Goldman Sachs (GS) just sent Wall Street a clear message: we're done experimenting with consumer banking, and we're doubling down on what we do best. The investment banking powerhouse also announced a whopping 50% dividend increase, raising its quarterly payout to $4.50 per share from $3 just a year ago. That's a bold move for any bank, but especially striking given that Goldman simultaneously reported selling off its troubled Apple Card business to JPMorgan Chase. The aggressive dividend hike signals ...

Core Insights - Goldman Sachs is divesting its $20 billion Apple Card portfolio to JPMorgan Chase, marking a significant retreat from consumer banking after struggling since the program's launch in 2019 [1][4] - The transaction is expected to close in 24 months, allowing Goldman Sachs to continue managing the Apple Card until then [1][8] Goldman Sachs - The company faced unexpected high charge-off rates due to looser lending standards, particularly among consumers with FICO scores below 660, which contributed to its challenges in consumer banking [4] - The struggles in consumer banking have been notable, as the company has not successfully penetrated this market segment [9] JPMorgan Chase - The acquisition provides JPMorgan Chase access to over 12 million Apple Card customers, who are generally more affluent and can be targeted for cross-selling various banking products [6][9] - The bank's CFO expressed optimism about the transaction, indicating it is economically compelling despite the integration challenges [7] - The financial impact of the acquisition on JPMorgan Chase is expected to be minimal, as the Apple Card balances represent only 1.3% of its total loan portfolio of $1.5 trillion [8]

Core Insights - Apple Inc. has selected JPMorgan Chase as the new issuer of the Apple Card, ending Goldman Sachs' involvement, which significantly alters the consumer finance strategies of all three companies [1][2]. Group 1: JPMorgan Chase's Position - The agreement allows JPMorgan Chase to expand its credit card business, bringing over $20 billion in Apple Card balances to its platform upon completion of the transition [2]. - This deal enhances JPMorgan's competitive stance in the U.S. credit card market and is seen as a strategic win under CEO Jamie Dimon's leadership [4]. Group 2: Goldman Sachs' Transition - The transition marks another step for Goldman Sachs in retreating from consumer banking after experiencing losses and strategic pullbacks [5]. - Goldman Sachs and Apple initially announced their intention to end the partnership in 2023, which began in 2019 [5]. - The Apple Card has struggled to generate sustainable returns for Goldman due to rising costs and regulatory scrutiny in consumer lending [6]. Group 3: Financial Implications - Goldman Sachs anticipates that the transaction will contribute approximately 46 cents per share to its fourth-quarter 2025 earnings, primarily from the release of $2.48 billion in loan-loss reserves [6]. - However, this benefit will be partially offset by a $2.26 billion reduction in net revenue related to the loan portfolio markdown, contract termination costs, and an additional $38 million in expenses [7].

Core Insights - Goldman Sachs has announced an agreement to end its partnership with Apple and transition the Apple Card program to JPMorgan, marking a strategic shift away from consumer banking towards institutional businesses [1][5]. Financial Impact - The transaction is expected to increase Goldman's EPS by 46 cents in Q4 2025, driven by the release of $2.48 billion in loan loss reserves, partially offset by a $2.26 billion reduction in net revenues and $38 million in associated expenses [2][9]. - JPMorgan anticipates a $2.2 billion provision for credit losses in Q4 2025 related to the Apple Card portfolio [2]. Transition Details - Goldman will continue to operate the Apple Card program during a transition period of approximately 24 months, while still recording regular business results from the portfolio [3][9]. Strategic Focus - David Solomon, CEO of Goldman, emphasized that this transaction completes the narrowing of focus in the consumer business, allowing the company to concentrate on core franchises in Global Banking & Markets and Asset & Wealth Management [4][6]. - The exit from the Apple Card program aligns with Goldman's broader strategy to retreat from consumer lending, which has proven costlier than expected, and to focus on higher-margin, scalable businesses [5][6]. Market Performance - Goldman's shares have increased by 70.3% over the past year, outperforming the industry growth of 43.6% [7]. - The company currently trades at a forward P/E ratio of 16.88, above the industry average of 15.35 [11]. Earnings Estimates - The Zacks Consensus Estimate for Goldman's earnings implies year-over-year growth of 20.9% for 2025 and 12.9% for 2026, with upward revisions in estimates over the past week [13].