Goldman Sachs lost $1.2 billion in 2022 mostly because of Apple Card

Posted:
in General Discussion edited January 2023
Goldman Sachs' consumer credit division lost $1.2 billion in nine months last year, and the losses were primarily related to the Apple Card.

Apple Card
Apple Card


Goldman's collection of businesses, known as Platform Solutions, lost over $1.2 billion in pre-tax losses in the first nine months of 2022 and was driven mainly by loan-loss provisions. It was mostly tied to the Apple Card, according to Business Insider.

Previously, the only financials Goldman had disclosed in its consumer business showed $1.3 billion in losses from the start through mid-2019. However, executives of Platform Solutions believe the consumer division may break even in 2025, although that target was initially by the end of 2022.

Goldman spent a lot of money to help launch Apple Card and its other consumer services. A report from 2019 revealed the bank spent around $1.3 billion on its consumer services, and reportedly spent roughly $350 to acquire every new Apple Card customer.

Due to Apple Card benefits such as no fees and a competitive interest rate, analysts believed "The Apple Card portfolio may generate lower revenues and face higher loss content relative to the industry average."

But Goldman CEO David Solomon called its partnership with Apple "the most successful credit launch ever" and noted that although its investment draws on the bank's returns in the short term, it's critical to expanding its capabilities and competitive position.

Read on AppleInsider
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Comments

  • Reply 1 of 26
    Wonder if this will jeopardize the launch of a savings account that was introduced in iOS 16. The feature would allow you to open a savings account and transfer money from your Apple Cash card to-and-from one from a Goldman savings account.
    watto_cobratwokatmewdesignr
  • Reply 2 of 26
    The Apple Card falls under Platform Solutions within GS which includes credit card partnerships and point of sale financing.  It also includes Transaction Banking.  All of this is not just Apple. While provisions for credit losses did move higher it is not accurate to say the $1.2 billion loss (9 months) is attributable to Apple. The GS earnings call is next week so more info at that time. Also Business Insider has not been a credible source for years unless you like cat videos and memes.  I suggest you read WSJ.com which is more accurate.
    mark fearingwatto_cobraracerhomie3entropystwokatmewwilliamlondontenthousandthingsdesignr9secondkox2FileMakerFeller
  • Reply 3 of 26
    drew216 said:
    The Apple Card falls under Platform Solutions within GS which includes credit card partnerships and point of sale financing.  It also includes Transaction Banking.  All of this is not just Apple. While provisions for credit losses did move higher it is not accurate to say the $1.2 billion loss (9 months) is attributable to Apple. The GS earnings call is next week so more info at that time. Also Business Insider has not been a credible source for years unless you like cat videos and memes.  I suggest you read WSJ.com which is more accurate.
    I was reading up on it as the 'lead' of that story made no sense. There's much bigger issues about how the deficit occurs than offering the Apple Card.
    watto_cobratwokatmew9secondkox2FileMakerFellerjas99
  • Reply 4 of 26
    DAalsethDAalseth Posts: 2,783member
    IANA Businessman/MBA/Entropnenur so I have no idea how losing over a billion dollars could be “The most successful credit launch ever”. 
    darkvader9secondkox2
  • Reply 5 of 26

    Sounds like BS to me. How can you lose that much money on a credit card business unless a vast number of customers default on payments or there is massive fraud. The fraud aspect is unlikely as the Apple Card is an order of magnitude safer than most other credit cards. The "defaulting" on payments also seems unlikely since iPhone owners and Apple Card users in particular seem to be from a demographic that generally pays off their CC balances or would be very negatively affected by not paying off their CC.

    rob53stevenoz9secondkox2jas99
  • Reply 6 of 26
    Who pays interest on a credit card? So they are claiming money they never had. If there was no Apple Card what would they blame the lose on?
    mark fearingJP234KTR9secondkox2jas99
  • Reply 7 of 26
    Due to Apple Card benefits such as no fees and a competitive interest rate

    …really? For who? My SO and I were given a predatory rate of almost 25%, despite excellent credit.
    dewmetyler82Japheyllama9secondkox2muthuk_vanalingammdw
  • Reply 8 of 26
    dewmedewme Posts: 5,259member
    Hmmm. I don't think we're getting the whole story here. At least from my perspective, and maybe because I don't have an Apple Card, it appears that all of the go-to-market, launch, strategy, and promotional costs of this new venture are being put on Apple. When I see offers for the Apple Card everything looks like it's being "sold" as an Apple thing. This attaches all of that amazing brand loyalty that Apple owns to the joint venture. Goldman Sachs is very much a behind-the-scenes partner, well at least until you start getting the bills. If Apple is still seeing profits and seeing growth while its competitors are falling, and everyone is in a down market, having Apple as the face of one of your products is probably a very valuable asset. The CEO's remarks seem to confirm this assumption. So why complain about it?
    9secondkox2jas99
  • Reply 9 of 26
    tyler82tyler82 Posts: 1,094member
    If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.”

    - Exodus 22:25

    The rich rules over the poor, and the borrower is the slave of the lender.”

