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Investing.com -- JPMorgan (NYSE:JPM) could regain the top spot in U.S. credit cards if it acquires Goldman Sachs’ Apple Card portfolio, a potential $17 billion deal that Wells Fargo (NYSE:WFC) analysts say makes “strategic sense” for both sides.
For Goldman Sachs (NYSE:GS), the Apple Card—worth $19 billion in receivables—has proven a poor strategic fit.
“GS said the Apple Card portfolio is not a strategic fit,” the analysts led by Mike Mayo wrote, noting that the consumer push through its Platform Solutions unit resulted in outsized losses.
A sale near breakeven would allow the bank to exit the business and redirect capital, potentially freeing up $3–4 billion.
JPMorgan, meanwhile, would add about 8% to its card portfolio, bringing total outstandings to roughly $252 billion. That would lift it back to #1 in the industry, ahead of Capital One (NYSE:COF) following its Discover acquisition.
Goldman would also likely transition more than $10 billion of Apple Card deposits with the sale, giving JPM additional low-cost funding.
Beyond scale, Wells Fargo highlights synergies from “targeting personalized marketing efforts to a loyal customer base to layering a card portfolio on what is already one of the most efficient consumer banking platforms.”
But the deal would not be without risks. About one-third of Apple Card balances are subprime, compared with 15% at JPMorgan, and delinquencies run nearly double the bank’s own rate.
Goldman’s decision not to charge late fees also creates a structural challenge. Analysts cautioned that “late fees can be around 15% of return on assets (ROA) for a high-quality portfolio like Discover and 25% of ROA for a firm with a credit mix like Capital One”.
JPM would also need to build roughly $1.3 billion of reserves on day one to keep its card reserve ratio steady.
Still, Wells Fargo estimates JPMorgan could achieve roughly 1% earnings accretion, helped by deploying excess deposits and capital. A possible $100 million network incentive from Visa (NYSE:V), if Apple (NASDAQ:AAPL) switches from Mastercard (NYSE:MA), could provide a further boost.
For Goldman, the move would reduce credit provisions, lower stress test requirements, and sharpen its focus on global banking and asset management.
“The move for JPM would seem to be ‘nice to have,’ but ‘need to have’ for GS,” the analysts concluded, framing the transaction as a rare win-win in the banking sector.