Behind the revelations about Apple’s credit-card partnership with Goldman Sachs business News

Officials from the two banks had been negotiating for months over the massive Apple credit-card program and its roughly $20 billion balance of trade, but talks had stalled. Privately, bankers on each side were blaming each other for unnecessarily slowing down negotiations.

JPMorgan had secured a discount on the balance to help cover potential losses, but wanted more protection in case the loan took a turn for the worse. Meanwhile, Goldman executives no longer felt the need to bend as much because the Apple program finally looked profitable.

Some officials on both sides had begun to question whether they should leave.

Dimon and Solomon received the call on December 8, according to people familiar with the matter. They discussed why the Apple deal was taking so long to close and agreed to break the impasse to close the deal sooner, the people said.

bank just before the new year Finalizing a deal that was announced last week, Confirming a previous report by the Wall Street Journal.

The deal brings together two of the most influential companies in the country. JPMorgan is adding attractive programs to its flagship credit-card operation and strengthening its connection with the trillion-dollar tech giant at a time when consumers are increasingly using phones and watches to make payments and manage their finances. Apple has found a new partner with a huge consumer base that is eager to develop the card. Goldman’s failed venture into consumer lending has closed, costing the company billions of dollars in losses, a chapter it hopes to forget.

Transferring an Apple Credit Card has never been easier. Such large card programs are not often put up for sale and few potential buyers exist. Apple is famously finicky when it comes to details and controls, including its credit cards. Before launching the program in 2019, Goldman and Apple agreed to unusual terms that other banks were reluctant to take. The interested executives were particularly concerned about higher-than-normal default and subprime risk and wanted a steep discount to consider the deal.

Still, there is almost nothing normal about the process of finding a bank to replace Goldman. To begin with, Goldman had already begun thinking about pulling out of its contract with Apple just months after extending its partnership with the tech giant until the end of the decade. Apple and Goldman held discussions with large and small credit-card issuers—American Express, Capital One, Synchrony, Barclays and Santander—as well as smaller fintechs. Apple also debated bringing in private-credit firms to help acquire the smaller card-issuing unit.

The conversation lasted longer than expected. Goldman wanted an announcement and closure of its painful consumer chapter by the beginning of the summer. By October, the delays had become so obvious that Goldman executives faced public questions from analysts about whether the deal would ever get done.

Solomon’s response was not enough for Wells Fargo’s Mike Mayo, who then began looking for an investment bank.

“I guess I’m just wondering why you’re the leading dealmaker in the world, and it’s still hanging around,” Mayo said.

In the end, the most likely buyer was always JPMorgan, the country’s largest bank. It has the capital and card experience, including underwriting a group of consumers, swallow programs, and ambitions to get closer to Apple and its core customer.

The story of the triangle of negotiations between the giants of corporate America and why Apple and Goldman struggled to break off their partnership is compiled from interviews with 20 people familiar with the matter and months of reporting on their conversations.

Apple, accustomed to high consumer-praise scores, wanted Goldman to approve almost all applicants. The result was a program with higher than normal exposure to subprime borrowers, requiring Goldman to set aside more revenue to cover possible future defaults.

The tech giant didn’t want late fees, removing a major credit-card issuer revenue generator. And Apple insists that all cardholders get their bills at the beginning of the month, which would make for a customer-service nightmare.

In 2022, Apple and Goldman increased our partnership Till 2029.

But shortly afterward, Goldman began looking for an exit, The Wall Street Journal reports. In 2023, Goldman spoke to American Express to gauge his interest in taking over the program, the Journal reported.

Later that year, Apple decided it wanted to oust it. sent a proposal to Goldman The Journal reported that there would be an exit from the contract within about 12 to 15 months.

Apple started making the rounds and delivered a glossy pitch deck to card issuers that was light on numbers but not on bravado. The presentation said Apple was the best company with access to every home in America, and it wanted to create the best credit card, according to payments executives who saw the pitch.

The tech company told a firm that he and Goldman’s marriage was unhappy. It said that both companies were willing to live together, but no one likes to marry someone who doesn’t want to marry them.

The two were also engaged in a heated exchange over regulatory issues they were facing behind the scenes. During an investigation by the Consumer Financial Protection Bureau, which concluded with enforcement action In late 2024, Goldman and Apple blamed each other and bureau officials for some of the regulator’s findings against both companies.

Looking deeper, issuers found reasons to be hesitant. North of 30% of the balance is associated with people whose credit scores are lower than what most lenders define as prime, which is higher than other large banks that specialize in subprime borrowers.

Still, many banks, including JPMorgan, were attracted by the card’s accessibility and the success of the Apple brand, which has become central to more consumers’ financial lives.

One possible solution explored by Apple, Goldman, and interested card issuers was to use a private-credit fund to carry the balance. Wall Street has increasingly turned to those lenders for complex specialty financing deals and has favored consumer lenders, but such a large and complex deal would have broken new ground.

Apple approached a boutique investment bank for help finding funds and a small fintech company for a deal with a private-credit partner.

Goldman bankers reached out to private-credit firms to gauge their interest and Barclays, considering its bid, contacted KKR to help arrange a deal.

It did not happen. Goldman executives felt that the process was taking too long because Apple was not completing the work it needed to do.

Apple didn’t seem very close. At one point Apple was writing three separate contracts with JPMorgan, American Express and Synchrony. Card-issuing executives were flying to Apple’s headquarters in Cupertino, sometimes within days or weeks of each other.

Looking for even more bidders, Apple pinged Capital One and said a deal was imminent but it had one last chance to get in on it. The bank said it would busy integrating its purchases Of Discover Financial, however, an executive took the meeting.

Synchrony was convinced it was getting a deal and began figuring out how to make card turnover as low-cost as possible.

By May, Apple told JPMorgan that it was its Favorite companion.

Nevertheless, Murray Abrams, one of Capital One’s most senior executives, met with Goldman in early June. Privately, Capital One executives viewed Apple’s outreach as an attempt by the tech giant to squeeze more favorable terms from JPMorgan.

With Apple acting as the middleman between Goldman and JPMorgan on the price, a temporary agreement was reached that the portfolio would proceed at a discount of about 7% on outstanding Apple credit-card balances. This would mean Goldman would take a haircut of more than $1 billion.

JPMorgan was also seeking greater protection in case card delinquencies increase or performance deteriorates in the period after banks sign the contracts. It would take about two years for the program to be transferred from Goldman to JPMorgan, and the latter wanted as much assurance as possible that the portfolio it would ultimately take would be the one it signed up to buy.

JPMorgan wanted the ability to walk away before the deal closed, which was a make-or-break item for the JPMorgan team negotiating the deal.

Bill Johnson, who oversees credit-card operations at Goldman, called JPMorgan to say such a clause was not needed.

Eventually, a security clause was included in the deal.

Throughout the negotiations, Goldman has been trying to keep enough employees to keep the program running. More than a year ago, Johnson told employees that those who stayed until the last day of the Apple program would be eligible for a one-time payment equal to their 2023 compensation.

With a deal finally in hand, Goldman plans to spin off Platform Solutions, which housed the bulk of its consumer-lending ambitions. When Apple eventually moves to JPMorgan, Goldman’s consumer-lending journey will come to an end.

Write to Annamaria Andreotis here annamaria.andriotis@wsj.com