] "FICO Scores: What You Need to Know" - MyFICO [6] "Goldman Sachs Sells Its Interest in the General Motors Card to Barclaycard" - The New York Times
- With the acquisition of the Apple Card portfolio from Goldman Sachs, JPMorgan Chase is aiming to invest in a lucrative volume opportunity by engaging loyal Apple customers, which will strengthen its position in the business and finance sector.
- The significant discount on the Apple Card portfolio given to JPMorgan Chase is a reflection of the high subprime credit exposure within the portfolio and an indication of shifting dynamics in fintech partnerships, positioning JPMorgan as a dominant player in Apple's consumer finance offerings.
