Goldman Sachs is reassessing its consumer lending strategy following significant losses and internal criticism, as it contemplates ending its partnership with tech giant Apple (NASDAQ:AAPL). The joint venture, which includes a savings account launched in April and an Apple credit card service, has been fraught with issues leading to a reported $1.2 billion loss in 2022.
The bank's internal review comes in the wake of the decision to retreat from consumer lending, selling GreenSky at a loss and offloading most of its personal loan portfolio. The move could signal the end of Goldman's venture into consumer lending. The bank's upcoming earnings report, scheduled for Tuesday, is anticipated to reveal a sharp drop in profits. Goldman Sachs CEO David Solomon is expected to reassure investors by emphasizing a refocus on core Wall Street operations.
The Apple savings account, despite initial skepticism, managed to attract billions in deposits swiftly, causing concern among some Goldman executives due to high balances that could complicate a potential separation from Apple. If the partnership were to move to another bank, Goldman might need to raise expensive last-minute funding.
Meanwhile, discussions about Apple assuming more responsibility in the partnership have been taking place. These include proposals for Apple to become the lender for new credit-card spending and issuance while Goldman manages existing loans. However, this proposal has officially been denied as being under discussion.
The Consumer Financial Protection Bureau is currently investigating Goldman’s credit card account management practices, including how the bank resolves billing errors and refunds cardholders. This investigation has added strain on customer service resources already overwhelmed by dispatching millions of electronic invoices simultaneously.
Bill Johnson, a Citigroup (NYSE:C) credit-card veteran hired in August, has been given the task of making credit-card partnerships profitable. If this proves unachievable or requires additional credit-card programs, Goldman might consider selling its card partnerships with Apple and General Motors (NYSE:GM).
Goldman's consumer lending experiment has not been without its critics. Internal partners blame CEO Solomon for the ill-fated expansion into consumer lending. The unit that includes credit cards and GreenSky has reportedly lost billions, leading to regulatory scrutiny and causing many top executives to leave or move to other units.
The future of Goldman's consumer lending experiment and its partnership with Apple remains uncertain. More details are expected to be revealed during Goldman Sachs' earnings call on Tuesday.
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