Last Updated on January 21, 2024 by Asfa Rasheed
Goldman Sachs Group Inc. is moving away from a discussion about introducing credit cards for T-Mobile customers. The Wall Street firm backed out of advanced talks to launch a co-branded credit card. If the talks continued, it could have been a third credit card program for Goldman Sachs and a first credit card for T-Mobile. The bank has previously issued co-branded credit cards for GM and Apple Inc.
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Improved expenses and reward costs halt the deal
In the latest breaking news, the bank moved away from the deal because of expected reward costs and other expenses involved in issuing the co-branded card. The telecom operator, T-Mobile, is also reportedly not interested in going with Goldman Sachs because the latter is rethinking its consumer ambitions. According to people familiar with the matter, the mobile operator will seek another card issuer for its business needs.
Recently, Goldman Sachs also stopped associating with Hawaiian Airlines for credit card programs. d Hawaiian Airlines already had a credit card program with Barclays PLC and was reportedly looking for ways to change the existing credit issuer.
Reported a loss of $3.8 billion
Goldman Sachs is also engaged in scaling back its consumer banking business, Marcus. The bank decided to end its personal loan business. In a recent disclosure, the bank said its unit, Platform Solutions, which has entered credit card programs with General Motors and Apple, has reported a loss of $3.8 billion since 2020 on a pretext basis. Most of this amount is set aside to cover the losses incurred on loans.
In a conference held this week, David Solomon, CEO of Goldman Sachs, said the bank has to allocate provisions for losses on credit card programs, as it is ramping up its portfolio in difficult macroeconomic conditions.
In last month’s earnings call, David stated that strengthening credit card partnerships is the company’s top priority. The bank expects to generate considerable dividends from its association with Apple in the future. According to people familiar with the matter, the bank is committed to the General Motors and Apple credit card programs. Goldman Sachs recently extended its partnership with Apple until the end of 2030.
Faces failures in its recent attempts
Goldman Sachs has recently expressed interest in several credit card programs. However, it could not achieve success with its efforts in such deals. According to information available from the best news websites in the US, its tender offer to Macy’s Inc. was not successful. Goldman Sachs failed in its bid attempt on Expedia Group Inc., according to people familiar with the matter.
In 2021, Goldman Sachs tried to take over the credit card program of JetBlue Airways Corp., but the latter decided to stay with its existing partner, Barclays. In a conference held this week, David said the bank will experiment with new products and services by putting in additional capital. The bank will make adjustments to its programs if it feels that they are not moving in the right direction.
According to Goldman Sachs, the Federal Reserve will increase interest rates an additional three times in 2023 because of resilience in the labor market and hot inflation. Several economists also predict that the Federal Reserve will affect interest rates at least twice soon.