    - Proverbs 22:7
    edited January 2023 DAalsethmangakatten9secondkox2
  • Reply 10 of 26
    I wonder if the loan loss provision was made at the behest of one of their regulators.
  • Reply 11 of 26
    entropysentropys Posts: 4,125member
    Apple got mentioned in the article as click bait.  The Apple Card would be a very small part of GS consumer credit business, which was making losses of this magnitude even before the Apple Card was a thing.

    the biggest issue with the Apple Card is it still limited to one market and has not expanded its services in any meaningful way since launch.  It seems to be getting as much corporate love as one of those google thought bubbles.
    AMcKinlay21llamaFileMakerFeller
  • Reply 12 of 26
    Comrade Tim Cook doing some thankless work against the banker cretins. :D 
    williamlondon9secondkox2
  • Reply 13 of 26
    DAalseth said:
    IANA Businessman/MBA/Entropnenur so I have no idea how losing over a billion dollars could be “The most successful credit launch ever”. 
    So your mistake here was relying on AppleInsider's crappy reporting. The quote is from October of 2019 and he was talking about the number of people that had applied for the newly launched card not the revenue generated from the card. The loss was from the first nine months of 2022. It turns out a lot happened between 2019 and 2022. 
    williamlondontenthousandthingsMrBunsideFileMakerFeller
  • Reply 14 of 26
    MarvinMarvin Posts: 15,267moderator
    I wonder if the loan loss provision was made at the behest of one of their regulators.
    Or just another tax avoidance scheme:

    https://www.imf.org/en/Publications/IMF-Policy-Discussion-Papers/Issues/2016/12/30/Regulatory-and-Tax-Treatment-of-Loan-Loss-Provisions-2014
    https://www.europeanceo.com/finance/goldman-sachs-and-cargill-fined-e89m-in-uk-tax-avoidance-case/

    Big companies do this all the time. They record losses on paper in their high tax jurisdictions, even when they aren't realized losses and may never be and their income on some remote island in the middle of nowhere where they pay little to no income tax.
    9secondkox2FileMakerFellerjas99
  • Reply 15 of 26
    lkrupplkrupp Posts: 10,557member
    If you are an Apple Discussion Forums junkie like I am and frequent the Apple Card forum you’ll get an idea of how utterly stupid those card holders are. That forum is flooded with users trying to play smoke and mirrors games with their credit, payments, balance transfers (not supported on the Apple Card), etc. You can assume that goes on with all credit cards so Apple not charging late fees, having a generous billing period, and interest free payments on Apple products adds up. Other credit cards make a ton of money on losers who can’t make their payments on time to save their lives, have huge APRs because of their wonky credit ratings, and carry gigantic balances. There’s also a steady stream of users who have either filed for bankruptcy or obtained a consolidated loan to pay off their debt. You simply don't see this stuff on other credit cards because they don’t have user forums. It’s a real Zoo.

    As for me and, I assume, a large percentage of Apple Card holders, I have never paid a dime in interest. So there’s another reason that Goldman Sachs could be losing money.
    edited January 2023 darkvadercg27
  • Reply 16 of 26
    Marvin said:
    I wonder if the loan loss provision was made at the behest of one of their regulators.
    Or just another tax avoidance scheme:

    https://www.imf.org/en/Publications/IMF-Policy-Discussion-Papers/Issues/2016/12/30/Regulatory-and-Tax-Treatment-of-Loan-Loss-Provisions-2014
    https://www.europeanceo.com/finance/goldman-sachs-and-cargill-fined-e89m-in-uk-tax-avoidance-case/

    Big companies do this all the time. They record losses on paper in their high tax jurisdictions, even when they aren't realized losses and may never be and their income on some remote island in the middle of nowhere where they pay little to no income tax.
    I used to work for the FDIC in the early 90s as a bank examiner. Whenever we examined a bank we would require them to give us a list of their loans and we would review the files to see if there were problems. We didn’t do it with every single loan, just the largest ones which accounted for most of the dollar value of the loan portfolio. If we found any problem with a loan we would classify them as Loss, Doubtful, Substandard or Special Mention and make the bank write off the value of the loan at 100%, 50%, 10% or 0%, respectively. However I don’t remember us ever reviewing credit card accounts so I don’t know how those are handled.
    FileMakerFellerjas99
  • Reply 17 of 26
    JP234 said:
    Aww, Goldman Sachs lost a billion dollars? That's a rounding error in their case.
    Actually lost $3G USD which is 14% of net income.
    JP234
  • Reply 18 of 26
    Well, let’s see what their earnings call reveals. Might get very interesting.
  • Reply 19 of 26
    omasouomasou Posts: 540member
    They didn't "loose" anything.

    Let's call it, what it was...an investment to launch a new card, partnership and support platform.

    I'm sure the "investment" was more than offset by the cardholder interest and transaction fees.

    Had they not made the "investment" someone else would have and would be reaping the benefits.

    Let's see the article about the Chase Manhattan or other bank executive that told Apple no.

    Also bet Visa is not happy that MC has the deal.
    9secondkox2JFC_PA
  • Reply 20 of 26
    Nobody knows, but I would guess that some of the money that they lost was on account of one-time setup costs (eg, buying a new building to house the new employees.) If true, then that could be how they are covering up the enormous profits that they are making.
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