In 2019, Goldman Sachs made headlines with the launch of a flashy new credit card in partnership with Apple.
It was hailed as a “game-changing” move—a signal that Goldman was diving deep into the consumer finance space. Fast forward five years, and that once-buzzworthy partnership now seems to be on the rocks. Reports indicate that Apple is looking for a new card partner, potentially leaving Goldman holding the bag on a massive financial liability, one that could range anywhere from $500 million to a whopping $4 billion, according to analysts.
To understand why this split matters, we need to rewind the tape to about a decade ago. Goldman Sachs, a firm typically associated with advising high-net-worth clients and running a powerhouse investment bank, decided to diversify. In 2016, the firm rolled out Marcus by Goldman Sachs, an online bank offering personal loans and savings accounts. This move was the firm’s first foray into the consumer banking space, and it was aimed squarely at capturing the so-called “mass affluent” market—a demographic that wasn’t exactly Goldman’s bread and butter.
The following years saw Goldman doubling down on this strategy, adding credit card offerings to its consumer lineup. Enter partnerships with major players like GM and, of course, Apple. For a while, this seemed like a promising way to branch out beyond its traditional stronghold in high-end wealth management. But things didn’t quite pan out as expected. By mid-2022, Goldman’s consumer banking unit was still in the red. So, the bank hit the reset button, stepping back from consumer banking and reorganizing its business structure.
Goldman restructured its operations into three main divisions. One unit combined asset and wealth management (AWM), another housed its bread-and-butter investment banking and trading operations (Global Banking and Markets, or GBM), and the third segment was dedicated to consumer banking and partnerships, which included the Apple and GM credit card deals. This third unit, known as Platform Solutions, also oversaw a specialty lender called GreenSky, which Goldman eventually sold off in 2023. At that point, Stephanie Cohen, the high-powered executive in charge of Platform Solutions, exited the company, signaling a broader retreat from consumer finance.
As Goldman started pulling back from its consumer ambitions, it became increasingly clear that the Apple partnership wasn’t going to last. By late 2023, Goldman had already agreed to transition the GM card portfolio to Barclays. Soon after, reports began surfacing that Apple, too, was seeking a new partner for its credit card business. According to the Wall Street Journal, JPMorgan Chase has entered into talks with Apple to take over its credit card program.
For Goldman, this isn’t just about finding a replacement for a business line. Analysts, including Mike Mayo from Wells Fargo Securities, believe that a full exit from the Apple partnership could prompt the bank to shutter its entire Platform Solutions unit. This move would allow Goldman to double down on its two core businesses—GBM and AWM. “It would be a strategic positive,” Mayo noted, referring to the potential sale of the Apple card portfolio, which holds about $17 billion in outstanding balances. However, there’s a catch: The cost of exiting this partnership could be steep, with estimates ranging from $500 million to as much as $4 billion.
Mayo cautions that while shedding the Apple credit card business might align with Goldman’s long-term strategy, the price tag could be a bitter pill to swallow. Exiting at a cost exceeding $1 billion would be particularly hard to justify, especially since the bank had hoped the card business would eventually break even.
On the bright side, exiting both the Apple and GM card partnerships could help Goldman streamline its operations and possibly even sidestep some regulatory hurdles. By shedding these consumer banking ventures, Goldman could remove the card business from the Federal Reserve’s annual stress tests, a scenario that Mayo argues would be beneficial in the long run.
As for Apple, the tech giant is reportedly exploring a few options to replace Goldman, including potential deals with Synchrony Financial, Capital One, and JPMorgan. While talks with JPMorgan have progressed the most, the bank is reportedly reluctant to pay full price for the $17 billion in outstanding balances tied to the Apple credit card portfolio.
With Goldman’s retreat from consumer finance all but certain, questions remain about how the investment bank will navigate the financial hit. CEO David Solomon has already warned that the transition of the GM cards and other small retail ventures will cost the bank $400 million. That news alone caused Goldman’s shares to drop 4%, though the stock has since rebounded.
For now, analysts like Mayo remain cautiously optimistic, maintaining an “overweight” rating on both Goldman and JPMorgan. His price target for Goldman stands at $550, while JPMorgan’s is set at $225. Despite the turbulence, it seems both institutions are well-positioned to weather the storm, with the long-term outlook still looking bright for the iconic Wall Street firm.
