NEW YORK–The country’s largest bank will become the new issuer of Apple’s credit card, one of the largest co-branded programs with some $20 billion in balances, in a deal that has been negotiated for more than a year, according to a new report.
“The deal, which is expected to be announced soon baring any more last minute hiccups, will further cement JPMorgan’s status as a behemoth in the credit-card sector and marks the final chapter of Goldman’s failed experiment in consumer lending,” the Wall Street Journal reported.
According to the Journal, the new deal is expected to bring two of the country’s most influential companies “closer together at a time when payments are increasingly playing out on people’s phones, watches and other gadgets. The bank gets a loyal base of Apple customers to whom it can pitch more financial products and Apple gets a partner with a sprawling consumer franchise to help it sell and finance more gadgets.”
Offloaded at a Discount
Goldman Sachs is expected to offload the roughly $20 billion of outstanding card balances at a more than $1 billion discount, according to people familiar with the matter, the Journal said, adding that with most co-brands, balances sell at a premium of up to 8%, a figure that can run into the double digits for the strongest programs.
“Discounts are rare and are reserved for the most challenged cases,” the Journal report stated. “The discount in this deal reflects a high exposure to subprime borrowers and what has been a higher-than-industry-average delinquency rate, creating the potential for significant losses on the outstanding balances.”
The Journal added that concerns over those losses slowed the deal talks and contributed to hesitation from JPMorgan and other banks that looked at pursuing a deal.
Apple Savings Account Planned
JPMorgan will issue Apple credit cards for both new and existing cardholders. The report further noted JPMorgan is planning to launch a new Apple savings account, according to people familiar with the matter. Consumers with existing Apple savings accounts at Goldman will decide whether they want to stay there or open an account with JPMorgan, sources told the Journal.
