JPMorgan, Apple and Goldman agree to transfer Apple Card portfolio

JPMorgan will acquire the Apple credit-card portfolio from Goldman in a transfer expected to take two years, during which customers should not see changes to their cards. Goldman will release nearly $2.5 billion of loan-loss provisions while JPMorgan will record credit-provision charges tied to the portfolio.

JPMorgan, Apple and Goldman Sachs announced an agreement under which JPMorgan will take on the Apple credit-card portfolio that Goldman has been managing. The banks said the transfer is expected to take two years and that Apple cardholders will not see changes to their accounts during that period. The move follows nearly two years of negotiations and comes as Goldman pares back parts of its consumer finance efforts. JPMorgan will add about a $20 billion book of card loans and will recognize related credit provisions. Key details: - The transfer is expected to take two years and customers reportedly will not see changes to their cards during that time. - Goldman will release nearly $2.5 billion of loan-loss provisions tied to the Apple card portfolio in the quarter it is about to report. - Goldman will also record roughly $2.3 billion in revenue charges from writedowns of some debts and termination payments to Apple, the article says. - JPMorgan will recognize a $2.2 billion charge for credit provisions against the transferred portfolio and is taking on about $20 billion of card loans. - According to reports, JPMorgan acquired the portfolio at about a $1 billion discount to the loans' value because of the portfolio's credit mix and Apple’s card setup. - The Apple card book has a higher share of lower-credit borrowers (more than one-third with FICO under 660) and higher delinquency rates (about 4.2% of balances), relative to JPMorgan’s existing card business, the article reports. Summary: The agreement moves the Apple Card portfolio from Goldman to JPMorgan, ending a multi-year effort by Goldman to build consumer credit businesses and shifting the loans into JPMorgan’s larger card operation. Goldman will free up reserves and take near-term revenue charges, while JPMorgan will absorb credit provisions and the loan book. Apple customers are expected to experience no changes during the two-year transfer. Updated fourth-quarter results from both banks are expected next week.