Goldman Sachs Group Inc (NYSE:GS) is reconsidering its position in the consumer lending sector, including its partnership with Apple Inc (NASDAQ:AAPL), due to internal disagreements and operational hurdles. The reassessment follows a series of difficulties encountered post-launch of the Apple credit card and other lending products. The bank’s consumer lending sector problems are exacerbated by operational inefficiencies, including billing process issues, and regulatory scrutiny from the Consumer Financial Protection Bureau investigating the bank’s credit card account management practices.
The partnership with Apple, initiated through a joint savings account, is under review with potential alternatives including an increased role for Apple or transferring consumer products to American Express Co (NYSE:AXP) AXP. However, discussions with American Express have been stalled by concerns about the Apple Card’s loss rates and its operation on the Mastercard (NYSE:MA) network. Further complicating matters, if Goldman is unable to reduce credit card costs, it might consider selling the Apple and General Motors (NYSE:GM) partnerships, a challenging undertaking due to billions in deposits in Apple savings accounts.
Monday saw Goldman Sachs contemplating a complete exit from consumer lending products, including those linked to Apple and General Motors’ credit card. This consideration is favored by several Goldman executives and may be reflected in the upcoming quarterly earnings report. CEO David Solomon has been criticized for the venture’s profitability shortfall.
In recent developments, Goldman Sachs plans to sell GreenSky, a “buy now, pay later” company acquired last year at a significant loss, which is expected to negatively impact its Q3 earnings per share by $(0.19). In addition to this, the bank has also divested most of its personal loan portfolio. The decision to sell GreenSky follows substantial losses incurred from Goldman’s acquisition and subsequent sale of the company.
As part of an internal shift in strategy, Goldman Sachs is moving resources from consumer lending to Project Blue, an initiative addressing regulatory issues. This move comes amidst increased regulatory scrutiny due to credit card billing errors and refunds, further pressurizing the bank’s consumer service. The unique billing cycle of Apple Card bills issued at each month’s start has intensified these pressures, with attempts to change this proving unsuccessful.
Despite these challenges, Goldman Sachs shares were up by 0.68% to $311.40 in premarket trading on Monday, ahead of an anticipated earnings report.
