“To us, the reported sale in the WSJ (not confirmed) of the GS Apple cards portfolio ($17B) would be a strategic positive and help it move further ‘back to the future,’” Mayo said. The issue, however, is the exit cost which if it exceeded $1 billion would seem negative, he wrote.
Mayo noted that the sale would reflect another “black eye” for Goldman’s failed consumer strategy, especially if the disposal cost is too high. There are some positives. If the investment bank exited both Apple and GM card partnerships before year end, it could remove cards from the 2025 federal stress test, Mayo said. “On balance, GS implies that cards are approaching breakeven, meaning a sale seems TBD (to be discussed),” Mayo wrote in the note.
According to the WSJ, Apple has held talks with several possible buyers for the card business including Synchrony Financial and Capital One, while its discussions with JPMorgan began earlier this year and have advanced in recent weeks. JPMorgan, however, doesn’t want to pay the full-face value of the roughly $17 billion in outstanding balances in the Apple credit-card program, the story said.
Mayo said in the note that he’s heard exit cost estimates from about $500 million to as high as $4 billion, with the analyst saying he would be in the low end of that range with a 3% to 10% discount to face value. “In our view, a payment from GS to JPM above $1 billion could be viewed negatively if GS really believes it is moving the portfolio toward breakeven, and in context of premiums often associated with card portfolio sales,” Mayo said.
https://finance.yahoo.com/news/goldman-sachs-break-apple-could-205314394.html